Covington Holdings Inc. owner Andrew Covington is fleet-footed in a fast-paced furniture industry.
As the operator of Ashley Furniture stores in southwest Missouri and northwest Arkansas, Covington has opened four stores in the company’s first five years.
Covington considers the latest addition – a Rogers, Ark., store in November 2011 – a big gamble because the company already operated an Ashley store 17 miles away in Springdale, Ark.
“We hadn’t really planned to go to that area as fast as we did,” he says, noting a vacant Sportsmen’s Warehouse building available for $2 million was too good to pass up. “That has turned into our premier location for Ashley in northwest Arkansas. Rogers holds the ticket for us down the road.”
The gamble paid off as first-year sales in Rogers rivaled that of the first year of business at the 1715 E. Independence St. Springfield store.
“Springfield is our crown jewel,” he says, adding the store open since 2007 represents 40 percent of the company’s $27.5 million in 2012 sales. “That’s typical for where you live. My day-to-day observations are on Springfield.”
While Springfield store sales were on their way to growing by $1 million last year, Covington added a second sales manager. Jeri Meacham was promoted to the role, joining Alexis Berg, who also serves as district manager. It’s the first store to have two sales managers.
“When something grows 10 percent, that’s phenomenal,” Covington says, adding he targets 4-6 percent same store sales growth.
Berg manages 20 salespeople on the floor as well as a designer, floor support staff and a handful of customer service representatives. She says a popular purchase recently is the $1,000 to $2,000 “instant room” that includes a sofa, love seat, rug, coffee and end tables, accessories and pillows from 12 styles.
“People can envision what it would look like in their home,” Berg says, noting customers range from the single guy who needs a $250 sofa to a property owner who spends $25,000 to outfit multiple condominiums.
Even with the expenses of a new store on line and payroll expanded by some 30 employees, the year turned out to be Covington Holdings’ most profitable yet. 2012 profit margins rose to roughly 7 percent, Covington says, against a furniture industry average of 2-6 percent.
“We make money on total volume, just like grocery stores,” he says. “Five percent is a good profit margin when you do a lot of volume.”
Covington keeps a pulse on individual store sales daily, rather than weekly, and tracks customer satisfaction through surveys issued 30 days after furniture delivery.
“In this type of economy we’re in, you have to be very timely and measurable where you look at lead measures and don’t wait for lag measures to come around,” he adds. “You don’t wait for numbers to pop out; you measure them as they’re happening.”
A need identified for 2013 is a distribution center to serve the Missouri stores – Springfield and Joplin, and any stores to come on line in the next few years – and Covington is pursuing a land purchase in south Springfield to build a 30,000-square-foot warehouse this year. The move would nearly double its current warehouse capabilities off of Kearney Street when considering the planned racking system 20 feet high.
“You’re only as good as how much you can bring product in and out,” he says, noting his 13 corporate staff members would relocate their offices into the new building.
As a licensed store operator, Covington Holdings carries Ashley Furniture house brands labeled Signature Design, Ashley and Millennium. Under the Ashley Furniture model, customer orders are sent electronically to Ashley Furniture and shipped direct from manufacturing plants in Mississippi, South Carolina, Wisconsin and California.
“I don’t have to inventory 100 pieces of each item,” Covington says. “The sofa comes in with that customer’s name on it.”
Covington says he avoids buying items from the big-city furniture markets, as well as from various manufacturers that require sales guesswork for the next six months or year. “You won’t sell them all no matter what,” he says. “The beauty of it is I’m not sitting on $2 million worth of inventory I’ve got to sell.”