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On the Road: Louis Shanks keeps evolving

Clint Engel -- Furniture Today, January 30, 2012

Louis Shanks of Texas operates this three-level showroom in San Antonio and also has stores in Houston and Austin, Texas.SAN ANTONIO - Mike Forwood's cell phone wouldn't stop ringing in the Louis Shanks of Texas showroom here.
     The president of Austin, Texas-based retailer was in typical work mode, doing many things at once - preparing for a high-impact "Retirement Sale," taking calls from suppliers, talking to a reporter and relishing what was about to happen the next day with Shanks in the Houston market.
     "I'm paying off the Fondren (Road) store Friday," he said with delight. With that payoff and the closing of the retailer's smallest Houston store - a 55,000-square-foot showroom on FM 1960 - following a final clearance sale, Louis Shanks will be in the enviable position of owning all of its real estate.
     Shanks' aversion to debt, diligent merchandising, attention to detail in display and operations and nimbleness that goes along with being a family-owned, family-run business are among the key factors that have kept the Top 100 company at the top of its game in Texas while some high-end contemporaries - in this state and in other markets - have fallen by the wayside.
     Louis Shanks ended 2011 with four stores in three Texas markets and estimated sales of $67.3 million. (The company doesn't provide sales figures, but Forwood said calendar year sales were up about 8% from the year before.)
Louis Shanks President Mike Forwood says one key to the high-end retailer’s success is its ability to quickly seize opportunities, whether it’s buying up a supply of oil paintings at a bargain price or driving business through limited-run offsite sales.     The sales increase was helped, in part, by the Houston store closing sale, which Forwood sale did nearly a year's worth of business - $5.4 million - in 10 weeks' time.
     More importantly, Forwood said Shanks has posted a profit in every one of its 67 years in business, and last year's gain was the best in six or seven years. The retailer's average gross margin is running about 44.5%, he said.
     While national market conditions are challenging, Shanks - like several competitors interviewed in this Texas marketplace - appears to be doing better than average, perhaps insulated from the economic downturn by a strong energy sector and diverse labor market.
     This year is off to a strong start. Here in San Antonio, the "Great $6 million Retirement Sale" (marketing that suggests Mike's father, CEO Amor Forwood, is stepping back a bit, at least in San Antonio) did $1.65 million in its first six days and drew about 3,300 consumers, Mike Forwood said.
     The third generation operator, who has brought his own two children into the business, said the retailer has navigated rough waters without having to change its core business model.
     "We still want to be known as the nicest store in this part of the country," he said - not just in high-end furniture but in all of retail. And as Amor is fond of saying, Shanks' main customer remains "Mrs. Gotrocks," that consumer in the Top 10% income bracket or better.
     "There are still people out there with a lot of money," Mike Forwood said. "It may seem like a small niche, but that's where the disposable income is."
     Fifteen years ago this month, Louis Shanks was featured in a Furniture/Today series called America's Best Retailers. That was two years after its 1995 entrance into the Houston market, when SHand-knotted area rugs, like those shown in the Fondren Road Houston store, are now a huge business for Louis Shanks. Feizy Rug has become the retailer’s biggest supplier.hanks snapped up three former Suniland locations. Back then, Shanks was noted in the story for its aggressive newspaper advertising, its comprehensive sales training and a tightly edited product lineup largely focused on a "Sweet 16" list of manufacturers.
     A lot has changed since then, partly out of necessity but also because that's how Shanks has always operated - adjusting quickly to take advantage of opportunities as they arise or to squarely meet new challenges.
     Newspapers used to be Shanks' biggest advertising vehicle - with six-page sections running every two weeks. No more. While the company's marketing budget as a percentage of sales remains about 6.5%, the mix has changed. The retailer uses much more TV, radio and direct mail today and has an online presence. Shanks even joined the Facebook fray, though Forwood concedes he's going kicking and screaming into social media.
     "I just hate it," he said, "but we're doing it because everyone says that's what we've got to do."
     Shanks handled advertising in-house for years, but recently hired an outside agency, Redroc of Austin, which Forwood said has been aggressive in bringing fresh ideas to the table and should be able to save money on media buys.
