Home Furnishings Stores

Transcription

1 INDUSTRY PROFILE Home Furnishings Stores NAICS CODES: SIC CODES: 5714, 5719 About First Research First Research, a D&B company, is the leading provider of Industry Intelligence Tools that help sales and marketing teams perform faster and smarter, open doors and close more deals. First Research performs the heavy lifting by analyzing hundreds of sources to create insightful and easy to digest Industry Intelligence that can be consumed very quickly to better understand a prospect s or client s business issues. Customers include leading companies in banking, accounting, insurance, technology, telecommunications, business process outsourcing and professional services. Used by more than 60,000 sales professionals, First Research can benefit any organization which has prospects in multiple industries. Attention: This Profile purchase is an individual license and is not to be distributed to additional individuals even within the same organization. For corporate or small business subscription information, visit or call or toll-free International

2 Industry Overview Companies in this industry sell new home furnishings, such as decorative items, kitchen and bath products, linens, and window treatments, from physical retail locations. Major US companies include Bed Bath & Beyond, Garden Ridge, Pier 1 Imports, Restoration Hardware, Sur La Table, and Williams-Sonoma. The US home furnishings store industry includes about 20,000 stores with combined annual revenue of about $26 billion. Competitive Landscape Demand is driven by consumer income. Large companies compete through volume purchasing, breadth of products, and effective merchandising and marketing. Small companies focus on a market segment and compete through depth of products and superior customer service. The industry is concentrated: the 50 largest US companies account for about 75 percent of industry revenue. Competition for home furnishing stores includes department stores, mass merchandisers, home improvement stores, and online and mail order retailers. Products, Operations & Technology Major product categories are domestics (17 percent of sales), decorative accessories (15 percent), and cookware (10 percent). Domestics are towels, sheets, blankets, and table linens. Decorative accessories include lamps, mirrors, pictures, clocks, and desk sets. Other products include window treatments, dinnerware, glassware, and small appliances. Home furnishings retailers include national chains and independent stores. Major chains, such as Bed Bath & Beyond, offer superstores that vary from 20,000 to 50,000 square feet and are located in suburban strip malls. Other chains, such as Williams-Sonoma, operate stores of 6,000 to 15,000 square feet located in enclosed shopping malls and strip centers. Independent stores range from 2,000 to 20,000 square feet. Large-format stores typically carry 15,000 to 40,000 different items and can generate $5 to $8 million in annual sales or $200 to $300 per square foot. Smaller stores have annual sales of $1 to $4 million and generate $250 to $400 per square foot. Chains usually have their own distribution facilities with centralized purchasing and inventory management. Goods may be purchased from distributors, importers, or directly from manufacturers. Independent retailers typically buy from several hundred suppliers, while large chains have several thousand suppliers. Most chains use third-party logistics companies for shipping goods to stores. To reduce inventory costs and respond quickly to demand shifts, some retailers are replenishing store inventories daily. Home furnishings retailers use computer systems to manage point-of-sale (POS) transactions and inventory and warehouse operations. To improve customer service, many also use hand scanners and bar codes to look up prices on the store floor. Computers are also used to store customer data, handle credit approval, and manage bridal gift registries. Sales & Marketing The typical target customer is a woman, age 25 to 55, who is fashion- and brand-conscious and has betterthan-average income. Based on local demographics, retailers vary the mix of styles and price points carried at each store. Effective merchandising and customer service are key to attracting new customers and repeat visits. Retailers frequently change displays and product mix to reflect seasonal variations in demand and create a fresh appearance for the store. Sales staff receive product training to help customers in purchase selections. Customer service also includes generous return policies for merchandise. Advertising typically includes full color newspaper inserts and direct mail. Retailers with catalog operations also use their catalogs as direct mail to drive store traffic. The Internet is also used for advertising and to provide shop-at-home convenience. To encourage repeat store visits, retailers offer customer loyalty programs that include private-label credit cards, advance notice of sales, and frequent buyer discounts. Industry trade shows are an important source of information on new products and market trends. Finance & Regulation Cash flow is seasonal, with higher sales in third and fourth quarters. Transactions are by cash or credit card, so

