Sessions focus on dealing with tough times
By Furniture Today Staff -- Furniture Today, September 1, 2008
RICHMOND, Va. — At past dealer meetings, W.S Badcock CEO Don Marks and other executives of the Top 100 company have dressed in all sorts of costumes to show spirit and build excitement for the hundreds of Badcock dealers in attendance.
Marks has been a cowboy — a spoof on the Ben Cartwright figure from “Bonanza.” He's been the medieval Lord Donald the Bold and he's donned a turban for his take on the late Johnny Carson's Carnac the Magnificent character.
But there were no special costumes for the annual meeting this time at the Richmond Marriott and convention center. The mood was decidedly more serious as Badcock dealers — especially in Florida — have been up against the toughest business climate in memory.
The crowd was even smaller, in part because Badcock brought fewer corporate employees, but also because of the distance for some dealers from Florida, who decided to stay home during tough times (next year's conference is planned for Savannah, Ga.). Then there was Tropical Storm/Hurricane Fay, which wreaked havoc with some travel schedules as the storm came and went over Florida four times.
Silly was out this year. There was time to unwind at two dinner parties, but during the business session, Marks and other executives drilled right down to business. They acknowledged some weaknesses, explained new actions the Mulberry, Fla.-based corporation was taking to help its Badcock Home Furniture & more retail partners, and reinforced all the ways it has partnered with them in good times and bad to share the burden of expenses and provide support so that both the corporation and dealers prosper.
The theme of this year's meeting was “Better Together,” and each executive's presentation was crafted to support it. Marks, who will retire as CEO at the end of this year, noted that many dealers have wanted to know where the rest of the profit margin goes after the dealer gets his or her 25% commission. “Or put another way,” he said, “why don't dealers get more?”
Some of the company's many investments are taken for granted, Marks told the group. They are “either not fully understood or not fully appreciated.”
“Whenever this happens, it means opportunity is lost. Value is left on the table.”
Much of the business session here was an elaboration on the millions of dollars the Badcock corporation spends on advertising, inventory, buying services, Web development, support and other aspects of the business that would normally fall to independent furniture stores.
One big surprise came when Bill Daughtrey, executive vice president of merchandising and marketing, announced an icing-on-the-cake initiative that garnered a few “wows” and an ovation from the 700 people attending. Starting in October, the 50-50 spit of strategic advertising expenses between the corporation and its dealer base will be done away until the June 30 end of Badcock's fiscal year. Instead, the corporation is going to absorb the entire cost.
The initiative is designed to take some short-term cash flow pressure off dealers during the economic slump, Marks said. It should equate to about $4,000 in savings per store through the rest of the year.
This year alone, Badcock is making nearly $73.8 million in expenditures — or $239,000 per store — on regular and special investments, covered by the corporation for the benefit of both the company and its dealer base of promotional to midpriced stores, said Chief Operating Officer and soon-to-be CEO Mike Price.
Some of the main areas of investment summed up by Price include $17.8 million for advertising this year, including the special deal announced here; nearly $900,000 last year for the development of Badcock's upgraded Web site being launched in September with e-commerce capabilities; $9.7 million in bad debt allowances, and more than $34 million for technicians, advisers and other expertise available to dealers daily.
This excludes some $95 million in inventory that is paid for and carried by the corporation in stores and warehouses until it is sold to the consumer and the dealer gets his or her commission.
Badcock's supply chain improvements from two years' past have saved the company $4 million in costs and improved its in-stock and “available for sale” rate to more than 90% from 76% previously, Marks said.
Nevertheless, instances of product shorting still occur, he said, so the company is now addressing that problem by building a reliable data foundation for forecasting and doing a better job of tracking and preparing for the sales lift that results from promotions.
This time last year, Marks was projecting a turnaround in business, but he now said a full-fledged uptick could be another year or two away.
Revenues this past fiscal year were down about 5% from the year before and have been running behind by about the same rate in July and August, he said.
Badcock is No. 16 on Furniture/Today's Top 100 with estimated furniture, bedding and accessories sales in the 2007 calendar year of $510.1 million.
Marks noted in his address to dealers that once the economy and housing market finally begin to recover, “the strength of the Badcock system will put us in an excellent position to capture the deferred demand that is building up out there, day by day, home by home.”
Some 70% to 75% of Badcock's revenues flow through an in-store credit program, and dealers have the ability to extend credit liberally, said Bill Pou, executive vice president of store operations. That's something working in favor of Badcock in these times of tight consumer credit, when the retailer is servicing a consumer “who has heard 'no' a lot of times in her life,” he said.
Pou urged dealers here to loosen up a bit and make sure they are taking full advantages of the full bad debt allowance covered by the corporation.
Last year, bad debt allowances taken by dealers amounted to $6.9 million, while the company was prepared to cover $9.7 million.
Also working in the retailer's favor: for the first time in years, the dynamics of furniture pricing seem to be shifting from deflationary to inflationary, Marks said.
“An inflationary psychology is taking over to some degree,” he said. “In the not-too-distant future, it will be realistic to enact real price increases for home furnishings,” which means Badcock dealer commissions will generate more revenue.
Change is coming, he said, “and I believe that we have a lot to look forward to and to get ready for.”
Remembering Don Marks...
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09/14/2003Don Marks dies at 62
10/12/2009Badcock aims to grow
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