| || |
Supply Chain Management of Haverty Furniture Companies, Inc. -
January 10th, 2011
Haverty Furniture Companies, Inc. is a leading furniture retailer in the south and central United States, with approximately 100 stores in 14 states. Havertys, as the company is known, targets the middle to upper-middle income market, eschewing high-pressure sales tactics and deep discounts in favor of quality merchandise, friendly customer service, and quick delivery of goods. The company also operates its own credit service. In 1998 Havertys reached an agreement with Furniture Brands International, the number two U.S. maker of residential furniture, to prominently feature its brands chainwide in exchange for improved access to that company's products. Havertys also has been on a campaign of expansion, adding or relocating as many as ten stores per year, sometimes through purchases of smaller retailers.
Havertys was founded in 1885 by J.J. Haverty and his brother Michael in Atlanta, Georgia. As young children they had seen the city burned during the Civil War and had endured the privations of the postwar years. As they grew to adulthood they also had watched Atlanta's inhabitants begin to rebuild. Believing in the city's potential, the brothers used $600 of J.J.'s money and an equal amount in borrowed capital to open a furniture store. The first 12 months were not an overwhelming success, with only some $6,000 in revenue, but by the third year the new company had grown enough to move to a larger location.
In 1889 J.J. and Michael Haverty entered a partnership with the owner of a neighboring furniture store, Amos G. Rhodes, forming the Rhodes-Haverty Furniture Company. Both stores liquidated their inventories prior to the new venture so that they could start fresh, and a new building was constructed to house the enterprise. The company issued 200 shares of stock, which the three partners split. In these early days sales were often made by men who canvassed neighborhoods carrying photographs of the various styles of furniture that were available, which included the full residential line from bedroom sets to parlor chairs. The company offered the popular option of purchasing on the installment plan, as well as free delivery. Illustrated newspaper advertisements also were used to promote the company's wares.
A year and a half after the Rhodes-Haverty store opened, J.J. Haverty decided to move westward to St. Louis with his family and go into business there. His first new store opened in 1891, and he soon bought interest in a number of smaller showrooms in outlying areas. In 1894 he returned to Atlanta and, with Rhodes and Peyton A. Snook, opened a new store in the former National Hotel building. Other stores soon followed in Waco and Dallas, Texas. In 1898 this partnership was dissolved, however, and Haverty and Rhodes opened yet another Atlanta store, later adding other locations around the South. By 1908 the company boasted 17 outlets.
J.J. Haverty's son Clarence, who started in the business sweeping floors, had risen to a leadership position by 1908. The ambitious young man, now 27, sought to take more control of the company's destiny, and a friendly split with Amos Rhodes was arranged. All but one of the company's stores was divided by the two senior partners through a series of coin tosses. The main Atlanta location was purchased outright by the Havertys, and the business took back its original name of Haverty Furniture Company. The company's nine stores were located in Atlanta and Savannah, Georgia; Memphis, Tennessee; and Dallas, Fort Worth, and Houston, Texas. Once again 200 ownership shares were distributed, this time among various Haverty family members.
Following the split with Rhodes, the company began to expand, opening stores in Birmingham, Alabama and Charleston and Columbia, South Carolina by 1916. Havertys also moved its Atlanta headquarters to a larger six-story building in 1924. A newspaper advertising section announcing the new location stated, "Our policy will be the same as we have maintained throughout our history--complete stocks, expertly selected, priced as low as our tremendous Buying Power and conservative merchandising will permit. Every article in our store is marked in Plain Figures. Our well known liberal credit system with terms to suit you applies to everything. A discount of 10 percent will be allowed for cash." Offering a complete tour of the store, the ad went on to note, "You will not be asked to buy anything unless you indicate that you are definitely interested." The company continued to offer free delivery, as it had done from the beginning, and maintained a fleet of trucks painted "Haverty blue" for this purpose.
