Changing cast in Top 100
By Jay McIntosh -- Furniture Today, December 21, 2009
HIGH POINT — Size is no guarantee of success in the furniture retailing business, a look at Furniture/Today's Top 100 rankings for the past decade reveals.
For some, it seemed more of a curse.
More than a third of the retailers that were on the Top 100 in 1999 — 34 companies — were off the list by 2009. Each year's list was based on estimated furniture, bedding and accessories sales from the previous year.
What's more, 25 of the dropouts went bankrupt or closed their stores for other reasons. Leading that ignoble list were three retailers that were in the Top 10 in 1999: Heilig-Meyers, which was No. 1 (and is mostly gone, although pieces of it survive as Mattress Discounters and Richmond, Va.-based The RoomStore); Levitz, which was No. 5; and HomeLife, also known as Sears HomeLife, which was No. 6.
Several other companies fell off the list because they were replaced by faster-growing retailers and in some cases by new startups — the largest of which was Ashley Furniture HomeStores, the current No. 1. Ashley joined the Top 100 in 2002 and had rocketed to the top by 2007.
And the list of droputs doesn't include four retailers that were acquired by other Top 100 companies, or five that changed their names. That means 38 companies have joined the list in the past decade — replacing the 34 that dropped off and the four that were acquired.
Meanwhile, among the companies that were on the list in 1999 and were still there this year, 11 saw their sales grow of more than 200% in the decade. Leading that pack were two full-line chains based in the Northeast, Bob's Discount Furniture (with 2008 sales up 480% from 1998) and Raymour & Flanigan (up 412%), and a pair of sleep-shop heavyweights, Sleepy's (447%) and Mattress Firm (418%).
In some cases, the members of the fast-growing group took advantage of their competitors' troubles to add market share, enter new areas or make acquisitions.
The largest retailer in this fast-growing bunch, Ikea, brought its globally proven business model to more U.S. cities, starting the decade with 13 stores in the country and ending it with 35. The Swedish retailer's U.S. furniture, bedding and accessories sales rose 326% to $1.95 billion as the company jumped from No. 11 to No. 2 on the Top 100.
And even though the industry has faced jolting changes in the past 10 years, from the rapid shift to offshore sourcing to swings in oil and materials costs and two recessions (2001-02 and the latest one), the 1999-2009 decade was not a particularly brutal period in Top 100 terms. From 1989 to 1999, the list lost 42 companies, although none in the Top 10.
What accounts for the turnover? Retailers and industry observers suggest several reasons.
Some companies “outran their headlights” by growing too fast, said Clarence Smith, president and CEO of Top 100 stalwart Havertys, which was No. 8 in 1999 and No. 13 this year.
“It's very difficult to do a national chain in the furniture business, just because getting the product out efficiently, and setting up distribution centers, is difficult and expensive,” Smith said. Atlanta-based Havertys added 22 stores during the decade but has stuck to a 17-state territory in the South and Midwest.
The starkest example of growth gone wrong was Heilig-Meyers, which was No. 1 in '99 and was off the list this year, although portions of the Heilig business survive as Richmond, Va.-based The RoomStore (No. 26 on this year's Top 100 with $312.6 million in sales) and Upper Marlboro, Md.-based Mattress Discounters (No. 76 with $75 million in sales).
Heilig acquired hundreds of stores in a years-long binge that took it to more than 1,200 units in 1998 with an empire that ranged from coast to coast. But its costs ultimately outpaced its revenues. A telling blow came when the retailer was forced to outsource its consumer financing and shut down its once-profitable in-house credit operation, which was stung by rising consumer bad debt and competition in the credit market.
Another poster child for unsuccessful expansion was Dayton, Ohio-based Roberds, which threw its resources into growth initiatives including a 250,000-square-foot store in Cincinnati that opened in 1996, as well as stores in the Atlanta and Tampa, Fla., markets. The company never got the profits it expected from the new stores and posted losses in each of the four years before it filed Chapter 11 in January 2000.
An issue related to growth is debt — which isn't bad in itself, but for many of the departed retailers grew to unsustainable levels.
Whether they borrowed money to finance growth, or to funnel money to their owners, or were left saddled with loans after an acquisition, some of the companies that failed were generating too little profit to service their debt. As one CEO said, furniture retailing isn't a high-margin game — a successful store might net 5% of sales — and generally can't support a lot of leverage.
One trait that some of the fastest-growing stores appear to have in common, meanwhile, is that they can keep up with the changes in the industry and in the consumer's shopping habits. Discounters like Wal-Mart and Costco are more of a factor than they were a decade ago. (Costco continues to sell home furnishings in its 500-plus warehouse stores, despite closing its two-store Costco Home specialty unit in July.) And for many consumers, the Internet is a fast-growing way to research big-ticket purchases.
“Today, it is about giving the customers what they want, even if they don't know what they want. That's where the innovation comes in,” said Jim Green, a consultant and former retail executive. “In its day, Levitz taught furniture buyers what they wanted. Later so did Rooms To Go. Even later Ashley did it.”
Green noted that 13 of the top 25 stores on the latest Top 100 are specialty stores or have a unique business model (such as Ashley's vertical control of sourcing, shipping and retail, or the Rooms To Go package approach), up from seven on the 1999 top 25. That points to the success of a strategy that takes an innovative approach to target a specific market, he said.