3 accounts receivable are low. Gross margins are typically 40 to 45 percent of net sales. Lease terms for home furnishings stores vary from two to 20 years. In addition to a base rent payment, leases can include advertising and maintenance fees, and a percentage of sales. The industry is unregulated except for standard state and federal regulations against deceptive sales practices and laws that regulate the use of credit financing. International Insights Many home furnishings products are imported, with China by far the dominant supplier. Other large suppliers are India, Pakistan, and Mexico. Regional Highlights In the US, home furnishings tend to follow population patterns. California, Texas, Florida, and New York have the most stores. Some national chains have expanded into Canada, but most focus on the US market. Human Resources Required skill levels for workers are relatively low. Average hourly industry wages are significantly lower than the average for all US workers. Due to the seasonality of sales, stores employ a large number of part-time workers. The industry injury rate is more than 50 percent higher than the national average, in part due to the heavy and bulky products handled by employees. A typical home furnishings store has a manager, one to two assistant managers, and five to 15 employees. Industry Employment Growth Bureau of Labor Statistics Average Hourly Earnings & Annual Wage Increase Bureau of Labor Statistics Industry Growth Rating

4 Demand: Driven by consumer spending Need efficient inventory management Risk: Changing consumer decorating preferences Quarterly Industry Update Trend: Online Sales Growth for Nonelectric Housewares - US online sales of nonelectric housewares grew by 8 percent from September 2012 to September 2013 to reach 15 percent of total nonelectric housewares sales, according to NPD Group. The growth was attributed to shoppers' increasing comfort with online purchases of cookware and dinnerware and merchants' significant investments in improving their websites. In addition, consumers' use of websites as tools for comparison can lead to them spending more for higher-quality products. Overall sales of nonelectric housewares were $5.6 billion for the year ended September 2013, an uptick of 0.5 percent. The modest growth came after several years in which sales fell. Industry Impact - Home furnishings retailers may want to see if their online sales for this category match up to the industry average and make adjustments to their Internet strategy if they fall short. Industry Indicators US consumer spending on durable goods, an indicator of home furnishing sales, fell 2 percent in November 2013 compared to the same month in The value of US residential construction spending, a key indicator of home furnishings sales, rose 17.1 percent year-to-date in November 2013 compared to the same period in US retail sales for furniture and home furnishings stores, a potential measure of demand for home furnishings, increased 4.6 percent in the first twelve months of 2013 compared to the same period in Industry Forecast US personal consumption expenditures of home furnishings are forecast to grow at an annual compounded rate of 6 percent between 2013 and Data Published: September 2013 First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy. Forecast FAQs

