Some furniture stores see brighter future

Despite declining profits and double-digit sales decreases, some Furniture retailers in the area are opening new locations or adding to existing stores.

Land and construction costs are cheap, and expanding now could serve them well once the economy turns around.

Of course, not everyone can afford to expand.

"In an average year, the average Furniture maker makes about 2.5 percent [profit] on sales after taxes," said Jerry Epperson, managing director for Richmond, Va., investment consulting firm Mann, Armistead & Epperson. Mann, Armistead tracks the Furniture and bedding industries.

"The number of Furniture stores that made money in the last year is maybe 10 percent of all of them. The numbers have just been absolutely frightening."

Charlotte-based Kimbrell's opened a store off New Bern Avenue in Raleigh about a week ago and is preparing to open another one in Garner off U.S. 70 in about a week.

The company prefers to purchase its land and build its own stores, paying cash rather than borrowing, said district manager Steve Wallwork. That can cost about $3 million per store.

Profits are down about 15 percent from last year, but because Kimbrell hasn't had to take on new debt, the company is able to bulk up its inventory, Wallwork said.

"The manufacturers are not doing well," he said. "They have to do business day to day to keep their workers. We're able to get phenomenal buys from most of the people we do business with because if they send us merchandise and we receive it on Thursday, we pay them next Tuesday, 100 percent. And not a lot of people do that nowadays."

Indeed, this recession, which is intricately tied to the meltdown of the housing industry, has rocked a Furniture business which relies on new home buyers.

Just Wednesday, a lawyer started Chapter 7 liquidation for four related Raleigh Furniture stores. Nationally, large chains have been hurt as well. Last quarter, Stanley reported that sales dropped by more than 28 percent from the same quarter in 2008.

Some larger companies may be strapped for cash because they acquired a dying competitor before the recession hit full stride, said Mike Pierce, spokesman for the National Home Furnishings Association. But the size of the business does not dictate fiscal health.

"Many retail operations are family-owned, and some of them have issues because they are paying family members who don't actually work. Everybody's got to be productive nowadays."

For Rooms to Go CEO Jeffrey Seaman, the decision to expand the Raleigh Rooms to Go store was strategic. The company wanted to consolidate its stores to have all its merchandise in one place and at the same time increase its local presence. So it added 11,000 square feet -- about half the size of the existing showroom -- to its store on Glenwood Avenue and will move the Rooms to Go Kids store -- now across the street -- into the bigger store. Construction should be finished before Labor Day.

"You've got to take sort of the long perspective on your business," he said. "Even though business is tough this year -- really since the credit crisis of last fall -- it eventually comes back."

Rooms to Go, which has about 100 stores nationally, is doing similar expansions in a half-dozen markets, but not all, Seaman said.

'We're not crazy'

"We're reasonably aggressive just as a retailer, but we're not crazy."

There are some signs that the Furniture business may slowly be turning around. The tax break for new home buyers is starting to move the housing market.

This month, La-Z-Boy surprised Wall Street when it reported a profit of 4 cents per share for its most recent quarter. Analysts were expecting a loss.

That's good news for Andre Haugaard, owner of Ambiente International, which just opened a 10,000-square-foot addition to its showroom in the Brier Creek area.

"The space was available, and there's lots of opportunities right now," he said. "When [the economy] comes back, if you've been actively promoting yourself -- bringing in new merchandise -- when the business really comes back, you really stand to gain more than people who have been sitting back."