Sun Capital picks up pace in retailing arena
Wickes, Nationwide among the firm's growing holdings in furniture
By Clint Engel -- Furniture Today, April 30, 2007
Boca Raton, Fla. — In 2002, Sun Capital Partners entered the home furnishings arena and hit its retail furniture stride in a big way.
While its first purchase was on the manufacturing side — Lexington Home Brands — it quickly moved to retail that year with the acquisition of Nationwide Warehouse & Storage (now Nationwide Mattress & Furniture Warehouse) of Norcross, Ga.
It followed in August 2002 by teaming up with a Rooms To Go affiliate to buy Wickes Furniture of Wheeling, Ill. (later buying out RTG's stake), then closed its industry buying frenzy that year with the purchase of The Mattress Firm (which it recently sold).
At the time of the Wickes deal, then Sun Capital Vice President Michael Kalb — now a managing director — stated what was becoming obvious: "We love the home furnishings market," he said. "This is now our third deal in (furniture) and we will continue to look at new opportunities in the industry."
Since then, the furniture world has seen Sun snap up Rowe out of bankruptcy, acquire importer Powell, take a 14% stake in Design Within Reach and 5% stakes in Furniture Brands International and Pier 1 Imports.
"They're very, very smart men and they look for opportunities where they see low valuations," said Jeff Seaman, President and CEO of RTG, who counts himself as both an investor in Sun Capital funds and a friend. (Seaman went to the University of Pennsylvania's Wharton School of Business with Sun's founding partners Roger Krouse and Marc Leder.)
Wickes President and CEO John Disa, who came on board shortly after RTG sold its interest in the retailer to Sun in 2004, said the investment company's retail strategy has not changed. Disa said it is no different than Sun's overall strategy of "looking for underperforming companies — either undercapitalized or under-managed — and getting them focused on a viable strategy to build enterprise value."
"That's their mantra for all their companies whether it's retail or manufacturing," said Disa, who worked with Sun briefly at the former One Price Clothing Stores before the Wickes deal.
Since Wickes was acquired, Sun has invested millions of dollars in systems and other infrastructure overhauls at the chain. At the same time, Wickes has moved to expand its geographic reach and market share.
Last year, Wickes opened six stores in its primary Chicagoland and greater Los Angeles markets. In March, it opened its 41st showroom in Beaumont, Calif. — the early stage of a much larger plan to open a dozen new stores this year, including its first two to three units in Las Vegas.
"(Sun) brought capital when they bought the company," Disa said. "They brought strong leadership, strong commitment toward excellence and a very professional team that helped us shape strategy and grow the business."
Asked if Sun was essentially prepping Wickes for sale similar to The Mattress Firm, which Sun sold to private equity firm J.W. Childs and senior management earlier this year, Disa said, "Their long-term goal is to maximize enterprise value (and profitability) whether through sale, merger — whatever you need to do to maximize value."
If there is one thing that's changed about Sun Capital since its 2002 entry into the industry, it's how much more buying power it has today, RTG's Seaman said. "It's not just furniture," he said, "They're a big player in retail," with holdings such as Mervyns, Shopko, Drug Fair and Big 10 Tires. Retail furniture represents only about 4% of the total revenues of Sun's portfolio of companies (see the list at www.suncappart.com).
"They manage a lot more money than they used to, so there's no acquisition in our industry that's too large for them if they wanted it," Seaman said. "And they have a lot more depth to their organization (now).
"They're a force, and they should be taken very seriously."
