Month: June 2015

P.C. Richard wakes up to mattress business

When you have a good idea, it’s generally good advice to sleep on it. But Gregg Richard, CEO of P.C. Richard & Son, slept on one big idea for three years before rolling it out. Now other people are sleeping on it.

While the more-than-a-century-old independent chain based in Farmingdale routinely adds products, it a year ago almost to the day began selling mattresses at a few stores.

The firm will have mattresses in 56 of its 66 stores (including a dozen of 19 Long Island locations) within a week and anticipates mattress “galleries” in all its stores within two months.

“We felt we were sending our customers to our competitors, because we weren’t giving them the choice,” