More retailers opening stores
Clint Engel -- Furniture Today, February 23, 2011
HIGH POINT — For every furniture retailer either closing stores or closing up shop completely these days, the industry is seeing a growing number of players moving in, often snapping up real estate on the cheap and beefing up their market share.
While it may be a long time before the industry makes up for all the storefronts it has lost in recent years, a trend in store openings appears to be building momentum. Here's just a sampling of what's happened in the past 100 days alone:
► Victoria, Texas-based Lack's Stores filed for bankruptcy in November, but subsequently this month RoomStore of Richmond, Va., and Rooms To Go of Seffner, Fla., each acquired lease rights to a pair of Lack's 36 Texas locations; separately, the unrelated Lacks Valley Stores of Pharr, Texas, acquired the Whalens Furniture store in San Benito, Texas, for a little expansion of its own.
► Pittsburgh's Roomful Express announced liquidation of its 13 area stores in December after defaulting on bank loans and entering receivership. A month later, Levin Furniture of Smithton, Pa., upped its presence in the Pittsburgh market, leasing a 53,000-square-foot store in Greenburg, Pa. Its CEO said the company was moving fast in the wake of its competitor's demise.
► Earlier this month, Farmington, Mich.-based Gorman's reopened in the former Israels Designs for Living showroom in Grand Rapids, Mich., after a 15-year absence and after Israels and sister company Klingman's Furniture announced they were closing due to debt repayment problems.
Many more retailers have opened or announced openings already this year, although the moves are not tied directly to a competitor's fall: Warren, Mich.- based Art Van Furniture grand opened three stores last month and just announced the grand opening of its third Art Van Pure Sleep bedding store this past weekend (Feb 19-20); in South Florida, another hard-hit area of the country, both El Dorado Furniture and City Furniture opened large showrooms with environmentally friendly features; and Howard Fineman, the Ashley Furniture HomeStores licensee in Jacksonville, Fla., opened his third location (see story, pg 8).
There's more, including Morris Furniture, which took additional space in the former Roberds Grand complex in Cincinnati for a now 144,000-square-foot Home Center with five store fronts that CEO Larry Klaben expects will do $30 million in annual sales; Weekends Only Furniture Outlet opened its sixth and largest store in St. Louis; HOM Furniture of Coon Rapids, Minn., will open three stores next month in Sioux Falls, S.D., and Sioux City, Iowa, including two Gabberts Design Studio and Fine Furnishings, its first expansion of the high-end concept since HOM acquired the Edina, Minn.-based retailer in 2008; and competitor Furniture Outlets USA of Sioux Falls said it would convert a liquidation center in Elk River, Minn., into fullline Furniture Mart and Ashley Furniture HomeStore.
Real estate still a good value
"There's a definite better attitude by the existing smaller, medium and larger retailers on at least trying to take advantage of potential outstanding real estate values," said Julius M. Feinblum, president of the industry specific Julius M. Feinblum Real Estate in Plainview, N.Y.
"The pricing on real estate is still a very good value, and the retailers that have survived are seeing an uptick in business. It's not consistent yet, but enough to give them encouragement."
Feinblum said business for his own firm started picking up last year. For the most part, that's the result of retailers looking to fill in existing markets, and they are cherry picking the best values, "which is prudent and smart, and they will probably all make money within the next three years on these investments," he said.
New real estate opportunities are hitting marketplaces across the country, not just from weak furniture stores folding but from the big-box non-furniture segment, including Blockbuster, the video chain that filed for bankruptcy in September and has been closing hundreds of stores, and Borders Group, the giant book retailer that filed for bankruptcy this past week with plans to close about 200 stores.
However, non-furniture spaces can be more difficult for furniture retailers to justify, Feinblum said, because of the tenant improvement costs that come with them vs. taking over a former furniture store where improvement costs are often minimal.
The first signs of a sustainable industry turnaround - and we're not there yet, Feinblum said - may lead more retailers to take a jump into new markets, not just fill-in locations or fill-in markets that expand a retailer's reach with existing distribution.
But "at this point, we're not seeing that," Feinblum said, noting one exception in the Ashley HomeStores licensees. "Nobody has got the guts to take that chance yet."
Gorman's would be another exception, although the upscale Detroit-area retailer operated in Grand Rapids years before, in the very same space it has taken with the Israels deal. And it wasn't strictly the real estate that drew them back, either.
"Here was also an opportunity to pick up experienced, dedicated staff," who in many cases had worked for Gorman's years ago, "in a matter of hours not agonizing months," said Gorman's President Tom Lias. "And we get to skim the cream of what's available."
Indeed, RTG CEO Jeff Seaman citied a similar reason for plans to reopen the former Lack's stores in Corpus Christ and Midland, Texas, about a month after its deal to acquire the leases.
"We want to get up and operating because you have a lot of good people there," he said.
In Pittsburgh, meanwhile, Levin Furniture moved quickly to open its seventh area store partly because Roomful Express was leaving the market.
President Robert Levin told Furniture/Today, the real estate opportunity - 53,000-squarefoot store on the ring road of Westmoreland Mall in an eastern Pittsburgh suburb - had been available for awhile and that the retailer had looked at it before, but Roomful's departure helped Levin to pull the trigger sooner rather than later.
"Clearly it's been a difficult environment ... and opportunities have emerged," Levin said.
"The ones that have the ability to expand - as long as they're not putting themselves at risk - are the ones that are going to prosper and thrive. We still feel we're being conservative, but this was just a good opportunity for us."
Levin said his company has been conservative for the past three years now, and by that he means it hasn't extended itself to the point where the risk of modest expansion would be unthinkable or unaffordable. "We're not taking on any debt to do this," he said.
While it seems more furniture retailers are willing to take that modest risk these days, it's not a completely new phenomenon.
Jerry Epperson, industry analyst and managing director of Mann, Armistead & Epperson, pointed to Bob's Discount Furniture and Raymour & Flanigan in the Northeast and El Dorado and City Furniture in Florida as retailers that have been opening stores on a relatively steady basis for years.
"And I think in many cases they're taking advantage of openings in marketplaces that are no longer being served because of failure of a competitor or weakness of a competitor," he said. Epperson added that the national vacancy rate on retail space is down dramatically over the past year despite continuing talk of a commercial real estate glut.
"I think it's perhaps the best indicator we've got that there are people out there who have confidence and see growth... going forward," he said. Epperson said there's no question the industry has reached a turning point, adding, "I feel better about our industry than I have in three to four years."
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