RTG, Wickes to split
Rooms To Go won't compete in Wickes markets
By Clint Engel -- Furniture Today, February 29, 2004
BOCA RATON, Fla. — Rooms To Go will sell its nearly 50% stake in fellow retailer Wickes Furniture to Sun Capital Partners here.
The move will end a short relationship that brought a Rooms To Go-like overhaul to Wheeling, Ill.-based Wickes and gave RTG instant access into a coveted California market.
RTG and Sun Capital, equal partners in Wickes, expect to close on the deal this week, said Marc Leder, managing director and partner in the investment firm. Neither Leder nor RTG President and CEO Jeff Seaman would disclose the price, but Leder said it will be more than RTG paid for its stake in Wickes in August 2002.
As part of the deal, Rooms To Go will sign a non-compete agreement in all of Wickes' markets, including California. Wickes' locations in the Golden State were one reason RTG was attracted to the acquisition in the first place.
Seaman said it "makes more sense for Sun to buy it if they don't have to look over their shoulder for another retailer coming into the market." He would not disclose other details about the non-compete agreement.
Even though RTG will be barred from certain markets, "It's a big country," Seaman said. And selling Wickes will free up RTG's time and resources to pursue other new markets, he said, although he declined to say where the retailer is looking.
Seffner, Fla.-based Rooms To Go, with 98 stores in the Southeast and Texas, did nearly $1.4 billion in sales last year and is likely to repeat as the nation's largest furniture store company on Furniture/Today's Top 100. It plans to open about six stores this year, filling in existing markets, and will launch its first specialty sleep shops in Florida.
Wickes, with 34 stores, did nearly $400 million last year, up from $365 million in 2002. Sales will approach $500 million this year, and the chain is expected to be profitable in all markets, Leder said.
When Rooms To Go and Sun Capital bought the then 39-store Wickes, the price wasn't disclosed, but the parties said it exceeded the reported $75.6 million value of an earlier deal to sell Wickes.
Both chains had stores in the Dallas market, and the new owners converted one Wickes store there to a Rooms To Go and closed four others. That left Wickes with stores in Chicago, Southern California, Minneapolis, Pittsburgh and Portland, Ore.
"It's been a great partnership. Jeff is a fabulous guy and he has a great team at Rooms To Go," said Leder, who, like Sun Capital's other founding partner, Roger Krouse, knows Seaman from their days at the Wharton School at the University of Pennsylvania.
But Wickes was at a crossroads, Leder said.
"We were at a stage where there needed to be investment at Wickes in systems and infrastructure," he said. Sun could either spend $4 million to $6 million on stand-alone systems or incorporate RTG's "phenomenal" systems, the latter of which only made sense if the two retailers eventually planned to merge, he said.
Seaman offered to buy out Sun Capital's interest, but "we've only owned the business 18 months and we felt there is still enormous upside," Leder said. Sun instead made an offer for Wickes to RTG.
Despite the buyout, Sun Capital and Wickes get to hold onto a lot of the RTG strategy that has been woven into Wickes since the original acquisition.
In September, Wickes opened a Rooms To Go-like store in the Chicago suburb of Downers Grove, Ill., designed by RTG's Vice President of Design Gerard Benatar, with architectural elements similar to RTG units, including a central rotunda display area with fluted metal columns and brick dividing walls. Another store RTG helped with will open in Rancho Cucamonga, Calif., this spring, Seaman said, and Wickes has every right to use similar designs in all its markets.
"Nothing changes. We're going to continue with the successful format Rooms To Go brought to us," said Howard Slavin, Wickes president and CEO. Wickes expansion plans remain intact, including a replacement store in Naperville, Ill., late this year or early next year.
"We're aggressively looking (at expansion opportunities) in Chicago and California," Slavin said.
A few adjustments are coming. Wickes attorney Peter Weitzner, Seaman's brother-in-law, has moved back to Rooms To Go. RTG people no longer will rotate in and out of Wickes.
Slavin said Wickes' merchandising and marketing strategy will continue, with no changes in vendors. In addition to president and CEO, Slavin also was chief merchant, with all buyers reporting to him. That "will be reviewed," he said, but wouldn't elaborate.
RTG had produced Wickes' broadcast commercials. Wickes will hire its own ad agency and media buyer, but the themes will be the same, Slavin said.
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