5 Industry Drivers Changes in the economic environment that may positively or negatively affect industry growth. Data provided by First Research analysts and reviewed annually Energy Prices Change in crude oil and related energy prices Consumer Spending Change in overall level of consumer spending on goods and services Technology Innovation Advances in science and technology, including information technology Critical Issues Consumer Income Drives Demand - Home furnishings are usually discretionary purchases that can be postponed when consumer income declines. For example, sales for home furnishings stores fell 8 percent from 2008 to 2009 and grew by just 3 percent from 2009 to 2010, as consumers deferred purchases during the lingering economic downturn. Sales rose by more than 5 percent from 2010 to 2011 as overall economic conditions began to improve. Imports Driving Down Prices - Consumer prices for home furnishing products have been steadily falling for nearly a decade, driven by low-cost imports and competition from national chains and mass merchandisers. Prices for linens fell nearly 20 percent from 2003 to 2012; prices for other home furnishings dropped by more than 35 percent. Business Challenges Changing Consumer Preferences - Most home furnishings products have become fashion items subject to changing preferences for features, styles, and colors. Like apparel, a particular product category, design, or color can become hot and surge in demand before cooling. Retailers must anticipate consumer lifestyle trends when buying merchandise and respond quickly when demand shifts. Managers review daily reports from point-of-sale systems to detect changes in buying patterns. Sales Seasonality - Home furnishings retailers have higher sales in third and fourth quarters due to back-tocollege, wedding, and holiday gift buying. Some retailers earn all their net income for the year during these quarters. Stores carefully manage inventories of popular items and rely on part-time workers to take full advantage of these peak sales periods. Competition from Other Retailers - Mass merchandisers like Wal-Mart and Target have been expanding their home furnishings departments and driving down industry pricing. Department stores have focused on bridal registry services and offer frequent sales to meet price competition. Home improvement stores offer limited home accessories to complement their home remodeling products and services. Dependence on Imports - Most home furnishings retailers get the majority of their products from overseas, primarily from China, Pakistan, Mexico, and India. Some buy through US importers, while others contract directly with foreign suppliers. This dependence on imports raises the risk of supply disruptions or pricing swings due to trade disputes and tariffs. Imports also increase exposure to currency exchange rate risk, though many retailers minimize exposure by pricing contracts in US dollars. Competition for Retail Locations - Home furnishings retailers seeking to grow their store count must compete with other retailers for prime locations in suburban strip malls and enclosed shopping malls. A limited number of power strip malls are suitable for superstore formats; locations also targeted by mass merchandisers, consumer electronics chains, home improvement stores, and warehouse clubs.

6 Business Trends Comparable Store Sales Fluctuate - Declining prices have made it more difficult for chains to grow sales at existing stores. Comparable store sales at the major chains have fluctuated the past several years, forcing store executives to rely on new store openings to achieve double-digit growth in overall sales. To attract repeat visits to existing stores, companies are expanding product lines, changing merchandising formats more frequently, and offering customer loyalty programs. Major Chain Expansion - Some home furnishings chains like Bed Bath & Beyond are opening new stores and expanding existing stores to maintain revenue growth. Bed Bath & Beyond opened 40 new stores in Direct-to-Consumer Sales - Many home furnishings retailers are selling directly to consumers via the Internet and catalog sales, in addition to their "bricks and mortar stores. Williams-Sonoma does about 45 percent of its sales directly to consumers. Online and catalog sales provide 24 hour shopping convenience for busy consumers. Celebrity Licensing - As home furnishings become more fashion-oriented, retailers and manufacturers are increasingly using celebrities in product branding and advertising. Martha Stewart helped initiate the use of celebrity branding, but it's expanded to include fashion models, clothing designers, and celebrity chefs. Industry Opportunities Customer Service Key to Success - Home furnishings stores can compete effectively with mass merchandisers by offering superior customer service through knowledgeable sales staff. Stores refer to customers as guests and invest in staff training on product categories and guest relations. Advice from knowledgeable sales staff has become more important with the expansion of product choices. Exclusive Brands - To differentiate themselves from the competition and attract new customers, many home furnishings retailers are developing exclusive product offerings. Some are developing their own private-label brands while others are working with manufacturers to license and develop celebrity brands on an exclusive basis. Investing in exclusive brands goes beyond individual sales potential: the main goal is to increase store traffic. Expanded Product Offerings - Declining prices are forcing home furnishings retailers to look for innovative ideas and products to grow sales at existing stores. Expanding beyond their traditional product categories is one strategy retailers are pursuing. Some stores are adding furniture, rugs, and other home decorating items. Others are expanding from bath accessories into beauty and personal care products. Leveraging Internet Capabilities - Most home furnishings retailers are using the Internet to offer convenient home shopping to customers. Innovative retailers are leveraging the Internet with their bricks and mortar stores to expand their services, including online bridal gift registries that track purchased items across stores nationwide. Some chains allow college students to shop for dorm room furnishings at their home store and pick up the items at another store, saving the cost of shipping bulky items like towels and bedspreads. Integrated Merchandising - To increase purchases per visit, many stores have changed from merchandising by product category to an integrated approach that combines products from multiple categories focused around particular styles or areas of the home. Seeing complementary products in mock home settings can lead to additional purchases. Stores are also matching the styles displayed and highlighted to the tastes of local demographics. Executive Insight Chief Executive Officer - CEO Anticipating Market Trends Like apparel, home furnishings have become fashion items subject to changing consumer preferences for features, styles, and colors. Given the lead times in ordering goods from overseas suppliers, retailers must anticipate what products will be hot months in advance. To discern trends, companies attend industry trade shows, buy consumer research from trade associations and consultants, monitor trends in related industries, and analyze sales patterns in their own stores.