Other Haverty Furniture stores were opened in the mid-1920s in Little Rock, Arkansas; Chattanooga, Tennessee; Charlotte, North Carolina; Greenville, South Carolina; and New Orleans, Louisiana. Also during this period, J.J. Haverty and Amos Rhodes formed another partnership, this time to erect the Rhodes-Haverty Building, which would remain Atlanta's tallest structure until 1955.
Initial Public Stock Offering in 1929
In the late 1920s the company decided to take advantage of the booming stock market and go public. Haverty Furniture at this time was owned by 17 separate stockholder corporations, and these were consolidated at the same time that 100,000 shares of preferred stock in the newly named Haverty Furniture Companies, Inc. were issued. J.J. Haverty retained 25,000 shares, and 75,000 were purchased for resale by Hambleton & Co. of Baltimore. The stock sale took place on October 1, 1929, and four weeks later the market crashed. Haverty stock dropped from $20 to $5 per share, and Hambleton went bankrupt. Despite this calamity, Havertys had no debt, and business remained steady enough for the company to weather the crisis. New locations were even opened in 1930, in Winston-Salem, North Carolina, and in 1931, in Jacksonville, Florida. The company had 23 locations by this year.
The Depression saw Havertys experience larger than usual amounts of product returns and credit defaults, as well as lower overall sales, and losses were posted for 1931, 1932, and 1933. In the wake of President Franklin D. Roosevelt's efforts toward economic recovery, however, the company made a return to profitability in 1934. Clarence Haverty, who had been running the business for many years, was officially named president in 1938, at which time J.J. Haverty became chairman of the company's board. In October of 1939, just short of his 81st birthday, founder J.J. Haverty passed away.
In December 1941 the United States entered World War II, and the company faced a reduction in revenues brought on by the rationing of materials used in furniture production. Profits dropped for 1942 and slipped further the following year, before rebounding slightly in 1944. When the war ended, pent-up demand for consumer goods caused sales to surge, and the company took advantage of the booming economy to remodel its older stores, also opening new locations in Shreveport, Louisiana; Richmond, Virginia; and Augusta, Georgia. Havertys' annual sales of $6 million in 1945 nearly doubled for 1946, topping $11 million. Clarence Haverty's son Rawson, who had returned from war service a major, assumed the position of corporate secretary.
Havertys continued to prosper during the 1950s, with new locations added in Alabama, Virginia, Arkansas, and Florida. Clarence Haverty stepped down as president in 1955 at the age of 73, and Rawson took on the role. By 1960, the year of the company's 75th anniversary, Havertys had 42 stores in ten states and annual sales of more than $22 million. That year also saw the passing of Clarence Haverty at the age of 79. In 1961 Havertys made a major expansion move by purchasing ten National Biederman stores in the Houston, Texas area, giving them the Haverty name. Additional stores also were opened in Charlotte and Jacksonville.
By the end of the 1960s, retail trends were changing. Suburban malls were luring shoppers away from downtown businesses, and Havertys began to adapt, moving its main Atlanta location from downtown to the area of the popular Lenox Square mall. Over the next several years other downtown stores also were closed in Roanoke, Virginia; Chattanooga, Tennessee; and Birmingham, Alabama. The company's structure was decentralized during this period as well, with regional managers appointed to oversee stores in Florida, the Mid-South, the Carolina/Virginia area, and the Western region. A downturn in sales had occurred during the early 1970s, but by 1973 the company was again growing, with revenues of $52 million and profits of $1.9 million.
1979: $100 Million in Sales
In the mid-1970s Havertys management set a goal of $100 million in sales for 1980, and the company's growth was such that revenues topped that mark a year early. In 1984 CEO Rawson Haverty stepped down as president, taking the role of board chairman. Company veteran and J.J. Haverty's grandson Frank McGaughey, Jr. was tapped as his replacement. In 1986 the company closed its last downtown Atlanta store, although it still remained the area's largest furniture retailer, with locations distributed throughout the metropolitan area. The company also recapitalized and created two classes of stock, leaving the Haverty family and other management personnel with control of about a third of the voting shares.
