Ashley HomeStores still ranks No. 1 in furniture store sales volume
May 26, 2009,
Combined furniture, bedding and accessories sales for the Top 100 U.S. furniture stores last year sank 8.1% to $27.84 billion from $30.29 billion for the same stores a year ago in another ugly record for the list.
Last year's decline was the first ever since Furniture/Today began ranking furniture, bedding and accessories sales 18 years ago, as a tumultuous economic climate took the wind out of nearly everyone's sales. The stores on last year's list posted a weak 0.5% sales increase in 2007, something most retailers today would long for, though it was the smallest gain ever at the time.
Surprisingly, this year's Top 100 showed a 1.3% increase in store count - a 118-store net gain - but this had more to do with the stability of some of the newcomers to the list than any true physical growth for an industry that's undeniably contracting. The previous year's Top 100 companies had slightly more stores (33 more) than this year's Top 100 companies, and included many businesses that eventually went to zero units in 2008 and are not listed this year - Levitz (76 stores), Wickes (44 stores), Sofa Express (44 stores) and Domain (27 stores).
(Note: Thanks to Broyhill Furniture Inds., Furniture/Today's Top 100 U.S. Furniture Stores Report will be available for download at no charge from May 26 to June 25. Normally, the only way to access this popular report is via a paid subscription to Furniture/Today or by purchasing the report at the Furniture/Today Research Store. Please click here to access your FREE Top 100 report.)
Also falling off the list this year were The Bombay Co. - which had closed all its U.S. stores by January 2008; Leath/Modernage, out of business before the end of 2007; Norwalk - The Furniture Idea, the Norwalk dedicated store network that fell apart after the upholstery producer filed for bankruptcy; USA Baby, forced into an involuntary Chapter 7, though stores continue to operate independently; and Hank's Furniture, the Sherwood, Ark., retailer that was No. 93 last year (an estimate for 2008 was not calculated).
The worst may not be over for the biggest furniture stores in the country, as banks continue to tighten up on businesses and consumers, despite billions of dollars in government bailouts and other efforts designed to get credit flowing again.
"This is the most difficult environment any of us has ever lived through," said Jerry Epperson, industry analyst and managing director of Richmond, Va.-based Mann, Armistead & Epperson. "As bank loans continue to come up (for renewal), we're going to see more of this (fallout)."
Almost all of the Top 100 companies have credit lines, he said, adding that some retailers won't get renewals when it comes time. The same holds true for manufacturers, too, he said, noting a report early this month that upholstery producer New Generations had shut down after its lender cut off its credit line
Epperson said the credit situation seems to be improving everyday, but the sticking point is that lenders are looking at trailing 12-month results when weighing credit renewals. "Would you want to lend to this industry based on the last 12 months?" he said.
In what may be a trend, this year's Top 100 again lagged the sales pace for all U.S. furniture stores, which did an estimated $50.22 billion in 2008, down 7.7% from the year before.
Epperson believes this lagging performance probably has something to do with the mix of retailers in the Top 100 vs. the mix of smaller players, which includes a greater percentage of midpriced to higher-end stores. That market segment probably held up better last year, because it is not as credit reliant as that of the more promotional-leaning Top 100, he said.
Only 17 of the Top 100 companies generated sales increases last year. And one of them - No. 71 Roomful Express Furniture - grew by less than 1%. No. 81 Gardner White was flat, and reliable year-over-year comparisons couldn't be calculated for five newcomers on the list. The rest - 77 companies - saw sales decreases last year (another unfortunate record), which compares with 56 companies posting sales decreases on last year's Top 100 and 26 with sales decreases the year before that.
There was a bit of shifting going on among the Top 10, but not at the very top, where the Ashley Furniture HomeStores network repeated at No. 1 for the third consecutive year, despite a more than 15% decrease in sales to about $2.1 billion. That equates to a $380 million drop in net sales, the largest net volume decrease of any Top 100 company this past year.
Berkshire Hathaway's furniture division moved up from No. 5 to No. 4, trading places with Williams-Sonoma. Liverpool, N.Y.-based Raymour & Flanigan managed the biggest leap among the Top 10, climbing three places to No. 7 as expansion helped drive an 8.2% sales increase to $953.7 million.
The only other retailer in the Top 10 to post an increase was No. 2 Ikea, which opened four U.S. furniture stores in its fiscal year ended Aug. 31, and increased furniture, bedding and accessories sales nearly 9% to $1.95 billion.
The nine newcomers to this year's ranking include two from last year's "Furniture stores to watch" list - No. 94 Easy Life, the promotional to midpriced southern California retailer that grew by two stores last year to 16 units; and No. 100 Conlin's of Billings, Montana.
Also on the list for the first time are the home furnishings stores of two department store chains - No. 37 Macy's Furniture Gallery, with an estimated $200 million in furniture, bedding and accessories sales at 65 stores last year; and No. 67 JCPenney Home Store, with 27 stores and an estimated $85 million in sales.
Two Ashley Furniture HomeStores dealers - No. 75 Hill Country Furniture Partners, with stores in Texas and Washington, and No. 88 Spencer Enterprises, with stores in Tennessee, Kentucky and Mississippi - made the list standing alone with estimated sales of $75.7 million and $61.1 million, respectively. It should be noted that adjustments were made to the Top 100 combined sales and store-count tallies to eliminate double counting (see methodology).
Other newcomers tracked for the first time were No. 89 Hudson's of Sanford, Fla., with estimated sales of $58 million at 24 stores; No. 90 Furniture Factory Outlet of Muldrow, Okla., estimated at $55 million in sales at 27 stores; and No. 95 Severegn Furniture Management, owner of high-end Sheffield Furniture & Interiors, Danker Furniture and the former Gallahans of Fredericksburg, Va., with total furniture sales estimated at $50.7 million.
Rancho Cucamonga, Calif.-based Living Spaces jumped the greatest number of spots up the Top 100 - 21 notches to No. 61 - thanks to list-leading percentage increases in sales and store count. The retailer, which has modeled parts of its business after Houston-based Gallery Furniture, doubled its store count to four units with the opening of stores in Van Nuys and Irvine, Calif., and grew sales an estimated 25.6% to $98 million.
Ikea was No. 1 in net volume growth, adding $160 million in furniture, bedding and accessories sales. No. 11 Sleepy's followed, growing sales by $137 million, and then came No. 7 Raymour & Flanigan, which grew by nearly $72 million.
The greatest percentage sales decrease belonged to No. 46 Hendricks Furniture Group, down 40.4% to an estimated $140 million. Hendricks has been significantly consolidating operations, selling most of its 17 Thomasville stores and closing the others last year. Today, its store count stands at 5, compared to 12 at the end of 2008 and 29 in 2007.
Median sales per square foot for the Top 100 was $233 based on the 44 retailers reporting, down from $276 for last year's Top 100. No. 54 Gallery Furniture again led the group with average sales per square foot of $1,155 - a number that blew away the others on the list, but was down from $1,214 a year ago. Other strong results in the category came from No. 3 Rooms To Go ($800) and No. 34 Room & Board ($761).
No. 83 PMD Furniture Direct led in the category of median stock turns, turning its inventory an average of 19.2 times. With 25 companies reporting, the median stock turn level for the Top 100 was 5 times.
Median gross margin for the group was 45%, based on 23 estimates with No. 14 Select Comfort's 58.9% average gross margin leading the pack, despite the bedding chain's 23.3% sales drop to $533.2 million.