Buffett heralds R.C. Willey in shareholders letter
By Clint Engel -- Furniture Today, March 20, 2005
Omaha, Neb. — In his annual letter to shareholders, Berkshire Hathaway Chairman Warren Buffett holds up R.C. Willey as one of two retail standouts for the investment company (along with jeweler Ben Bridge).
It's not the first time Buffett has showcased the Salt Lake City-based retailer of furniture, appliances, electronics and flooring.
R.C. Willey is part of Berkshire's portfolio of furniture heavyweights, which includes Nebraska Furniture Mart in Omaha, Neb., Star Furniture in Houston and Jordan's Furniture in metro Boston.
Six years ago, Buffett's letter beamed the success of R.C. Willey stores outside the company's Utah home. (See Berkshire's Web site at www.berkshirehathaway.com for the 1999 letter.)
This year, he updated how that strategy was working, praising management with a dash of self-deprecating humor.
Here's what Buffett wrote:
"At Utah-based R.C. Willey, the gains from expansion have been even more dramatic, with 41.9% of 2004 sales coming from out-of-state stores that didn't exist before 1999. The company also improved its profit margin in 2004, propelled by its two new stores in Las Vegas.
"I would like to tell you that these stores were my idea. In truth, I thought they were mistakes. I knew, of course, how brilliantly Bill Child had run the R.C. Willey operation in Utah, where its market share had long been huge. But I felt our closed-on-Sunday policy would prove disastrous away from home. Even our first out-of-state store in Boise (Idaho), which was highly successful, left me unconvinced. I kept asking whether Las Vegas residents, conditioned to seven-day-a-week retailers, would adjust to us. Our first Las Vegas store, opened in 2001, answered this question in a resounding manner, immediately becoming our number one unit.
"Bill and Scott Hymas, his successor as CEO, then proposed a second Las Vegas store, only about 20 minutes away. I felt this expansion would cannibalize the first unit, adding significant costs but only modest sales. The result? Each store is now doing about 26% more volume than any other store in the chain and is consistently showing large year-over-year gains.
"R.C. Willey will soon open in Reno. Before making this commitment, Bill and Scott again asked for my advice. Initially, I was pretty puffed up about the fact that they were consulting me. But then it dawned on me that the opinion of someone who is always wrong has its own special utility to decision-makers."
R.C. Willey Chairman Bill Child offered a slightly different take on what his boss has done for the retailer.
"He is so supportive and so insightful and certainly gives us confidence to continue to expand and grow," Child said.
"We've had a good year and we're going to have a better year," he added. "We love our group. It's a wonderful industry, and we're having more fun than we deserve."
R.C. Willey plans to move into its fourth state next year with a 150,000-square-foot store in Rocklin, Calif., in the Sacramento market. It is expected to have annual sales of $85 million to a $100 million.
"And we need another one in Las Vegas," Child said, but plans aren't firm on that yet.
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