Gary Evans
PONTOTOC, Miss. — After two years of ownership, principals of promotional upholstery maker American Furniture here say they


have taken an outstanding company and made it even better.

Despite rumors to the contrary, the company said it has seen sales grow, and plans to expand its workforce. More importantly, it has shifted its supply line for fabric and other raw materials overseas and maintained margins in a market segment where every dollar is important.

“We really thought there was a great opportunity,” said Matt Harrison, the company’s chairman and head of the holding company formed when American was bought in July 2004 by New York-based Hampshire Equity Partners and Dallas-based Hunt Private Equity Group.

“We’re very pleased” with the company’s progress, Harrison said. “The Hunt guys and the Hampshire guys are very proud when we show American Furniture to our investors, because we think this is an opportunity for all of us to get a very nice return on our investment.”

At the time of the acquisition in 2004, the company was doing about $120 million in annual sales, based on a business model of limited SKUs with few cover options created  by industry veteran Gerald Washington, one of the previous owners.

For 2013, the company said  revenues to date are up 22% from last year, with projected  sales this year of $160 million. In addition, the company said its gross profit and net income have increased accordingly.
Key to the company’s success, according to Harrison, was hiring Mike Thomas, a former executive with Gerald Washington, as president, and Lyle Harris as vice president of sales and marketing.

“The management team has done a terrific job,” said Harrison.

That’s counter to the buzz in the Tupelo area, which has for several weeks been predicting that Thomas was on the way out, that the company was doing poorly, and that it would be bought by other investors or companies like Ashley (which Ashley denied).

“Generally, there’s a kernel of truth in these things,” Harrison said of rumors in general. “These don’t have a kernel, an atom or a molecule of truth about them.”

American’s growth comes despite recent domestic plant closings and downsizings, increased competition from Asia, and dramatic increases in the price of raw materials, including foam and fabric.

To maintain its retail price points of $299 and $399, the company has shifted a large part of its raw materials sourcing overseas. Previously, it purchased everything domestically.

“Probably 60% to 70% of our fabric we’re now either sourcing in roll goods or cut-and-sew kits,” said Thomas. The company also is getting its showood, legs, and tables from Asia.

Meanwhile, American has consolidated operations into a 1.1 million-square-foot manufacturing and warehouse “campus” and no longer uses a 500,000-square-foot leased facility, making production more efficient. Since Thomas and Harris began managing American, the company said it has increased the plant’s production capacity by more than 30%.

In June, the board of directors approved a plan to expand capacity by another 25% by the end of 2013, which American said will “better serve its customer base during the critical fourth- and first-quarter periods.”
It also has installed new management systems that report real-time information and help streamline day-to-day operations — which is essential for a company American’s size, said Harrison.

Thomas said American has about 1,000 employees and expects to add another 100 by year’s end.

Employment is up 20% under the new ownership and up 10% over the past year, the company said.

American said it serves 75% of Furniture/Today’s Top 100 U.S. furniture stores. Maintaining price points have been one of the main ingredients in keeping customers happy, according to the company. Few manufacturers are holding to the $299 retail price point for a sofa and only a handful of majors — Affordable, United, Global, Albany, Simmons/Stratolounger, and New Generations — are holding to $399.

“One of the things that Mike and Lyle and the investors agreed about early on is that we were going to stay laser-beam focused on the model that was working,” said Harrison. “We’re staying in the same business and the same manufacturing process and the same limited number of SKUs, all of which are available for delivery in a very short period of time.”