FBI to retarget brands
Also will consolidate back-office jobs
By Jay McIntosh and Larry Thomas -- Furniture Today, October 29, 2007
New York — Furniture Brands International plans to overhaul its far-flung organization by targeting designers for its upper-end brands, consolidating back-office operations, and implementing a new product development strategy.
In a presentation to securities analysts here last week, the No. 2 U.S. furniture source also said it will emphasize growing its Thomasville and Drexel Heritage dedicated store networks, but may close some of its company-owned Lane and Broyhill stores.
Ralph Scozzafava, vice chairman and CEO-designate, said the midpriced Lane and Broyhill brands will be targeted to traditional furniture stores and mass-market retailers, while dedicated stores will be the primary focus of the higher-priced Thomasville and Drexel Heritage brands.
The company's other high-end brands, including Henredon, Pearson, Laneventure and Hickory Chair, will be targeted to designers, he said.
Scozzafava told analysts the brand strategy is a key element of FBI's transition from a holding company to an operating company.
Other key parts of the transition include combining back-office operations such as human resources, finance, information technology and supply chain management.
"We have too much infrastructure, and we will deal with that," said Scozzafava.
In addition, the company soon will begin implementing a new product development strategy that will involve considerable consumer research and testing before a product is put on the market. Each brand will continue to design its own products, but a chief marketing officer will be named to ride herd over the process for the entire organization.
"We don't have a great product development strategy," Scozzafava acknowledged. "It's more art than science ... but we want to bring a little bit more science to it."
He described 2007 as a year of "cash flow and clean up," but said 2008 will be a year to focus on improving margins.
In 2009, the company will be able to focus on improving margins and growth, he said.
With the dedicated Thomasville and Drexel Heritage stores, Scozzafava said the first phase will involve strengthening the business, and phase two will be to expand the store networks to cover all key U.S. metro areas.
"Drexel Heritage is understored," he said. "There's no question consumers know the brand. There will be a major push" to open more stores.
Scozzafava said FBI's board approved the strategic plan in August, and the company began implementing it immediately. He said Furniture Brands has the resources to remake itself, with a cash reserve of $75 million and more cash expected to be raised with the previously announced sale of HBF, its contract unit. The sale is expected to close in the first quarter of next year.
Among the other moves that are planned:
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China-based arm FBN Asia will handle all sourcing. Currently, each brand can source on its own or through a third party. One result is expected to be a greater availability of mixed containers.
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SKUs will be reduced, although Scozzafava didn't indicate by how much. New products will be screened before launching to make sure they will generate an adequate gross profit margin.
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Lean manufacturing practices will be spread company-wide, based on the model of Hickory Chair, which has involved all of its employees in a continuous campaign to improve the way it operates.
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Even though its earnings are way down this year, Furniture Brands will continue to pay its stock dividend. "We're not going to react violently to one year that's been bad in the marketplace and penalize our shareholders," said Scozzafava.
Many of the changes will make Furniture Brands more like a conventional consumer products company — the kind that Scozzafava, most recently a top executive at gum giant Wrigley, and some other recent FBI hires are from.
As last week's meeting opened, executives acknowledged an outside force that might affect the company's future, but said they couldn't comment on it. Affiliates of Samson Holding, the big China-based furniture manufacturer headed by Samuel Kuo, disclosed Oct. 1 they had acquired 14.9% of Furniture Brands' stock. Samson approached FBI in July about a possible merger, but FBI executives said they declined to pursue it.
Lynn Chipperfield, Furniture Brands senior vice president and general counsel, said the new strategic plan was formulated and the meeting to announce it was scheduled well before the Samson disclosure.
Furniture Brands has posted a Webcast of the four-hour conference with the analysts on its site at www.furniturebrands.-com.
| Acknowledgements | ||
| Senior Contributing Editor Carole Sloan contributed to this story. | ||
