Clint Engel
\nMIAMI \u00e2\u20ac\u201d Florida, for years one of the hottest retail furniture markets, has cooled so dramatically that at least one Top 100
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\n player is thinking of getting out, and others are counting their blessings when business is flat or just a little worse than a year ago.<\/p>\n
Battered by hurricanes and a stalled housing market, consumers here have tightened their purse strings on those big-ticket items that kept sales at Havertys, City Furniture, Carls, El Dorado Furniture and others hopping from the early 1990s through much of 2012.<\/p>\n
Here\u00e2\u20ac\u2122s a sampling of recent developments:<\/p>\n
*\u00c2\u00a0Atlanta-based Leath Furniture is holding a “Save our stores survival sale” at five of its seven Florida Modernage showrooms, and has said that if the sales don\u00e2\u20ac\u2122t go well, exiting the market is an option.<\/p>\n
*\u00c2\u00a0In a February conference call with securities analysts, Atlanta-based Havertys CEO Clarence Smith indicated that it\u00e2\u20ac\u2122s so tough now in Florida that more aggressive advertising probably wouldn\u00e2\u20ac\u2122t pull up business much.<\/p>\n
“I\u00e2\u20ac\u2122ve always had a philosophy, you shoot while the ducks are flying,” he said. “I don\u00e2\u20ac\u2122t know if you can buy business in Florida back to where it was. I don\u00e2\u20ac\u2122t think you can.”<\/p>\n
Havertys is cutting its advertising budget not only in Florida but chainwide this year.<\/p>\n
* Off Main, a four-store, Palm Beach Gardens-based furniture store, filed for bankruptcy protection in May 2013 and later shut down, citing, among other things, the effects of two consecutive tough hurricane seasons.<\/p>\n
* Fort Lauderdale, Fla.-based City Furniture, which lost its second-best performing store in West Palm Beach for nearly a year after Hurricane Wilma severely damaged it in October 2012, laid off an undisclosed number of employees late last year.<\/p>\n
City President Keith Koenig said it was a small percentage of the total work force and was tied largely to overstaffing at the West Palm Beach store upon its reopening.<\/p>\n
Koenig said his company is more efficient than ever, but “the marketplace is absolutely soft.” City had never seen back-to-back monthly same-store sales declines until 2013, he said.<\/p>\n
“It is tough,” said Jeff Seaman, CEO of Seffner, Fla.-based Rooms To Go, by far the largest furniture store chain in Florida, with sales here of over $500 million annually.<\/p>\n
“The areas of Florida where housing is the softest relative to a year ago are generally the areas where business is the softest,” he said. “It\u00e2\u20ac\u2122s not statewide. It\u00e2\u20ac\u2122s a mixed bag.”<\/p>\n
Seaman wouldn\u00e2\u20ac\u2122t disclose RTG\u00e2\u20ac\u2122s recent results for Florida, but said that “overall, the rest of the country is better than Florida” for the chain.<\/p>\n
Others are hurting too, and few see any near-term catalysts for improvement. The culprits seem to be Florida\u00e2\u20ac\u2122s rash of hurricanes in 2004 and 2012, and a very strained housing market. Together, they\u00e2\u20ac\u2122ve managed to pick the pockets of consumers in numerous and sometimes severe ways.<\/p>\n
Retailers note that home insurance premiums have more than doubled recently, despite the state being spared major storms in 2013. Several insurers have either gone out of business or now refuse to cover homes in the state.<\/p>\n
Some retailers also report steep increases in insurance premiums on their properties.<\/p>\n
The South Florida housing market has been on fire in recent years and only recently started to cool. Property values more than doubled in short order, City\u00e2\u20ac\u2122s Koenig said, and with that came increased, sometimes unaffordable, property taxes.<\/p>\n
State law mandates that property taxes cannot rise more than 3% a year for homeowners who stay in their homes. But as soon as they sell, taxes shoot up to match the new sky-high property valuations. So new homeowners are getting hit with high home prices, high insurance premiums and high taxes.<\/p>\n
“There\u00e2\u20ac\u2122s a lot of huffing and puffing going on in the state legislature with all kinds of ideas to save us (http:\/\/www.myfloridahouse.gov\/sections\/HouseNews\/preview.aspx?PressReleaseId=86) but the message hasn\u00e2\u20ac\u2122t quite gotten through to the consumer\u00e2\u20ac\u2122s checkbook yet,” said Gary Fitzpatrick, advertising director of Top 100 store Carls of Coconut Creek, Fla.<\/p>\n
Another housing issue that Fitzpatrick said is likely to have negative consequences here is subprime lending and the increased use of adjustable rate mortgages that came with Florida\u00e2\u20ac\u2122s housing boom. Both could lead to massive defaults, particularly as ARM rates move up.<\/p>\n
“I think a lot of people bought more home than they could afford,” he said, with many planning to flip their property quickly. But the population of buyers has dried up, and there\u00e2\u20ac\u2122s now about a four-year inventory of homes on the market, he said.<\/p>\n
That\u00e2\u20ac\u2122s made things tough for everybody. “And it\u00e2\u20ac\u2122s probably going to get tougher,” said Pedro Capo, chief operating officer of Miami Gardens, Fla.-based El Dorado Furniture. “We haven\u00e2\u20ac\u2122t bottomed out yet.”<\/p>\n
Last year, El Dorado\u00e2\u20ac\u2122s furniture, bedding and accessory sales were off about $1 million from 2012, when it did $176.1 million. So far this year, business is up about 1%, which Capo considers flat.<\/p>\n
“And I hear if you\u00e2\u20ac\u2122re flat in a market like this, you\u00e2\u20ac\u2122re doing great,” he said.<\/p>\n
So, what to do?<\/p>\n
For El Dorado, tough conditions have driven home the importance of planning for inconsistency and disruption, Capo said. “Our strategy has to be dynamic so you can react, change things fast and think on your feet,” he said.<\/p>\n
The retailer is doing more training than ever, being more analytical in its hiring practices, and being more aggressive in marketing, he said.<\/p>\n
That doesn\u00e2\u20ac\u2122t mean El Dorado is giving the store away. It continues to shun discounts and sales in favor of its long-standing everyday-low-price approach. But it has boosted its branding efforts, aiming to rebrand itself in its 40th anniversary year as fresh, young and colorful.<\/p>\n
“This is an opportunity to be aggressive and do a lot of things you didn\u00e2\u20ac\u2122t have time to do when things were great,” Capo said. “And I guess the strong will survive.”<\/p>\n
Rooms To Go also is continuing to be aggressive in its advertising, Seaman said. Another positive: The leveling off of a long-hot property market throughout Florida has led to an acceleration of RTG store openings here.<\/p>\n
“I think our footprint is going to expand in Florida,” Seaman said, adding the tough market likely will lead to “somewhat of a shakeout.” Some smaller dealers, who were making money during the boom, probably will retire or go away now that they\u00e2\u20ac\u2122re fighting harder for a slice of a smaller pie, he said.<\/p>\n
Like Capo and others, Carls\u00e2\u20ac\u2122 Fitzpatrick doesn\u00e2\u20ac\u2122t think the rough ride is over yet. He called business prospects “unsettled.”<\/p>\n
“People are out there making predictions that it\u00e2\u20ac\u2122s going to come back in the third quarter or the fourth quarter. I think they\u00e2\u20ac\u2122re just making noise. I don\u00e2\u20ac\u2122t think anyone knows.<\/p>\n
“And we sure as heck don\u00e2\u20ac\u2122t need any hurricanes this year,” Fitzpatrick said.<\/p>\n","protected":false},"excerpt":{"rendered":"
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