Execs to buy Lexington
Owners-to-be say deal should pave way for growth
By Powell Slaughter -- Furniture Today, February 10, 2002
Lexington, N.C. — A group of Lexington Home Brands senior management has agreed to purchase the full-line manufacturer from LifeStyle Furnishings International.
Terms of the deal, which is expected to close by March 31, were not disclosed. The group will acquire nine North Carolina plants and the Lexington showroom in Thomasville. LifeStyle said Lexington had sales approaching $300 million last year.
Bob Stec, Lexington president and chief executive officer, and investment advisor Harris Williams & Co. of Richmond, Va., are leading the new ownership group. Stec said the structure of the group is still evolving, but that it will be all-Lexington, with no outside entities or licensors.
"A lot of managers will have a piece of it," Stec said. "There probably will be several tiers of ownership."
He said such a structure will allow Lexington to steer its own course, continuing its move toward tighter distribution and an expansion of dedicated-space programs at retail.
"The fact that this is an internal change of control will insure a seamless transition for our brands, our retail partners, our suppliers and our associates," Stec said. "With a new capital structure, LHB will be able to more aggressively roll out its growth initiatives and marketing plans."
One aggressive goal is to expand Lexington's in-store gallery program from the current 212 sites to more than 500.
While he didn't rule out the possibility, Stec said it's unlikely the company will develop dedicated stores.
"We want to take the retail expertise that certainly exists out there … and combine it with the product development and branding expertise we have," he said. "When you look at the country today, it's over-stored anyway."
A good balance for now
Stec said Lexington has reached a good balance for now between U.S.-made and imported product (about 70% domestic) and has no plans for more plant closures. The company closed its Spruce Pine, N.C., plant last year and is suspending production at a youth bedroom plant in Lexington. The company has about 3,500 employees.
"Our factories were back to working full weeks in January," Stec said. "All the plants currently in operation (including the mothballed youth plant) are a part of the deal."
Lexington, which traces its history to the 1901 founding of a predecessor, Dixie Link Furniture, was an independent company until its sale to Masco Corp. in 1987 in a deal valued at $250 million. Lexington and other furniture and fabric companies split from Masco in a 1996 buyout to become LifeStyle.
The pending sale ends months of rumors about Lexington's future direction.
"We have to make sure we use this fresh start to energize all our employees," Stec said. "Hopefully today we put a major distraction behind us. We think the opportunity exists to double the size of the company."
While he provided no details, he said the company "will not be overly leveraged and will have the appropriate levels of capital to grow the business and run the business."
He said the deal will give Lexington greater control over updating equipment and making other capital improvements.
"Capital investment at LFI was there, but it wasn't aggressive," Stec said.
Like all manufacturers still producing much of their product in U.S. plants, Lexington faces a tough battle from imports. Stec is counting on three things to help.
"First, there's Lexington's history of doing innovative product," he said. "Second, we put a halo around our product that we call branding it. It doesn't replace great product, but adds emotional appeal."
Branded products make up 42% of Lexington's shipments now, and Stec plans to push that to 80% soon.
"Third, we are a worldwide sourcer," he said. "I don't think you can be all domestic these days, but we also believe you can't be all import."
A strong Lexington would be good for the industry, said analyst Jerry Epperson, managing director at Mann Armistead & Epperson. "Lexington was perhaps our industry's best company during the '90s, and everyone in the industry would like to have a healthy Lexington back," Epperson said.
Management changeover
Stec's tenure at Lexington, which has involved a complete changeover in senior management and development of tighter distribution, has taken place during a difficult time for the industry. He was named Lexington's president in late 1999. He had joined the company as executive vice president of sales and marketing in July of that year after a career in the apparel and consumer goods industries, most recently at London Fog.
"At the very least, he hasn't had a chance to show what he could do because he was fighting the bad economic times in addition to changing the company," Epperson said. "I hope that, given a better economic environment, he'll have the opportunity to show his decisions have been right."
| Lexington CEO Bob Stec announces the long-awaited deal. |
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