Ashley HomeStores still leads in growth

Dedicated store network takes title for two of five growth measures

By Clint Engel -- Furniture Today, June 11, 2006

High Point — Some day, the big news will be that Ashley Furniture HomeStores was not the fastest-growing Top 100 company.

But not today.

For the fourth consecutive year, the dedicated furniture store network of Arcadia, Wis.-based Ashley — operated largely by independent dealers — topped the index of fastest-growing retailers, with net volume growth in 2005 that left all other Top 100 companies in the dust.

Ashley HomeStores actually took the title for two of five growth measures used for this report — sales volume growth and net change in store count. And just like last year, when it was gauged on results from 153 stores, the now 219-store network was the only Top 100 company to appear in the Top 10 of all five measures used to calculate Furniture/Today's growth index. Indeed, Ashley Furniture HomeStores ranked no lower than No. 3 in any single category.

Ikea ranks second in sales

The closest any company came to Ashley's $668 million increase in furniture, bedding and accessories sales (which grew to $1.58 billion) was Ikea, with a $185 million increase. The next-best performer behind Ashley's net 66-store count increase was Bethpage, N.Y.-based Sleepy's, which grew by 57 stores to 375 units.

Ashley was second best in percentage revenue growth (up 73.2% and just topped by Design Within Reach with a 74.6% sales growth rate). It also was No. 2 in equivalent-store sales, where its 30% growth rate was topped by Room & Board's 32.8% increase.

Equivalent-store sales is a Furniture/Today-developed variation on same-store sales calculated by subtracting the percentage change in a retailer's net store count from its percentage increase in sales.

This year's growth index effectively omitted 19 companies — eight with decreases in sales and store counts, seven with sales decreases and flat store counts and four retailers that were flat in both categories.

Ashley's now four-year reign at the top of the index could be extended again. Last year, the HomeStores network sales came in just shy of the $1.6 billion in sales for the No. 1 Top 100 company Rooms To Go. But Ashley has continued to grow at a much faster rate than RTG thanks to the rollout of Ashley stores by numerous retailers, including other Top 100 players. In February, Ashley said retailers will open another 100 or so HomeStores through this year, expanding the network by more than 40%. And that will position the company for a shot at the Top 100's No. 1 spot and growth rates that could exceed last year's gains.

In addition to Ashley, four other companies on this year's growth index Top 10 are repeaters — Raymour & Flanigan, Select Comfort, Sleepy's and The Sleep Train.

DWR joins the listing

No. 2 on the index, however, was a newcomer, Design Within Reach, which showed up in the Top 10 of three categories. DWR posted the best percentage change in revenue, up 74.6% to $110 million, and the best percentage growth in store count, up nearly 70% to 56 stores. It also had the sixth-highest net growth in units, having added 23 stores.

But as a public company with the best showing in the index next to Ashley, DWR illustrates that fast growth and profitability don't necessarily go hand in hand. The San Francisco-based, multi-channel retailer has faced several challenges recently, including a $2.1 million loss last year, another loss in the first quarter of this year and a revolving CEO door. Since September, it has lost two people at that post.

The latest change came last month, when Tara Poseley resigned to "pursue other interests" and spend more time with her family. She was replaced by Ray Brunner.

Still, in two short years, DWR has made a dramatic climb through the Top 100 ranks, from No. 98 last year to No. 63 this year.

Raymour & Flanigan was No. 3 on the index, with strong showings in three measures. The Liverpool, N.Y.-based retailer had the fifth-greatest net sales increase, up nearly $124 million to $655.5 million in 2005. Raymour's percentage increase in sales was seventh best at 23.3%, and its equivalent-store sales rose 12% for the 10th-best rate among the Top 100.

While it didn't show up among the Top 10 in store growth measures, the 59-store retailer ranked a very respectable 18th in both percentage and net change in store count as it added six stores last year, further penetrating greater New York with the acquisition of the three-store, Yonkers, N.Y.-based Futurama Furniture (one store replaced a clearance center) and with other openings in Woodbridge, N.J., Danbury, Conn., and Carle Place and Middletown, N.Y.