7 Creating Customer Service Culture To successfully compete against mass merchandisers and warehouse clubs, both large chains and small independent home furnishings retailers emphasize customer service. Companies often refer to customers as guests, invest in product knowledge and customer relations training for employees, and try to hire fashionconscious employees. Small specialty stores, in particular, often compete by offering in-depth product knowledge and interior design advice to customers. Chief Financial Officer - CFO Negotiating Store Leases Home furnishings retailers compete with other retailers for high-traffic store locations, usually in enclosed shopping malls or power strip malls. The rapid expansion of major chains for all retail specialties has intensified competition for prime locations and increased the negotiating power of leasing companies. In addition to a base payment, leases may include advertising and maintenance fees, as well as a royalty on store sales. Since lease terms range from three to 20 years, effectively negotiating new leases and lease renewals can have a long-term impact on store costs. Improving Inventory Turns The risks of declining prices and changing consumer preferences, along with a desire to reduce costs, are causing home furnishings retailers to reduce inventory levels at stores and distribution centers. Companies are using point-of-sale (PPS) and inventory management systems to track daily turnover. Some have implemented daily store replenishment from distribution centers and more frequent deliveries from distributors. At home furnishings chains, store managers are being given more ownership for store inventories, and are being evaluated on performance measures such as inventory per square foot. Chief Information Officer - CIO Enhancing Sales Reporting Systems Home furnishings retailers analyze store sales to understand buying trends and avoid stock-outs of hot products and excess inventories of slow-selling items. For chains, sales reporting systems have usually involved sending overnight batch updates of store data to corporate for next day analysis. Advances in technology now allow both store managers and corporate to view sales and inventory data in real-time to more quickly respond to demand shifts. Sales reporting systems are also developing enhanced analytical and graphical reporting capabilities to help managers discern trends in the data. Developing Internet Capabilities To compete with large chains and enhance customer service, many small home furnishings retailers are developing their Internet capabilities. A website and online advertising are replacing some spending on traditional marketing vehicles, such as Yellow Pages and newspaper ads. An online presence also provides 24-hour shopping convenience. Small retailers usually outsource their website s development and hosting, and may use marketing consultants to help with site design and search engine optimization. Human Resources - HR Hiring Part-Time Workers The majority of workers at most home furnishings stores are part-time. Part-time workers are needed to respond to sales seasonality and to staff weeknight and weekend store hours. Turnover is often high among these part-timers, forcing companies to constantly hire and train staff. Developing effective hiring and training programs for new employees becomes critical as home furnishings stores compete based on customer service with mass merchandisers and warehouse clubs. Training New Store Managers Large home furnishings chains are rapidly expanding the number of stores they operate, with some opening more than 50 new stores a year. This rapid expansion creates a need to develop and train new store managers. To meet this need, most chains have a formal management training program involving rotation through various store operations and classes on employee relations, staffing planning, company information systems, and selling skills. Local community colleges with retail management programs are being used for training and as a source of management candidates. VP Sales/Marketing - Sales Growing Repeat Store Visits To grow sales at existing stores, home furnishings retailers are encouraging more repeat visits. Companies are updating merchandising displays more frequently to create a fresh store appearance and highlight promotional items, and are introducing products throughout the year. Most retailers are also using customer loyalty programs that include private-label credit cards, advance notice of sales, and frequent buyer discounts. Leveraging Direct-to-Consumer Sales Many home furnishings stores offer consumers the convenience of shopping via catalogs or the Internet. These

