Sourcing focus pays off for Havertys
Retailer maintains relationships in Asia
Clint Engel -- Furniture Today, May 11, 2010
 Clarence Smith |
ATLANTA — In an earnings conference call last week, Havertys opened a window into the trials of operating in a furniture world dominated by Asian sourcing - and what it's taking these days to come out on top.
Clarence Smith, president and CEO of the Atlanta-based Top 100 company, told the investment community during the call that Havertys is having discussions with some of its suppliers about price increases - something many in the industry have seen coming for a while now -"but we've been successful in keeping our costs under control due to our long-standing commitments to our core vendors."
"Pricing has caused and will cause some shifts in our merchandise lineup," he said, adding, "We remain dedicated to providing a superior value in our niche."
Asked later if those shifts could involve sourcing changes or tweaks to product from the same sources, Havertys Senior Vice President of Merchandising Richard Gallagher said the retailer has "a menu to choose from," including dropping certain product to switching production to a factory that's not facing the same pricing pressures because of better efficiencies.
But he added, "There's been very little of that because most (suppliers) are very committed to doing business with Havertys and it's in their best interest to keep their product on our floors. That's what's running their factories."
While Havertys is discussing direct price increases on product, Smith said it hasn't experienced the container shipping delays that many in the industry were facing earlier this year, "due to our strong contracts with shipping lines and our communications and logistics systems."
The 119-store retailer has several ocean carriers available to it from "all our major Asian ports," which he said helps insure that goods get on the ships when requested, with transit times that allow for a smooth flow of furniture at its distribution centers.
Smith also confirmed that many Chinese furniture factories saw fewer than expected workers return to work after the Chinese New Year in February and for that reason, had a tough time ramping up production. The problem has since improved slightly, he said, with most suppliers now increasing their production and shipping sooner than originally planned.
"We have had a few supply interruptions due to factory closures, but for the most part we're in the larger and stronger facilities in Asia that have worked through most of the problems," he said.
For the first quarter, Havertys posted its third consecutive quarterly profit, earning $2.4 million, and a 10.1% same-store sales gain.
Asked during the call about the retailer's market share gains and who might be on the losing end of this, Smith said he believes it's the independent furniture players "who will continue to suffer and fall out of the marketplace just because they can't get the overall support."
"Those who are not matched up with major players (in Asia) and don't have the resources to do that (will be affected)," he said. "They're going to have to go through middlemen. They're going to have ... higher costs."
They also won't have exclusive goods that can support higher margins, he said.
"And they not going to be able to get the product," Smith said. "I think that's going to be a real challenge. As business starts to get better, who gets the product from major factories in Asia? That's why we're spending a lot of energy building those relationships, staying on top of them, giving them larger cuttings, paying bills on time - all those things we think are important to maintaining those relationships."
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