Business Spotlight: Showroom Ready

Springfield is a middle market when it comes to Haverty Furniture Co. Inc. (NYSE: HVT) store sales.

Cleveland Tubbs was brought in to change that – in time.

Tubbs transferred in February from the Louisville, Ky., market, one of several promotions in his five-year career with the furniture chain. He brings a corporate accolade: The Louisville store earned a second-place finish in Haverty’s President’s Cup, recognizing its $10-$16 million annual sales.

As general manager in Springfield, Tubbs and his team have a five-year plan to raise the store’s sales to the $10 million range. Last year, it finished over $7 million.

“We’re hoping we can have some incremental increases. We’ve been growing here,” Tubbs says, pointing to a $1.2 million showroom remodel unveiled in August.

The new look is meant to mimic current home interiors with urban designs in hardwood flooring and concrete accents.

“We’ve updated every light we have in the store so it shows the true natural color of the furniture,” Tubbs says.

Sales of master bedroom sets, mattresses and motion recliners compete for about 10 percent of sales apiece, or more, but Tubbs says upholstery sales represent 20-40 percent of the business locally. Two years ago, the company launched an in-house interior design program, called H Design.

“We create a plan for the customer to complete their full fashion look,” Tubbs says, noting up to 20 percent of  local customers utilize the free service.

Furniture fragmentation
The price points at Haverty’s range from $600 to $2,000 for sofas and $2,000 to $4,000 for bedroom collections. Targeting the middle to upper price range, Haverty’s competes locally with La-Z-Boy, Ashley, Wheeler’s and Missouri Furniture stores.

Tubbs has gotten to know these names. But also emerging are the department stores that carry furniture pieces as well – Target and Macy’s, for instance.

“The furniture business is highly fragmented. You have several companies that cross over into the same categories you sell,” Tubbs says. “You have to be very developed and qualified at educating customers why your product is different.”

A quarterly industry update released by First Research in September identified 52,000 establishments in the U.S. home furniture and housewares stores industry, representing annual revenue of about $105 billion. But the 50 largest companies generate about 45 percent of the sales.

As interest rates and the housing market goes, so goes the furniture industry. Personal income is another key economic indicator influencing expenditures at furniture stores.

According to the U.S. Bureau of Economic Analysis, personal income grew 1 percent in the second quarter, and Missouri’s income growth was slightly above the national average.

As income relates to expenditures, the BEA’s annual personal consumption expenditures report indicates deceleration of 3.6 percent nationally last year. A bright spot in the BEA report for furniture sellers is the 4.2 percent growth in expenditures in the housing and utilities category. And an encouraging stat for Tubbs: Missouri was one of only three states last year to post an accelerated personal consumption expenditure rate.

Across Haverty’s 124 stores in 17 states, sales topped $800 million and net income bounced back from $8.5 million in 2014 to $27.8 million in 2015. According to second-quarter financials, Haverty’s net sales were up 2.7 percent the first six months of the year and comparable store sales rose 2.3 percent. And similar to Springfield’s store numbers, custom upholstery orders were trending up 5.5 percent.

Form and function
One way to cut through the furniture clutter, Tubbs says, is with technology.

Haverty’s has had a mobile site for a few years, but recent updates include a virtual tour of the store and on-screen fabric changes.

“Customers can change those colors from their smartphone and see what it looks like,” Tubbs says. “You started your buying cycle by looking at our website – 70 percent of customers look at the site before walking in. We’re married to our smartphones now.”

Also online are two-dimensional and 3-D room-planning tools. That’s not to say brick-and-mortar operations are any less significant.

Inventory is strategically placed in the 50,000-square-foot showroom and a nine-man distribution crew load up the store’s two trucks from a 10,000-square-foot attached warehouse.

Each month, about 30,000 pieces are delivered within a 50-mile radius. Tubbs counts multiple pieces for a single unit of furniture.

Corporate buyers attend the furniture markets, often held in Las Vegas and High Point, N.C., to see the latest styles and select Haverty’s inventory.

Much of it comes from the American furniture mecca in North Carolina. The look of the products coming in is a weathered, rustic style with ash and oak woods.

“People really like that weathered, rustic, light-to-medium colored look,” Tubbs says. “Most furniture stores are doing very well with it.”