Upholstery group finds new life
By Gary Evans -- Furniture Today, November 11, 2002
New Albany, Miss. — Caye Home Furnishings' Herb Hester likes the pony story.
It goes like this:
A father had two young sons. One was always cantankerous, and never pleased. The other always looked on the bright side. At Christmas, the father decided to test his boys to the limit. He filled the room of the joyless, cynical son with every toy imaginable.
The other's room he filled with horse manure. Predictably, the first son grumbled and whined. But when the father opened the door to the other son's room, he found him joyous and laughing.
"Son, why are you so happy?" To which the son replied, "Dad, you don't understand. With all this horse manure, there's a pony in here someplace."
Hester has seen the pony. But not before tromping around in a lot of ... you get the picture.
Hester is president of Caye Home Furnishings. Even some of his biggest customers might not recognize that name, because Caye is a holding company for what historically are some of the industry's most significant names — Stratford, Simmons Upholstery and Stratolounger. All are linked to Morrie Futorian, widely regarded as the father of Mississippi upholstery manufacturing.
"The heritage of the company is enormous," said Hester. "We're very mindful that the company was founded by an industry legend."
Three years ago, the holding company, then Heath Home Furnishings, was riding high. It had five plants, including a 350,000-square-foot frame plant, a profit center unto itself, selling to other manufacturers. Heath acquired two wood furniture importing companies. Sales were at $250 million, and the company had in its stable some of the nation's largest retail customers.
Unfortunately, those customers included Heilig-Meyers, Montgomery Ward and HomeLife. All three folded within a year, taking with them $100 million of the company's business and leaving Heath with just under $15 million in bad paper.
"We got caught completely off guard," said Hester. "I think the industry was caught completely off guard. We were very close to those (retailers), and we had three companies doing business with them."
As those retailers closed, Hester knew he had to restructure quickly to keep the company from sliding deeper into difficulty. He consolidated manufacturing into one plant — a 1.2 million-square-foot facility in New Albany — and slashed the workforce by almost half, from 1,500 to 800. The other plants, including the frame facility, were sold.
"We knew we weren't going to try to replace the volume quickly because it was not a reasonable thing," said Hester. "We thought the better thing was to restructure ourselves to get our overhead under control and rebuild our account structure. That was the program we started in December 2000.
"And I must tell you that (the October High Point market) was the culmination of all that. It has taken a couple of years to do new styles, new looks and (build) a customer base. The October market pulled it all together."
The just-concluded market proved "good and exciting," said Hester. "We were pleased to get new customers as well as expand our positions with our old ones. We had an exceptional market all way around."
In reinventing Heath, which is now Caye, Hester is sticking to the philosophy that the company "is there for one reason: To build quality product for the retail industry with value and name brands."
That, plus offering dealers, mainly smaller and midsized, a one-stop source of sofas, sofa-sleepers, leather, wood and recliners. "I've got everything a retailer needs," he said.
In addition, the company decided to upgrade its fabrics and cushioning and raise the quality level. "We don't worry about price points," Hester said. "We've found that the retailer is far more interested in value than they are in price points."
Now with its strength in the $599 sofa niche, Caye no longer is in the penny-pinching promotional arena, but is going head-to-head with some of the industry's strongmen: Lane, BenchCraft, Berkline, Klaussner and Ashley.
But Hester is undaunted, mainly because the company is large enough to act as a mini-conglomerate but small enough to be flexible and provide a personal comfort level for its dealers.
"We can be fleet of foot," Hester said, picturing Caye as an alternative to its bigger competitors. "I don't mind being Avis. I don't mind being No. 2," he said.
More important, perhaps, to the company's success is the strength of the new holding company. Caye is owned by Ken Hendricks, Dianne Hendricks and Karl Leo.
"They have brought to us the corporate level of financing," Hester said. "It's so gratifying to be around business people who can look at something and see the value of it, even when the value is not so apparent. We had some battle scars. We had some deep wounds."
Leo, sitting nearby in the High Point showroom, added, "The wounds would be called mortal on most battlefields."
Ken Hendricks is known for buying and keeping properties for the long haul, according to Hester. "They recognize the furniture industry is in a trough," he said. "Will it go lower? Maybe. But he's prepared for it if it happens. We're financed well enough to overcome the difficulties."
"Our strategy is that, during this recession, we're not going to participate," said Leo.
The company is less concerned about getting bigger faster than in taking care of the customers it has and growing slowly, Hester said. Right now, sales are running shy of $100 million, with expectations high for a profitable quarter.
And going vertical with its own retail stores is not in the plan.
"We are never going to do that, ever," Hester emphasized. "We're blessed with manufacturing ability, not retail ability. It's the right thing for us."
Hester admitted the past couple of years have been painful, but the company is about ready to find that pony.
"The most important lesson that I learned is that people are still people," he said. "We had many, many good retailers, good people, that stuck with us. That is a lesson I will never forget.... We had some strong support from the retail community and the vendor community during our reorganization time. I found a circle of friends that I didn't know was there."