Of the 11 stores that were on the list in both 1999 and 2009 had sales gains of more than 200% during the decade, eight were specialists and three were full-line stores.
Of course, traditional full-line retailers can adapt and thrive as well. Those that have fared best on the Top 100 appear to be well-capitalized, have consistently good management, and have a clear brand and marketing message. Examples are Bob's Discount Furniture and Raymour & Flanigan in the Northeast, Oklahoma-based Mathis Bros. and the stores in Berkshire Hathaway's furniture division.
And in a trait that distinguishes the furniture business, several of the most successful retailers are family-run, even if as in the case of the Berkshire Hathaway companies they're owned by a corporate parent.
Top 10 stores, then and now
Based on U.S. furniture, bedding and accessories sales in millions the year prior to each ranking
| 1. Formerly Value City Source: Furniture/Today's survey of Top 100 U.S. Furniture Stores, 1999 and 2009. |
||
| 1999 | ||
| 1998 sales | Change from 1997 | |
| Heilig-Meyers | $2,060.0 | 19.1% |
| Ethan Allen | 962.2 | 13.9% |
| Pier 1 Imports | 780.1 | 38.4% |
| Rooms To Go | 705.0 | 20.5% |
| Levitz | 703.9 | -17.8% |
| HomeLife | 644.0 | -0.9% |
| La-Z-Boy | 593.1 | 17.2% |
| Havertys | 540.3 | 10.3% |
| Value City | 511.2 | 7.6% |
| Art Van | 490.0 | 11.4% |
| 2009 | ||
| 2008 sales | Change from 2007 | |
| Ashley Furniture HomeStores | $2,095.0 | -15.4% |
| Ikea | 1,950.0 | 8.9% |
| Rooms To Go | 1,520.0 | -12.6% |
| Berkshire Hathaway furniture division | 1,197.3 | -9.1% |
| Williams-Sonoma | 1,185.0 | -18.3% |
| American Signature1 | 1,063.4 | -5.9% |
| Raymour & Flanigan | 953.7 | 8.2% |
| Pier 1 Imports | 920.2 | -15.1% |
| Ethan Allen | 912.0 | -17.6% |
| La-Z-Boy Furniture Galleries | 833.0 | -9.9% |
A decade of Top 100s
Figures reflect furniture, bedding and accessories sales the previous year in billions of dollars. The 1999 Top 100, for example, was based on 1998 sales.
| Source: Furniture/Today's survey of Top 100 U.S. Furniture Stores, 1999-2009. |
||||||||||
| $18.2 | $19.9 | $21.7 | $21.3 | $23.4 | $25.2 | $26.9 | $29.2 | $31.5 | $31.4 | $27.8 |
| No 1: Heilig-Meyers, for third straight year. First retailer to break $2 billion in sales Notable newcomers: Select Comfort, Nationwide Warehouse & Storage, Sofa Express, The Sleep Train | No 1: Heilig-Meyers Heilig divests 343 stores including Rhodes and Mattress Discounters, which are listed on Top 100 at Nos. 13 and No. 22 Berkshire Hathaway acquires Top 100 store Jordan's of Avon, Mass. Notable newcomers: Bernie & Phyl's, Dial-A-Mattress, Stickley/E.J. Audi | No 1: Ethan Allen Rooms To Go is No. 2 as Heilig-Meyers falls to No. 3 and files for Chapter 11 protection in August Notable newcomer: Pottery Barn, No. 21 Exits: Roberds, This End Up, Expressions Custom Furniture, Workbench | No 1: Rooms To Go Heilig-Meyers sinks to No. 15 as The RoomStore/Heilig-Meyers Notable newcomer: Ashley Home Stores, at No. 39 Exit: HomeLife (also referred to as Sears HomeLife), which was No. 8 in 2001 | No 1: Rooms To Go Notable newcomers: Big Sandy Superstore, Wolf Furniture Exits: Nationwide Warehouse, Krause's Furniture | No 1: Rooms To Go Ashley enters top 10 Notable newcomer: Arhaus Exit: Sleep Fair/Mattress Warehouse | No 1: Rooms To Go Notable newcomers: America's Mattress, Design Within Reach Exits: Breuners Home Furnishings Corp., Benchmark | No 1: Rooms To Go Exits: Homestead House, Wood-Armfield Levitz closes its Seaman's chain | No 1: Ashley Furniture HomeStores Exits: Rhodes, Kirschman's, Gabbert's (later sold to Top 100 company HOM Furniture) | No 1: Ashley Furniture HomeStores Exits: McMahan's, Storehouse, Rockaway Bedding | No 1: Ashley Furniture HomeStores Notable newcomers: Two Ashley dealers, Hill Country Partners and Spencer Enterprises Exits: Levitz, Wickes, Sofa Express, Domain, Bombay, Leath/Modernage, Norwalk — The Furniture Idea, USA Baby |
| 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
Featured Company
-
Wright Labels
Bill and Tom Wright founded Wright of Thomasville in 1961 on the idea that printing was a creative medium and the belief that "a promise made is a promise kept." The Wright brothers focused their attention on providing exceptional printing for the... more
VIEW ALL GALLERIES
