FBI: We're meeting challenges
By Jeff Linville -- Furniture Today, June 27, 2005
New York — During an investor conference here last week, Furniture Brands International outlined some challenges it faces and the steps it is taking to meet them.
Furniture Brands continues to be the industry's largest manufacturer and importer to the U.S. market, but faces competition from Ashley Furniture, which grew 26% in 2004 to climb to second in Furniture/Today's Top 25.
The furniture industry is going through unprecedented changes, said Mickey Holliman, Furniture Brands chairman and CEO. Retail chains such as Ashley HomeStores, Rooms To Go, Wal-Mart and Ikea are pushing promotional goods.
A continuing increase in imports, especially from Asia, has hurt companies that have relied too heavily on U.S.-made goods, said Holliman, who included his own Broyhill division in that assessment.
A weak economy for the past five years has hurt FBI's customer base — 190 retail accounts have closed, he said.
Furniture Brands, meanwhile, has been selling more through its 250 dedicated stores (led by 160 Thomasville stores), which now account for 46% of company revenues. But he added that attempts at opening Broyhill and Lane dedicated stores have hurt retailer relationships in some areas.
At the New York conference, FBI executives laid out plans to answer these challenges.
They said the most important step is hiring good people to develop and implement strategies. Holliman has added several executives this year, including Joe McClelland Jr. as vice president of logistics and supply chain management; Denise Ramos as chief financial officer, treasurer and senior vice president; and Harvey Dondero as president and CEO of Broyhill.
"This industry is not accustomed to having had an abundance of brain power on board," he said. Ramos and McClelland are both outsiders, with Ramos most recently at KFC and McClelland from The Home Depot.
Holliman praised Dondero as having developed outstanding relationships with key suppliers while head of Universal, and possessing one of the best strategic minds in the furniture world.
Last month, Furniture Brands said it was consolidating management of three divisions — Henredon, Drexel Heritage and Maitland-Smith — into a new unit called HDM under Drexel President and CEO Jeff Young.
Holliman was asked if he plans other similar moves, such as combining Broyhill, Lane and Thomasville. "Let's digest HDM first ... before we wrestle with the next piece of it," he said. "You can rest assured that we won't stop at HDM." In recent months, the corporation also has added four new vice presidents of upholstery, at Broyhill, Drexel, Henredon and Thomasville.
These moves were necessary because the company hasn't had any organic growth in either revenue or units sold in the past five years, according to Ramos. The only growth has come through acquisitions such as Drexel Heritage and dedicated store openings.
The company has several ideas for boosting sales, but in the meantime it is cutting overhead to reduce expenses. Holliman said he used to pride himself on letting each subsidiary run independently, and while he still wants to do that to some extent, he said his approach created many redundancies in management functions, with each division running its own computer services, accounting and payroll, product development and other functions.
This also prevented FBI from fully utilizing its buying power in supplies and in areas such as health insurance, risk management and shipping carriers, Ramos said.
As for competing with promotional companies, Holliman said its lower-end divisions, including Creative Interiors and Founders, have been performing well. The company also said Broyhill would stretch to reach lower price points. Also, FBI is looking at a direct-container program for Broyhill to improve price points offered.
Furniture Brands will continue to push its own store program, but with new guidelines. Broyhill and Lane stores will keep opening, but slowly and more cautiously so as not to infringe on the existing customer base. He noted that Broyhill has little market penetration in New York, Los Angeles and San Francisco, so increasing urban sales is a priority.
Thomasville and Drexel Heritage will continue to open stores except in areas where it doesn't make sense.
One area of concern with traditional furniture stores is that the manufacturer risks losing control of product presentation, said Holliman. Many retailers are simply pushing price and payment terms instead of quality and brands, he said, which can hurt a company that emphasizes its quality and service.
All of the company's businesses have broad product lines, he said, but each should be distinct. FBI doesn't want to be like General Motors, making cars for several brands that look a lot alike, said Young.
For FBI, the most irreplaceable asset is its brands, said Holliman. "Like being born wealthy, you can still fail, but you have to work at it," he said.