In the late 1980s Havertys began to embark upon a comprehensive revitalization program, upgrading most of the company's stores over the next decade. Enhanced lighting and display areas were the primary improvements, with some stores also being expanded in size. The changes were intended to appeal to a more upscale clientele, while continuing to retain the company's traditional middle-income customers. A new, more aggressive expansion strategy was also in place, with five to ten new stores opening per year, in some cases as replacements for smaller outlets. In 1990 a new regional distribution center also came on line in Jacksonville, Mississippi.
Despite a relatively weak year in 1991, sales for Havertys continued an upward trajectory during the early 1990s, with revenues reaching $322 million by 1993. Net income was $9.7 million, double that of the previous year. The company reached an agreement with mid- to high-end furniture maker Thomasville Furniture Industries, Inc. to prominently feature that company's products in many Haverty stores. Havertys also opened a prototype store in Naples, Florida in late 1992 that solely featured Thomasville merchandise; three more such stores were added over the next year. The company had made the alliance to gain better access to the manufacturer's products, as customers were increasingly seeking out top brand names like Thomasville.
In 1994 Frank McGaughey stepped down, and John E. Slater was named president and CEO. Slater had joined the company in 1956 and was serving as its chief operating officer. Havertys now owned 90 stores. Nearly three-fourths of sales were made via the company's own credit program, and this provided it with another consistent source of income. In contrast to the problems experienced in this area by many lower-priced furniture stores, Havertys had an insignificant default rate of less than one percent of sales. The company began to rethink its distribution of furniture to stores at this time and implemented a "Just In Time" system. This made better use of Havertys' five regional warehouses, which were linked with computers to the retail locations. Truckloads of furniture could be sent from a regional center to stores for final delivery so quickly that large backstocks no longer needed to be maintained in each city, thus reducing storage costs.
Continued Growth and New Manufacturer Alliances in the Late 1990s
In the late 1990s Havertys continued to grow, with 1997 seeing the company purchase its first two locations in Kentucky, replace eight smaller outlets with seven larger ones, and open a new store in the Dallas distribution center. Sales for the year hit $490 million, both on the growth in revenues from new locations and on rising same-store sales figures. The year also saw Havertys' credit operations more centrally consolidated, which cut administrative costs and improved efficiency.
Early in 1998 the company announced a strategic alliance with Thomasville's parent company Furniture Brands International, the number two manufacturer of furniture in the United States. Havertys agreed to allocate as much as half of its display space chainwide to products manufactured by Furniture Brands, which also owned names such as Broyhill and Action/Lane. This agreement allowed the company to put the popular Thomasville line in all of its stores, which it had not been able to do previously. Furniture Brands pledged to improve delivery times for Havertys and also to design some pieces for exclusive sale in the company's stores. In August of 1998 Havertys' stock listing moved from the NASDAQ exchange to the more prestigious New York Stock Exchange.
The company formed another alliance with a major manufacturer in 1999, announcing an agreement with La-Z-Boy Inc. to take over an existing La-Z-Boy store in Memphis and possibly open a second store in the area. Other new Havertys openings were planned that would take the company's holdings to more than 100 stores by year's end.
As it approached its 115th year in business, Haverty Furniture Companies could look back on a long history of growth and prosperity. Boasting a continuous string of annual profits since the Second World War, a seasoned management team, new strategic manufacturer alliances, and a successful program of expansion and store renovations, the company's prospects for a long and healthy future looked bright.
Principal Subsidiaries: Havertys Capital, Inc.; Havertys Credit Services, Inc.; Havertys Enterprises, Inc.
Principal Competitors: Ethan Allen Interiors, Inc.; Heilig-Meyers Co.; Levitz Furniture, Inc.; J.C. Penney Company, Inc.; The Rowe Companies; Sears, Roebuck and Co.