For retailers — for generations — a surefire way to grow your business was to buy up a competitor and add their stores to yours. The number of times this happened — particularly during the go-go days of the 90s and early 2000s is staggering.
But what was once smart is now just plain dumb. It’s a lesson the folks at Mattress Firm learned the hard way. For much of the past decade they had been buying up the competition and rolling up a pretty impressive operation. The crowning achievement was buying Sleepy’s in 2016, taking the company’s store count to 3,500 units. That’s when the strategy hit the fan…so to speak. Turns out that 3,500 often overlapping, sometimes poorly situated and generally unimpressive stores was not such a good thing.
Mattress Firm filed for bankruptcy this week and immediately announced it was closing 700 doors. Don’t be surprised if that number climbs before the bankruptcy process is said and done.
Mattress Firm was basing its business model on an out-of-date premise and it is now paying the price. What else would you call it but Stupid Real Estate Strategy.
So, the guys who destroyed Toys’R’Us by loading it down with impossible-to-service debt and then putting in management that was unable to figure out a plan how to be successful as the only toy store in America have decided they may want to try this again.
The company’s “controlling lenders” — at least some portion of the Bain/KKR/Vornado triumvirate that took down the chain earlier this year — announced this week they were pulling the intellectual properties of Toys — the name, the logos, the branding and let’s not forger Geoffrey the Giraffe — from the bankruptcy meltdown with the intention of resurrecting the retailer sometime in the not-too-distant future.
Certainly, the void in the marketplace suggests that their instincts are right, there is a need for a big toy store and given the right financing and business plan it could be quite successful. But do we really think these are the guys to do it? What makes anyone think they will make any better decisions this time around than they did last time?
Of course, the conspiracy theorists among us are thinking this was the plan all along. Dump all that debt, get rid of bad real estate and start with a clean slate. Frankly I’m not sure these guys are that smart…though they certainly are that devious.
The toy industry is already reordering itself and if they are serious about this they better move fast before that black hole closes. But I personally have my doubts about this whole thing. To me it could just be another example of Stupid Greed.
While most of the rest of the home furnishings retailing world (with the exception of Bed Bath & Beyond) is benefiting from favorable demographics, housing trends and the overall economy, Pier 1 Imports is mired in a continuing slide in the deep water of a retail quagmire. Is a new ad campaign and a three-year plan enough to turn this ship around? And do they have three years to do it? Could it be another case of stupid retailing? Read my take on this whole thing on Forbes.com.
The retailing business seems to take ghoulish delight in the macabre act of resurrecting dead retail brands and attempting to bring them back to life. The list of regurgitated retailers is embarrassingly long and it’s about to be added to with word that investors have bought the Bon Ton name and will play Dr. Frankenstein with it.
Somehow, to me at least, this practice just needs to die a proper death. That’s what I had to say on Forbes.com:
The home furnishings business needs to get over this ridiculous idea that the monthly housing numbers — starts, sales, permits, whatever — have a whole lot to do with forecasting what it means for the sale of its products. These numbers are for the construction industry and — maybe — for companies that make very specific home-related products like windows, kitchen cabinets, heating and air conditioning systems and plumbing fixtures.
They have very little bearing on the sale of products like sheets, towels, pots and pans, dishes, area rugs, home decor or even furniture. Plus, a surprisingly large percentage of home sales are the result of private equity firms buying up houses so they can rent them out as money-making investments. These are not traditional homeowners buying home goods for their own homes, they are putting the bare minimums into these properties with the intent of getting maximum return on their investments.
The home furnishings business needs to look at the household formation numbers as a much more accurate barometer of business conditions. These reports chart households being started and these are the places where the industry’s products will be needed.
Now it’s the pensioners’ fault. Fast Eddie Lampert, in his eternal quest to blame anybody but himself for the mess he’s made at Sears and Kmart, is now saying if he didn’t have all those legacy pension payments to make, he could have used that money to make his stores better places to shop. One suspects he would have just taken that money and found some other way to flow back into his own pockets through a special dividend or some other financial quackery.
Reality check: One estimate is that the pension funding amounts to $300 million a year. Not inconsequential but hardly a deal breaker for a company that has drained billions out and invested virtually nothing back into the business.
Realty check #2: These retirees didn’t just show up on his doorstep last Tuesday. They’ve been part of the Sears picture since the day he bought the place.
This dog-ate-my-company whining is classic Eddie…at his very worst.
Just back from the grand opening of the new RH Gallery in the Meatpacking District in Manhattan and it’s about the best furniture and home store I’ve ever seen. You must check it out next time you are in that area — in fact you really should make a special trip to see it.
But it’s not RH that belongs in the Stupid Business category…by any means. It’s the rest of the furniture retailing community that still doesn’t get it. All of those drab, boring warehouses of beige boxes and seating that pass for furniture stores these days still don’t realize the end is near for that model. RH is making a connection with its customer base in a way nobody else in the space is even remotely close to.
If you haven’t seen a new format RH Gallery — Los Angeles, Houston, Chicago, Denver and now New York, among the 19 now open — you not only haven’t seen the future of home furnishings retailing: you’re not seeing the current state of the art. And that makes you a candidate for Stupid Businessperson….