8 direct marketing channels are also being used to drive sales at brick-and-mortar stores. Catalogs may serve as direct mail pieces to increase store traffic. Online shoppers can order items for pickup at the store location of their choice, and can register for alerts of special store promotions and advance notice of sales. The key is to use direct channels to complement, rather than cannibalize, traditional store sales. Executive Conversation Starters Chief Executive Officer - CEO How does the company predict new fashion trends in the market? Home furnishings have become fashion items subject to changing consumer preferences for features, styles, and colors. How does the company cultivate better customer services? Companies invest in product knowledge and customer relations training for employees, and try to hire fashionconscious employees. Chief Financial Officer - CFO How aggressively does the company compete for prime store locations? The rapid expansion of major chains has intensified competition for prime locations, and increased the negotiating power of leasing companies. How does the company manage and monitor inventory levels? Companies use POS and inventory management systems to track daily turnover. Chief Information Officer - CIO What types of sales reporting systems could improve the company's ability to analyze sales trends? Sales reporting systems are also developing enhanced analytical and graphical reporting capabilities to help managers discern trends in the data. Who manages the company's websites? Small retailers usually outsource their website s development, hosting, design, and search engine optimization. Human Resources - HR What types of training does the company offer part-time workers? Part-time workers are needed to respond to sales seasonality and staff weeknight and weekend store hours. What kinds of training does the company offer new store managers? Most chains have a formal management training program involving rotation through various store operations and a variety of classes. VP Sales/Marketing - Sales How does the company encourage repeat business? Companies continuously update merchandising displays, introduce new and seasonal products, and offer customer loyalty programs. What kind of Internet or catalog shopping services does the company offer? Direct marketing channels are used to drive sales at brick-and-mortar stores as well as to entice online shopping. Call Prep Questions Conversation Starters How sensitive are the company s sales to economic conditions? Home furnishings are usually discretionary purchases that can be postponed when consumer income declines. How has the company responded to declining prices? Consumer prices for home furnishing products have been steadily falling for nearly a decade, driven by low-cost

9 imports and competition from national chains and mass merchandisers. How does the company keep pace with trends in consumer preferences? Most home furnishings products have become fashion items subject to changing preferences for features, styles, and colors. What role does customer service play in the company s competitive strategy? Home furnishings stores can compete effectively with mass merchandisers by offering superior customer service through knowledgeable sales staff. How many exclusive brands does the company offer, if any? To differentiate themselves from the competition and attract new customers, many home furnishings retailers are developing exclusive product offerings. How has the company expanded its product categories? Declining prices are forcing home furnishings retailers to look for innovative ideas and products to grow sales at existing stores. Quarterly Industry Update What strategies have helped the company increase online sales? US online sales of nonelectric housewares grew by 8 percent from September 2012 to September 2013 to reach 15 percent of total nonelectric housewares sales, according to NPD Group. Operations, Products, and Facilities What product categories are most important to the company? Product categories include domestics, decorative accessories, dinnerware, cookware, other kitchen and bathroom accessories, and window treatments. How big is a typical store? Independent stores range from 2,000 to 20,000 square feet; chains are typically 6,000 to 15,000; and superstores run 20,000 to 50,000. What are average sales per square foot? Superstores average $200 to $300 per square foot; smaller stores vary from $250 to $400. How many different items does an average store carry? Large stores carry 15,000 to 40,000 items, while smaller stores typically carry 1,000 to 5,000. How many suppliers does the company buy from? Small retailers have hundreds of suppliers, while large chains have thousands. How automated are the company s operations? Computer systems are used to manage point-of-sale (POS) transactions and inventory and warehouse operations. If a chain, how much freedom do individual stores have to change their product mix and merchandising format? Chains are giving store managers more control over product selection and merchandising to meet local customer needs. How important are sales via catalogs or the Internet to the company s business? Many large retailers use catalog and Internet sales to complement their stores. How does the company handle its e-fulfillment operations? Companies with significant catalog or Internet business often have separate facilities for filling orders. Customers, Marketing, Pricing, Competition Who are the company s target customers? Typically a woman, age 25 to 55, who is fashion- and brand-conscious with better than average income. What types of marketing vehicles are most effective? Home furnishings retailers use newspaper inserts, direct mail, catalogs, and the Internet. What is the company s merchandising strategy? Many retailers are integrating products into display environments focused on a particular style or area of the home. How often does the company change its merchandising displays? Companies typically change displays frequently to reflect seasonal changes and give their stores a fresh look. What is the company s pricing strategy?