At No. 4 on the index, Select Comfort is becoming another regular to Furniture/Today's fastest-growing report. The airbed maker and retailer showed up in four measures, including net change in units, where it had the fifth-greatest increase, up 26 stores to 396 units at year's end. This year, it's looking for an even greater jump, with plans to open a net 40 to 45 stores on top of 30 or so relocations.

Select Comfort also was No. 6 in the category of net revenue change, increasing sales by nearly $114 million to $639.2 million. It had the ninth-best percentage gain in sales (up 21.7%) and the ninth-best equivalent-store sales gain (up 14.7%).

Sleepy's was No. 5 on the index, with its greatest strength coming in the form of store growth. Sleepy's was second only to Ashley in net unit growth, adding 57 net new stores for a total of 375 units by the end of the year. That equated to the eighth-best percentage increase in store count, up almost 18%.

The sleep shop specialist also had the eighth-greatest net increase in sales, growing $69 million to $394 million, but its equivalent-store sales rate was among the lowest third of the Top 100 at 3.3%.

Bassett returns to scene

After a two-year absence, Bassett Furniture Direct returned to the index Top 10 at No. 6 on the strength of its net increases in both stores and sales. The dedicated store network grew by a net 13 stores to 129 total units at year's end for the eighth-best gain. It's sales grew by $62 million to $440 million for the ninth-largest gain in that category.

While not making the Top 10 cut in the other categories, BFD still performed well there, scoring in the top one-third in percentage gains in sales, stores and equivalent-store sales.

No. 7 on the index Baer's is another newcomer, appearing on the Top 10 in only one measure — percentage sales gain — but coming very close to the Top 10 in two more. The 16-store, Pompano Beach, Fla.-based retailer's sales grew 24.5% to $161.7 million for the sixth-best gain. It also had the 12th-best percentage gain in store count, adding two stores (for a 14.3% gain), and the 13th-greatest equivalent-store sales gain — up 10.3%.

Hendricks Furniture Group, another newcomer, was No. 8 on the index, with both the eighth-best percentage sales growth (up 22.2% to $275 million) and eighth-best equivalent-store sales rates gain (up 15.6%).

The upscale, Conover, N.C.-based retailer, which has been rolling out Thomasville Home Furnishings and Drexel Heritage dedicated stores, in addition to new Boyles stores, also had the 12th-best net gain in sales, which grew by $50 million this past year.

The Sleep Train returned to the index this year at No. 9, thanks largely to store expansion. The Citrus Heights, Calif.-based sleep specialist added a net 13 stores in existing markets. Though it showed up among the Top 10 in only that one measure, it was among the top one-third performers in all categories.

Furniture Outlets USA rounded out the growth index at No. 10 with fairly strong performances in all categories, but particular strength in percentage sales growth and equivalent-store sales, where it grew 29.2% and 20.1%, respectively, for the fourth-best growth rate in both categories.

Among the companies that didn't make the index, but did well in one or more measures are:

• Minneapolis-based Room & Board, which appeared on the Top 10 of two measures, including equivalent-store sales, where it had the best gain (32.8%) of any Top 100 company. It's 32.8% overall sales gain to $178 million was just behind the percentage gains for Design Within Reach and Ashley.

• Rooms To Go, the nation's largest furniture store chain, was among the top one-third in all but one category and was No. 3 in net sales growth — up $180 million to $1.6 billion.

• Ikea, also in the top one-third in four measures, including net sales gain, where its $185 million gain to $1.26 billion was second only to Ashley.

• Houston-based Gallery Furniture, a perennial leading performer among the Top 100 in the areas of inventory turns and sales per square foot, had the third-best equivalent-store sales gain (21.4%) and the 10th-best percentage sales gain (21.4% to $134.8 million).