Furniture firms see buyouts, mergers picking up

By Karen Jacobs

HIGH POINT, N.C., March 30 (Reuters) - Furniture makers said this week they expect more industry consolidation as slumping sales put pressure on some manufacturers and retailers to combine their operations.

"I think you're going to see more consolidation on both the retail and the wholesale side," Hooker Furniture Corp. (HOFT.O) Chief Executive Paul Toms Jr. said at the High Point Market home furnishings show in North Carolina.

Acquisition and divestiture activity in furniture has picked up. In February, Hooker agreed to buy chair maker Sam Moore Furniture from La-Z-Boy Inc. (LZB.N), which plans to sell off several noncore business.

Ethan Allen Interiors Inc. (ETH.N) CEO Farooq Kathwari said the current activity in furniture mirrors the consolidation that took place in other sectors such as home improvement and consumer electronics as more sales flowed to big retailers.

"Larger mass retailers are taking more of the market share, which means consolidation of smaller and weaker retailers," Kathwari said. "It creates an opportunity to differentiate yourself by being good at providing better style, quality and service," he added.

Hooker, which has streamlined its distribution and closed its U.S. wood furniture plants to cut costs, said improved earnings would enable it to expand with niche acquisitions, potentially in accessory products such as lamps.

"As we have cash available, there are opportunities to look to acquisitions as a way to grow the property," Toms said.

La-Z-Boy, looking to extend its brand beyond the recliners it is well-known for, is focusing on its larger business units. In addition to selling Sam Moore, La-Z-Boy is also looking to shed its Pennsylvania House/Clayton Marcus furniture operation.

"We are going to continue to evaluate" the portfolio, said Kurt Darrow, La-Z-Boy chief executive. "If we have companies that over a sustained period of time we can't make an adequate return on, it's not our intention to hold those forever."

Darrow also said La-Z-Boy, based in Monroe, Michigan, would not rule out any acquisition that would be a good strategic fit.

"Our acquisition mentality today is acquiring more real estate ... and building out the markets we're in with stores," Darrow said. "If in fact we saw a strategic move in our store business that made sense, that would be where we would be adding something different to our mix."

PRIVATE EQUITY

Private investment firms have become more active acquirers in furniture.

This year, an affiliate of Florida-based Sun Capital bought Rowe Furniture, which filed for bankruptcy protection last year. Sun Capital owns manufacturer Lexington Home Brands as well as several furniture retailers.