Retailers weigh in on proposed Flexsteel takeover

HIGH POINT — News that stakeholder CSC Generation made an all-cash offer to take over furniture manufacturer Flexsteel sent shockwaves through the industry last week.

CSC Generation is a technology company that acquires so-called overlooked store and catalog-based companies and transforms them into, what it calls “high-performance, digital first brands.” Since its founding in 2016, it has acquired and integrated several well-known brands, including Z Gallerie, One Kings Lane and Sur La Table.

In the two years since it acquired Sur La Table, CSC said it has transformed the gourmet chain into a digitally centric business and said that Dubuque, Iowa-based Flexsteel needs a comparable transformation. Flexsteel and CSC were contacted for this story but neither has responded yet.

Many in the industry are in wait-and-see mode or are not in a position to express themselves about a potential new path for Flexsteel. “After all the years and buy-outs, I don’t worry too much about what ifs. It will be news if it actually happens,” said Dave Harkness, owner of Tacoma, Wash.-based Harkness Furniture.

Added Kyle Johansen, executive director of merchandising for Top 100 retailer HOM Furniture, “Ultimately, Flexsteel’s board has an obligation to vet out any legit offers and determine what is in the best interest of their stakeholders. HOM and Flexsteel have a great relationship, and we hope to continue it into the future with or without CSC involvement.”

Others suggested that any deal will likely do more harm than good.

Kittle’s Furniture CEO Eric Easter, reflecting on his time with Thomasville, told Furniture Today he feels Flexsteel is on the right track, so taking it in a different direction could have dire consequences. Easter cites the downfall of Furniture Brands International and later Heritage Home Group as a cautionary tale that should mitigate against the takeover.

“Our concern is that someone comes in from outside with an agenda — answers questions that may not even need to be asked. This changes the culture, changes the priorities. The company shifts gears and good people leave. It’s a movie we’ve seen many times in our industry,” Easter said. “I was part of Thomasville before new leadership took many, many wrong turns. It is now gone like so many of the FBI Brands. I would hate that to happen to Flexsteel.

“Sometimes someone from outside coming in can work — Warren Buffett comes to mind, but this doesn’t sound like that model,” he added. “Flexsteel is one of the few companies that has a brand name that resonates with consumers. Here in the Midwest it means a lot. I would hate to see something happen that would move them off the track they’re on.”

Easter said in the years Kittle’s has carried Flexsteel, it’s been a hit with customers and salespeople alike, and he thinks it’s already headed in the right direction. “Flexsteel has momentum. The new management team they brought on a few years ago is doing great things. The quality is great; shipping is great. Their eye is on the ball. We’re big fans of the company and the changes the team has brought about. We think they’re on a positive trajectory,” Easter said.

In the greater St. Louis area, Mueller Furniture is also one to wave the flag for Flexsteel. The Belleville, Ill.-based retailer has been one of the brand’s key vendors for decades, and co-owner Mark Mueller said a potential acquisition could scuttle a lot of those dealings.

“We really appreciate the longevity of our relationship and the consistency at Flexsteel. We’ve had the same sales rep for 40 years, and now his son calls on us. (Flexsteel Vice President of Product Management) Tim Newlin, the first furniture market I went to, I met him. I’ve known him for 18 years. I love that he knows furniture,” Mueller said. “There are a lot of people at Flexsteel who have been there for a while and are good at what they do. If this acquisition takes place, within two years it won’t resemble the company that it currently is.”

Mueller added that if the deal goes through, he will begin searching for replacements to Flexsteel right away.

He also noted that CSC’s positioning of Flexsteel as a “digital-first” brand also strikes him as an odd fit for a vendor.

“I very much value online presence. I understand that is where the shopping process starts,” Mueller said. “We’ve got a great website and social media presence and embrace the Internet as a way to draw customers in, but I don’t see any way this acquisition would have positive outcomes for Mueller Furniture and many other independents out there.”

The digital-first piece also has Oscar Miskelly, CEO of Top 100 Miskelly Furniture, questioning the deal, particularly regarding higher end goods such as those offered by Flexsteel. Miskelly pointed out that being able to tell the story behind the product is one of the more important roles of selling through brick-and-mortar.

“I don’t know how well you can sell high-end motion online. It’s got to be shown,” Miskelly said. “You have to demonstrate it and talk about the features and benefits because it’s a higher-end product. I don’t know how well it will sell online with the way the story needs to be told.”

The downfall of Furniture Brands’ portfolio of properties also weighed on Miskelly’s mind. He said while sometimes outside investors work, there are plenty of examples where those investments cratered.

“Any time there’s a takeover from someone like that — we’ve seen it from the old FBI days, Southern Motion recently — it never seems to work out,” Miskelly said. “There are exceptions. I think Klaussner has been a good company since it happened (in 2017), but you can name a lot more that haven’t worked out than have. You hate to broad-brush everything, but it’s been our experience they come in, strip the company and raise prices, and it’s not the same company.

“I’ve been reading about the guy who runs CSC (Justin Yoshimura); he seems like an interesting guy. I was looking at his background, and he started out with a lemonade stand, and I said I’m afraid he’s going to turn lemonade into lemons.”

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