by At the time, many of these retailers were at the top of their games, but they are gone today
I happened to be going through some old papers this week and found a ranking of the Top 100 furniture stores in 2002.
That list was made up of scores of amazing retailers that, at the time, were at the top of their games and were often thought of as category killers in their respective markets.
If you were a player on the home furnishings field in ’02, you knew these were names to be admired, and, if you competed against them, possibly to be feared.
High on the list were retailers such as Levitz, Heilig-Meyers, Art Van, Rhodes, Boyle’s, Wickes, Seaman’s and others.
These were the movers and shakers, the retailers that everyone suspected had a magical goose somewhere because it seemed that everything they touched turned to gold.
But as we all learned, looks can be deceiving and all that glitters is not gold.
Back then, those elite retailers shared top rankings on that list. Today, if they share anything, it’s probably only a memory of how they all toppled, fell and disappeared off the playing field.
Assuming hindsight is 20/20, let’s take a quick look back at the challenges that took the wheels off what were then some of the best retailers in the business.
I’m starting with Heilig-Meyers because, during the 1990s, it earned bragging rights as the nation’s largest furniture retailer, operating more than 1,000 stores nationally.
Many observers agree that rapid overexpansion marked the beginning of the end for the chain. In 1993, it gobbled up more than 100 McMahan’s Furniture stores, and at that same time also bought other chains in the west while acquiring the L. Fish furniture chain in Chicago.
Worth noting is that Heilig-Meyers would not be the only powerful furniture retailer to fail because of the one-two punch of aggressive expansion followed by the failure to generate the revenue needed to support it.
The chain also was further rocked when most of its customers, who for years had used the chain’s in-house credit, opted to use other credit cards.
Concurrently, it was reported that customers, particularly those who had always used the store’s in-house credit, had become fed up with the lower quality of the merchandise being sold.
As a result, the wheels flew off a giant that at its peak, had enough money to sponsor NASCAR Winston Cup drivers such as Mike Wallace and Bobby Hillin Jr.
In the case of Levitz, observers would probably agree that after gaining prominence early on as a pioneer as a “warehouse retailer,” the company initially sealed its fate when it piled on unsustainable debt in 1985 as part of a leveraged buyout with the help of Michael Milken, often referred to as the king of junk bonds.
Even after going public again in 1993, the retailer was choked by debt, with the final nail in its coffin coming from not adapting to changing consumer tastes in home furnishings.
Looking back, the chain’s slogan, “You’ll love it at Levitz,” clearly had a longer life than its stores did.
At its peak, Wickes Furniture, which was launched in 1971, had five distribution centers, some 43 stores, and more than 1,700 employees. But in the early ’80s, balance sheet issues emerged, and it was impacted by the bankruptcy of its parent, Wickes Corp in 1982.
After being picked up by investment firms in the late ’80s, Wickes Furniture was sold to a Taiwanese investment group that later went into receivership.
In 2002, Sun Capital Partners picked them up but by 2008, the company reported needing an investor or a buyer to recapitalize.
Neither showed up to save the day and in 2008, all the Wickes stores were shuttered.
Years ago, if anyone would have suggested Art Van’s dominance in Michigan was at risk, he or she would have been laughed out of the room. In 2002, the chain had 12 stores, sales of some $575 million, and was going nowhere but up.
So, what happened? In this case, I think the recipe for disaster included ingredients of outside equity, unrealistic expansion, bad decisions, bad timing and a crappy playbook.
The chain was picked up in 2017 for some $550 million by Thomas H. Lee Partners LP, which was a fan of using debt to finance the transaction, a strategy we’ve seen used quite a bit by private equity, and not always with a happy ending.
There was also the issue of trying to transition from a family-owned-and-run business. And that was further exasperated by lots of turnovers at the senior level of management.
Taking a page from Heilig-Meyers’ ill-fated playbook, the company went on a tear, entering the already tough Chicago market, while simultaneously trying to juggle its Pure Sleep mattress store brand, while gobbling up Mattress World, Levin Furniture and Wolf Furniture.
And if hindsight is 20/20, then timing truly is everything. While Art Van was on a feeding frenzy, the landscape for home furnishings was changing with folks like Wayfair, Overstock and Amazon becoming strong competitors.
Art Van’s bedding business, which had always been strong, was suddenly challenged by e-commerce competitors including Purple, Leesa, Tuft & Needle and Casper, all of whom played a part in Art Van’s giving up the ghost.
The deadly ingredients of overly aggressive expansion, too little revenue and/or funding, equity partners, too much debt and a changing retail landscape seemed to be recipe for disaster.
I am not a betting sort, but I would wager that before their declines, each of the retailers mentioned believed failure was out of the question.
While today’s uncertain market has certainly discouraged aggressive expansion, it has been replaced by the challenges of top-heavy inventory levels, slowing consumer demand, record inflation and a still funky supply chain.
Add those earlier- mentioned ingredients — equity participation, heavy debt, revenue challenges and a changing retail landscape (this time, thanks to Covid-19) — and the stage may be set for a play that may make the Greek tragedy “Antigone” look like a minstrel show.
Stay tuned. This show is just getting started!
…
Great article.