10 Major chains have adopted an everyday low prices strategy to attract customers and compete with mass merchandisers. What role does customer service play in the company s competitive strategy? Smaller companies can compete against large chains and mass merchandisers by offering superior customer service. How does the company monitor trends in customer preferences? Most retailers review daily sales reports from stores to detect changes in buying patterns. Trade shows are also an important source of information on market trends. How is the company building customer loyalty? Customer loyalty programs include private-label credit cards, advance notice of sales, and frequent buyer discounts. Regulations, R&D, Imports and Exports What role do imports play in the goods the company sells? The majority of home furnishings products sold in the US are imported. Where does the company buy its imports: US distributors or sourced directly from foreign manufacturers? Most are bought from US distributors, but some large chains also buy direct. How does the company price its contracts for imported goods? Most companies price their contracts in US dollars to minimize foreign currency exchange risk. Organization and Management How many full- and part-time employees does a typical store have? A typical home furnishings store has a manager, one to two assistant managers, and five to 15 employees. Over half of employees are part-time. What training programs are provided for employees? Sales staff is trained on products and customer relations skills. Management training programs are available to develop new managers. How is the company minimizing employee turnover? Flexible scheduling and higher wages are aimed at employee retention. What performance measures are used to evaluate store managers? Typical measures include sales per square foot; inventory per square foot; store contribution (sales minus expenses); and employee turnover. Financial Analysis How seasonal are sales and earnings? Sales and earnings are higher in third and fourth quarters. What are typical terms of the company s leases? Lease terms vary from three to 20 years. In addition to a base rent payment, leases can include advertising and maintenance fees and a percentage of sales. What are typical inventory levels? Inventory levels of 60 to 120 days sales are typical. How is the company improving inventory costs? Companies are investing in supply chain management systems; some are implementing daily replenishment of stores. Given declining retail prices, what else is the company doing to maintain operating margins? Companies are analyzing costs and implementing process improvements, and seeking ways to grow sales at existing stores. Business and Technology Strategies What trends does the company foresee in the home furnishings industry? Companies need to stay on top of trends in order to appeal to customers. What is the company s strategy to grow comparable store sales? Comparable store sales have been growing 5 percent or less recently. How does the company determine locations for new stores?

11 Demographic analysis is used to determine desirable areas, and retailers look for strip mall or enclosed mall locations. How is the company s use of the Internet changing? Companies are leveraging the Internet to develop services that complement their brick-and-mortar stores. Financial Information COMPANY BENCHMARK TRENDS Quick Ratio by Company Size The quick ratio, also known as the acid test ratio, measures a company's ability to meet short-term obligations with liquid assets. The higher the ratio, the better; a number below 1 signals financial distress. Use the quick ratio to determine if companies in an industry are typically able to pay off their current liabilities. Financial industry data provided by MicroBilt Corporation collected from 32 different data sources and represents financial performance of over 4.5 million privately held businesses and detailed industry financial benchmarks of companies in over 900 industries (SIC and NAICS). More data available by subscription or single report purchase at COMPANY BENCHMARK INFORMATION NAICS: Data Period Last Update January 2014 Table Data Format Mean Company Size All Large Medium Small Size by Revenue Over $50M $5M - $50M Under $5M Company Count Income Statement Net Sales 100% 100% 100% 100% Gross Margin 46.2% 48.9% 45.7% 45.1%

