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Why would anyone want to get into the furniture business today?
The new-home market is barely showing a pulse, venerable furniture retailers have gone bankrupt and consumers have pulled back their spending on big-ticket items. Meanwhile, competitors ranging from home decorators with access to the Internet and aggressive Chinese conglomerates are grabbing market share.
You don't have to tell Larry Norris times are tough. But his response is classic entrepreneur: “If everything was just rosy, there wouldn't be opportunity.”
Norris won't reveal his age, but some might argue that he should be enjoying the fruits of his success. He sold his namesake furniture business to Hendricks Furniture Group in 1998 for an undisclosed sum. At the time, Norris Furniture & Interiors was generating $15 million in annual sales from two showrooms in Naples and Fort Myers.
Now, he's starting over by forming Norris Home Furnishings. Norris opened a showroom in Fort Myers, a design center on Sanibel Island and is planning to open another showroom in Naples within the next few weeks. “I think it keeps you young,” says Norris. “I love a challenge.”
The key to managing a successful home-furnishings business is to avoid the high debt that got rivals in trouble. Norris won't say how much he's investing in his new venture — “a lot of money,” he says — but he's eschewing debt. “You have to have more skin in the game,” he says.
Norris, who had signed a 10-year non-compete agreement when he sold his stores to Hendricks in 1998, is confident he can do better than the $15 million in annual sales with the same number of stores. “I hope to do that and more,” he says.
Land of liquidation
Anyone who has driven U.S. 41 in recent years can see the empty shells of furniture stores, but Norris says many of them didn't go out of business because people stopped buying furniture.
Sure, consumers cut back. But what devastated companies was the huge debt they took on to expand, Norris says. For example, North Carolina-based Hendricks closed the Norris stores in February 2009 and filed for bankruptcy later that year. Similarly, lenders forced Fort Myers-based Robb & Stucky to file for bankruptcy protection this year.
When Hendricks closed the Norris stores in 2009, owner Larry Hendricks told publication Furniture Today: “Norris has accounted for 80% of our losses and just 15% of our revenues. We cannot continue in Florida with the state's economy still so unstable, without unnecessarily jeopardizing our other unaffiliated operations.”
Norris disputes that assertion, however. “Norris and Robb & Stucky didn't go out of business for lack of business,” he says. “Companies get too big for their britches.”
Companies like Hendricks took on too much debt and when the inevitable downturn in the business cycle came they were unable to remain in business, Norris says. “Common sense takes you a long way in life,” he smiles.
Norris takes care not to gloat in the misery of his competitors. He says the industry suffers a “black eye” when venerable names like Hendricks and Robb & Stucky go out of business, laying off hundreds of people and scaring away prospective customers.
Still, Norris says, “it presents a tremendous opportunity.” The economic downturn means he can rent showroom space at more favorable lease rates, vendors are willing to extend credit on better terms and job applicants with decades of sales experience are eager to work for him. “The overhead is definitely lower than it was back then,” Norris says. “I shop hard at the markets.”
Recently, more than 50 well-qualified people applied for 20 sales-and-design positions at Norris. “I'm very proud that I'm creating jobs,” he says, though he notes he doesn't get any help from a federal government that hinders small businesses. “It's just crazy what's happening in Washington,” he says, shaking his head.
Consumers are spending
Norris acknowledges that consumers have changed their buying patterns, but he says Florida's demographics and attractiveness for retirees haven't changed. “The weather up north isn't going to get better,” he quips.
Consumers aren't furnishing entire homes like they were during the boom, but they are choosing instead to fix up one or two rooms at a time. “We are all more savvy shoppers,” he says.
But a lot has changed since Norris sold his previous furniture chain in 1998. For one thing, shoppers are using the Internet to scour for deals. And home-decorating entrepreneurs say the same technology means they don't have to maintain large showrooms with money tied up in inventory.
Norris waives off those competitive threats. “I try not to get sidetracked by other businesses,” Norris says. For one thing, he says customers still want to sit on a sofa before they buy one. What's more, Norris says manufacturers still give furniture dealers better or exclusive terms. By the time you add shipping costs, ordering furniture on the Internet may turn out to be more costly.
To counter entrepreneurial home designers who ship via the Internet, Norris offers free interior-design consultations and free delivery. An interior designer will help customers measure rooms and help make selections. In addition, the showrooms include areas where interior designers can bring prospective clients to make special selections.
The key to running a furniture business is not to expand too fast. More than a few stores and you lose control. “I have no interest in that,” Norris says.
Dan Lubner's sunny outlook is infectious, but the bankruptcy and liquidation of his family's furniture business was tough on the young 37-year-old entrepreneur.
Weighed down by more than $45 million in debt and faced with declining revenues from the real estate bust, Fort Myers-based Robb & Stucky filed for bankruptcy reorganization in February and a judge ordered a liquidation of the company's furniture stores shortly thereafter.
Walking out of bankruptcy court in Tampa on the last day of the firm's existence this spring, Lubner spotted a group of people sitting at a table outside, laughing and chatting. “I didn't think I could ever be happy and laugh like that again,” Lubner recalls.
Dan Lubner's father, South African emigre Clive Lubner, acquired Robb & Stucky in 1979 with a local development company called the Mariner Group. The company was founded in 1915 as a general merchandise emporium but became a high-end home-furnishing retailer when Lubner took over, emigrating to the U.S. with $70,000. Established as a limited-liability partnership, Robb & Stucky had two general partners and 267 limited partners.
The younger Lubner says there was a plan to save the company, but creditors didn't accept it. Bankruptcy filing documents show Clive and Dan Lubner together owned about 23% of the company's equity.
But the Lubners didn't waste any time over the demise of Robb & Stucky, gathering the firm's top executives in May. “We started planning a store that didn't yet exist,” Dan Lubner says. Former chief financial officer Craig Nesvik, who retired five years ago from Robb & Stucky, has joined the venture.
With two undisclosed partners, the Lubners plan to open an 85,000-square-foot furniture showroom and design center on U.S. 41 in Naples this fall called Clive Daniel Home. Lubner says the company won't be at the mercy of lenders again. “We're paying cash for the goods,” says Lubner, who declines to cite the amount of money his family is investing.
“We're looking for a new warehouse now,” Lubner says. “We will look to bring on other locations in Southwest Florida.”
While Lubner declines to go into the details of the company's bankruptcy filing, he says eight of Robb & Stucky's stores were profitable at the time of the filing. “The business model continues to work,” says Lubner.
Lubner says he's eager to help any customer whose goods weren't delivered because of Robb & Stucky's bankruptcy filing. “You can't run a successful business without knowing how to take care of the customer,” he says.
Details about the Clive Daniel store in Naples are a closely held secret for now, but Lubner acknowledges that more furniture will be available at lower prices than at Robb & Stucky. And the store won't look or feel like a Robb & Stucky showroom, which was dominated by dark, heavy woods. “We're starting with a blank canvas,” Lubner says.
Besides more stores, Lubner says the family is considering a wholesale division that would supply furniture retailers all over the country. “We're just getting started on that,” he says. And they continue to grow Lubner Group, a firm that specializes in furniture purchasing and design for the hospitality industry. “Retail is in the blood,” he says.
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