In the weeks before temporarily shutting down stores to slow the spread of Covid-19, HOM Furniture's March sales were up over last year. Store traffic was brisk right up until the company voluntarily closed its stores—including Gabberts, Seasonal Concepts, and Dock 86—throughout the Midwest on March 19. But Minnesota’s largest furniture retailer had already been experiencing disruption within its supply chain from China weeks before a national emergency was declared in the U.S. HOM Furniture CEO Rod Johansen—who has a reputation for keeping cash on hand—talked to TCB about how the more than $250 million company is navigating the shutdown, and how it might impact business in the coming months, including the delayed opening of a new store in Eau Claire, Wis., and the possibly delay of one near completion in Bloomington.
TCB: How had business been in the few weeks leading up to a national emergency being declared? Were you starting to see store traffic thin out?
Johansen | Our business had been good prior. Weather was very good, which is an important factor at this time of year. We probably felt a slight decline two weekends ago, but probably better than we anticipated. I think a fair amount was because the general marketplace had not started taking this as serious as it was. At the beginning of the week of March 16, we started to see a noticeable dip in business, but still, in my opinion, better that it probably should of been with a crisis of this magnitude going on. Obviously, people have needs for a variety of reasons that most customers don't experience and HOM carries a very large inventory and was able to deliver products to customers quickly.
Q. you’re able to sell online now?
A | We will continue to do e-commerce through our websites, which have been much busier than normal. We have added phone support for those customers that have additional.
Q. In addition to existing stores, you had some construction projects underway?
A | We were supposed to open our brand-new showroom in Eau Claire on March 19, and so we have a beautiful new showroom with anxious customers waiting to get in, and we will all just have to wait. We also have our new Bloomington HOM, Gabberts and DOCK 86, which is in its final stages of construction and we will be starting to move furniture in there as soon as we go back to work. So many of our departments were very busy, including our marketing department, developing a host of new campaigns for this wonderful new showroom. They are all working from home now, also staying safe.
Q. So how does this impact your moving plans from Galleria in Edina to the new Bloomington store?
A | We are not yet sure how it will affect the opening date in Bloomington, but there is a chance it will delay us some. The biggest issue we have there is the moving sale we are running at the Gabberts Galleria location. It gives us a month less time to liquidate the goods we needed to move out before we move.
Q. How much work is happening behind the scenes?
A | Some departments are still operating, trying to receive freight that was in process. Delivery staff is completing orders for current customers and also assisting online customers that have emergency needs. Our office staff are either working at home or have been given additional PTO along with the bulk of our sales department so they can go home and hunker down for the time being.
Q. You’ve been in business a long time—have you ever experienced anything comparable to this?
A | We have been in business for 46 years this spring, so we have been through a lot but nothing has been as difficult as this with all the potential devastation to so many families in the world and the financial devastation that we are going to see for almost every American.
It was interesting how this really has come full circle. The devastation for Asia and China in particular was obviously in February to a large degree when they were fairly locked down in many areas and not allowing their people to be able to return to work after Chinese New Year. Then slowly, they got back to work and the concern for American wholesalers and retailers was product shortages from all of Asia due to the dependency on China component supply chains that were disrupted. Turn the clock forward to today and now we have America and Europe, the biggest customers of Asia exports now dealing with the pandemic and American and European businesses now cancelling major orders that they feared they were going to have a hard time fulfilling.
In our industry, factories in Asia are experiencing cancellations of over 50 percent currently and now dealing with major disruption from a sales stand point. They are getting geared back up and have no one to buy from them
Q. How much of your product comes from factories in Asia?
A | It is dependent on the category but probably 20 percent or so is from Asia. For example, the majority of all dining room products are made in Asia. Furniture products generally are coming out of Vietnam more than anything today, whereas 10 years ago, these items used to be made in China. The big issue is China has a fair amount of the components or raw materials for a lot of products so many are dependent for these parts to complete items throughout the world.
Q. Do you expect business to rebound quickly?
A | Recovery will be slow unless the government can make very good decisions and gets the money into the hands quickly and efficiently. So far it feels like they have made some good decisions for the small to midsize businesses where I believe around half of the total employment is at in the U.S. Many companies are able to work from home like your professional industries, some of course will benefit from the pandemic so for those companies the employees should hopefully be able to get and start consuming goods relatively soon. While I don't think [recovery] will be rapid, I do think that it will start moving back up in a degree that will stabilize the economy and get all of us on some solid footing again which is all we are seeking right now.
Q. What do you hear from others in your industry, or vendors that HOM works with?
A | We have had talks with many within our industry and also with the contractors that work for us and many are concerned about how long they can hang on. The good news is the largest expense for most businesses are our employees and there are good relief packages set up, as I said, for the small and mid-size businesses. What is also going to be necessary is some low cost guaranteed loans for these successful small businesses that have a proven record so they may be able to cover the other fixed expenses that they will need to deal with while being shut down. Real estate companies have been getting notifications from many of their tenants already expressing they will not be able to pay their rents for immediate coming months so there will be issues like these that may create hardships for down line businesses all over and I am sure some will not be able to get through it.
Q. Do you share any of those concerns for HOM Furniture?
A | What is concerning for us personally is there has been minimal relief to date for companies like HOM that have over 500 employees but are still a regional, family-owned businesses. [Relief efforts continue to evolve and change on a daily basis.] We don't have Wall Street to back us like major national public companies do. Government is worried that they may need to get some of this aid into the larger companies. We are one of those in between companies—just like middle Americans that tend to many times get left behind because they have worked hard, done a little better than average, but are not rich by any means. They too get left out most of the time when it comes to relief. It’s sad because most of these are our best employees and the people who are who are building America. We would like to be able to keep our employees on the payroll, making sure they can keep their healthcare. While we are fortunate that HOM has been a successful company, this will be very difficult on our company. Depending on how long this lingers, it may force us, along with many employers in a similar situation that have over 500 employees, to do what may not be best for their employees, but is necessary to keep the business afloat.