12 Officer Compensation 2.6% 2.1% 2.0% 3.2% Advertising & Sales 4.6% 5.0% 4.7% 4.3% Other Operating Expenses 37.2% 39.8% 37.1% 35.8% Operating Expenses 44.4% 46.9% 43.8% 43.4% Operating Income 1.8% 1.9% 1.9% 1.8% Net Income 0.8% 0.8% 0.8% 0.8% Balance Sheet Cash 6.9% 7.4% 6.4% 7.0% Accounts Receivable 9.6% 11.4% 9.0% 9.1% Inventory 42.1% 37.1% 43.7% 43.7% Total Current Assets 65.8% 63.5% 66.0% 67.0% Property, Plant & Equipment 21.2% 23.2% 21.0% 20.3% Other Non-Current Assets 13.0% 13.3% 13.0% 12.7% Total Assets 100.0% 100.0% 100.0% 100.0% Accounts Payable 17.1% 15.3% 17.6% 17.7% Total Current Liabilities 34.4% 30.6% 35.0% 36.0% Total Long Term Liabilities 22.3% 16.3% 21.7% 26.0% Net Worth 43.4% 53.1% 43.3% 38.0% Financial Ratios Quick Ratio Current Ratio Current Liabilities to Net Worth 79.2% 57.6% 80.8% 94.6% Current Liabilities to Inventory x0.82 x0.82 x0.80 x0.82 Total Debt to Net Worth x1.30 x0.88 x1.31 x1.63 Fixed Assets to Net Worth x0.49 x0.44 x0.49 x0.53 Days Accounts Receivable Inventory Turnover x3.20 x3.30 x2.99 x3.29 Total Assets to Sales 39.7% 41.6% 41.2% 37.8% Working Capital to Sales 12.5% 13.7% 12.8% 11.7% Accounts Payable to Sales 6.9% 6.4% 7.4% 6.8% Pre-Tax Return on Sales 1.3% 1.3% 1.3% 1.3% Pre-Tax Return on Assets 3.3% 3.2% 3.3% 3.5% Pre-Tax Return on Net Worth 7.7% 6.0% 7.5% 9.3% Interest Coverage x2.42 x2.24 x2.38 x2.59 EBITDA to Sales 2.9% 3.2% 2.9% 2.7%

13 Capital Expenditures to Sales 1.1% 1.4% 1.1% 1.0% Financial industry data provided by MicroBilt Corporation collected from 32 different data sources and represents financial performance of over 4.5 million privately held businesses and detailed industry financial benchmarks of companies in over 900 industries (SIC and NAICS). More data available by subscription or single report purchase at ECONOMIC STATISTICS AND INFORMATION Retail Annual Sales Growth - Census Bureau Change in Consumer Prices - Bureau of Labor Statistics VALUATION MULTIPLES Home Furnishings Stores Acquisition multiples below are calculated using at least 16 private, middle-market (valued at less than $1 billion) industry asset transactions completed between 6/2003 and 9/2013. Data updated annually. Last updated: November Valuation Multiple MVIC/Net Sales MVIC/Gross Profit MVIC/EBIT MVIC/EBITDA Median Value MVIC (Market Value of Invested Capital) = Also known as the selling price, the MVIC is the total consideration paid to the seller and includes any cash, notes and/or securities that were used as a form of payment plus any interest-bearing liabilities assumed by the buyer. Net Sales = Annual Gross Sales, net of returns and discounts allowed, if any.

14 Gross Profit = Net Sales - Cost of Goods Sold EBIT = Operating Profit EBITDA = Operating Profit + Noncash Charges SOURCE: Pratt's Stats (Portland, OR: Business Valuation Resources, LLC) To purchase more detailed information, please either visit or call Industry Websites Bed Bath & Beyond Largest home furnishings chain. Canadian Home Furnishings Alliance Media, links, directory, and events. Home Furnishings News Weekly news and retail trends in home furnishings. National Home Furnishings Association Trade association for furniture and other home furnishings. National Retail Federation Largest retail trade association. Williams-Sonoma High-end home furnishings retailer. Glossary of Acronyms BBB - Bed Bath & Beyond HFN - Home Furnishings News NHFA - National Home Furnishings Association NRF - National Retail Federation POS - point-of-sale

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