     Many of the erstwhile Sweet 16 suppliers, including Barcalounger, Drexel Heritage, Highland House, King Hickory and Woodmark, Shanks no longer carries and/or they are out of business. The reason, according to Forwood, is simply "product." Shanks buyers now go wherever it takes to find goods that fit its upscale niche. Some sources haven't been able to keep up.
     "It's not the Sweet 16 any more, it's the Great 48 or whatever you want to call it. It's because I've had to diversify," he said.
     While it's more woLouis Shanks recently made a big push into upscale outdoor furniture. At the San Antonio store, the retailer displays goods from Lloyd Flanders and Meadowcraft on its spacious shaded porch.rk, the broader variety has made the stores more interesting to walk through and helps Shanks offer what it has long strived to provide - a look that can't be duplicated in just any store.
     Some longtime suppliers are still go-to sources for the retailer, including Lexington Home Brands, Hancock & Moore and Sherrill. But in many other instances, Louis Shanks has had to look elsewhere for that wow factor.
     In Houston, for instance, the retailer shows a 17-foot dining table from Italian source Rho, new for Shanks. It's made from a blend of walnut, rosewood, ebony, tulip wood, satinwood and mahogany, he said, and the veneer table top is one long piece - no leaves. Above it the retailer has hung three crystal chandeliers and below the table is a $250,000 handknotted Feizy rug.
     The customer who buys the table, chairs, buffet and chandeliers and rug will pay about $450,000, Forwood said, and he has no doubt a sale is coming, although the table has only been displayed for a few weeks.
     "I wouldn't put it in the store if I didn't think I was going to sell it to somebody," he said. "It's going to take a fantastic house to put it in."
     This kind of attempt at creating unusual, unforgettable displays has never changed for the retailer, though the way Shanks goes about it is always evolving to deal with distribution challenges and the needs of consumerAn opulent table from Italian producer Rho spans 17 feet and makes a grand statement at Louis Shanks’ Fondren Road store in Houston. The table, chairs, buffet, chandeliers and handknotted Feizy rug would cost about $450,000. The rug alone is $250,000..s, who are savvier than ever before.
     "I think we're working harder and longer today than we were 15 years ago," Forwood said. The stores are open more days of the week (Shanks added Sunday hours about 18 months ago) and the company buys from more vendors.
     The word "imports" wasn't even mentioned in the section on merchandise mix in the Furniture/Today report years ago. Now, expensive, imported hand-knotted rugs are an extremely important business, and Feizy has become its largest supplier. Indeed, Louis Shanks sells more Feizy rugs each week than any piece of furniture, Forwood said.
     Bedding - premium goods from Kingsdown, Tempur-Pedic, Restonic and E.S. Kluft & Co. - and wall art also have become more important categories.
     The retailer has also made a push into outdoor furniture, displayed in San Antonio along the store's spacious porch, for example. It did more than $1 million in the category with suppliers such as Lloyd Flanders and Meadowcraft.
     With zero debt and a tight control on inventory, Forwood said Louis Shanks is able to pull the trigger on opportunities when they come along.
     In 2007, it turned about 4,000 square feet of its Fondren Road store into an art gallery, offering oils and custom artwork through a partner importer. It became a big business for the retailer, which expanded the concept to all stores.
     Later, however, Shanks' art supplier ran into a cash crunch, Forwood said, so the retailer ended up buying all the pieces in the stores at bargain pricesLouis Shanks’ bedding department in Austin features premium mattresses from Kingsdown, Tempur-Pedic, Restonic and E.S. Kluft & Co.. It's now showing them within the furniture vignettes and is making more money off the art than it had in the initial gallery format, he said.
     Several years ago, the retailer began running temporary, off-site Henredon outlet sales. In 2009, Shanks rented a vacated building at a busy intersection in Austin for one such event and rang up $750,000 in Henredon sales in a single day.
     Over time, these pop-up events have evolved for the retailer, running for longer durations and adding other vendors. But the idea and the execution is the same; Louis Shanks gets the temporary real estate for next to nothing, Mike Forwood said, then uses its cash to get great deals on high-end goods that suppliers want to unload quickly.
     At one time, Shanks officials were looking to expand, even considering a move into a fourth market - Dallas. But Mike Forwood, who is 50, says he no longer considers steady growth a necessary sign of success. He said true success is "maintaining what you do, enjoying what you do and providing for a bunch of families over the years."
     "There's not one secret to success in retail," he said. "It's all those little things my dad likes to harp on that will add up to making you successful."

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