by Products supplied by both manufacturers represented 7% of merchandise purchases thus far in 2022
COLUMBUS, Ohio — Given its latest quarterly performance, Big Lots didn’t need any more bad news for its furniture segment.
But that’s what happened on Nov. 21 when news broke about one of its key suppliers — United Furniture Industries and subsidiary Lane Home Furnishings — abruptly ceasing operations.
It was bad enough that United’s and Lane’s entire estimated workforce of 2,700 workers were let go without warning. But Big Lots also just lost at least one, and possibly two major upholstery brands — Lane, which produces a mix of sofas, sectionals and recliners — and Broyhill, much of whose upholstery, sources tell Home News Now, has been produced by Lane and United.
As expected, Big Lots has not responded to multiple requests for comment.
But being a public company, it has had to let investors in on what’s happening. Here is what it revealed in its latest fiscal quarter ended Oct. 29.
“United Furniture Industries Inc. (“UFI”) unexpectedly and without notice to us ceased operations and terminated its employees on November 21, 2022. Furniture products supplied by UFI to the company represented approximately 7% of our merchandise purchases in the year-to-date 2022. We are closely monitoring this developing situation, evaluating its potential impact on our business and reviewing our rights and legal and strategic options with respect to UFI.”
It went on to note that, as part of the process, “we are investigating our ability to acquire from UFI finished goods and work-in-process inventory that relate to outstanding and unpaid purchase orders that we currently have with UFI. In addition, we are identifying and believe that we have identified merchandise sourcing alternatives to fill near-term gaps in our product offerings that may result from UFI’s cessation of operations, including, among other things, obtaining merchandise from other furniture vendors, pursuing closeout opportunities and acquiring additional non-furniture merchandise.”
It added that because its “investigation” is ongoing and due to uncertainties regarding the situation, “we cannot determine at this time the ultimate impact of UFI’s cessation of operations on our results of operations. Over time, if we are unable to secure alternative sources of merchandise on acceptable terms to replace merchandise previously sourced from UFI, our results of operations could be materially adversely impacted.”
That in a nutshell is telling most everyone what they already know about the potential impact on Big Lots’ operations.
But to gain the confidence of the investment community, it’s pretty clear the company will have to move fairly quickly and be even more transparent about its plans given the importance of the furniture segment to its overall business, which represented by far the highest amount of sales of any given category at 25.2%.
And business overall is not looking good at least in the latest quarter ended Oct. 29. Total net sales decreased 9.8% or by $131.4 million — and that’s with additional stores opened during the period. Its report noted that comparable sales for stores open at least 15 months, plus e-commerce net sales, decreased $151.5 million, or 11.7%.
Its operating loss rose to $130.8 million, compared to a loss of $4.1 million last year.
In the furniture segment, sales fell by $97.5 million, or 24.3% to $303.7 million from $401.3 million the same period last year when the category represented about 30.1% of the overall business.
In its report, it noted the furniture category in particular was most impacted by “our customers’ discretionary spending habits due to economic pressures, inflation and the absence of government disbursements, as discussed above, and as compared to the third quarter of 2021.”
Based on ongoing economic pressures and inflation, these consumer spending habits may not change anytime soon. And as inventories of the Lane and Broyhill product dwindle, the company faces increased pressure to find a replacement on the floors.
Based on a look at what’s on the floor and its website, the good news is that Big Lots still has plenty of product supplied by Ashley, Franklin and others that could help fill some of the void created by United and Lane.
But given the percentage of products supplied by United, the industry and investors will be eager to hear what the next steps are for replacing these other well-known and important industry brands.
