Krause’s Chairman Forms Ambitious Expansion and Remodeling Plans
Starting with $7.5 million in new financing, custom sofa maker Krause’s Furniture Inc. announced ambitious plans Monday to revive its struggling chain of furniture stores.
The company said it will open 36 new outlets and remodel 50 of its 80 existing showrooms over the next 30 months.
The move is part of a push by Chairman Philip Hawley, former head of Carter Hawley Hale Stores, to update the company’s image and stem the tide of losses over the last few years.
“We have always had an excellent product, but in recent years, sales have unquestionably been hurt by the dated and austere look of our stores--many of which have changed little since our company was founded,” Hawley said in a prepared statement. Company executives weren’t available for comment.
The new showrooms will feature brighter colors and better lighting and they’ll display the company’s custom couches in living room groupings, instead of lined up in rows like a warehouse.
The remodeling already has boosted sales “beyond management’s expectations” at six stores, said James Donnelly, an outside spokesman for the company. The company plans to open four new stores and remodel 13 existing locations this year, he said.
Industry analysts say the company could have problems pulling off such an ambitious expansion, mainly because there are too many furniture stores now and a waning demand from consumers as baby boomers age.
“It’s a tough time for traditional furniture stores,” said Ira Kalish, an economist with Price Waterhouse LLP in Los Angeles. “The next generation is much smaller and more likely to spend money on experiential purchases rather than furniture.”
In addition, real estate brokers say the company’s financial track record could be a problem as it looks for new space to lease.
“It would definitely cause some hesitation. A developer would have to take a really hard look at their current financial structure,” said Jeffrey Simonds of Voit Commercial Brokerage in Irvine.
Many furniture companies like Krause’s have been downsizing rather than expanding in recent years as California’s economy and housing market have slumped.
Last year, declining sales pushed Krause’s net loss to $13.4 million, higher than the $8.7-million loss it reported a year earlier.
But the company has been engineering a turnaround. Last August it ousted its chief executive, Thomas DeLitto, and hired retired retail executive Hawley, who along with other investors pumped an additional $17 million into the company.
Hawley promised to recast Krause’s management, hone its strategy and overhaul its showrooms.
The $7.5 million in new financing that will partially support the chain’s overhaul was provided by General Electric Capital Services, the Permal Group and Congress Financial Corp.
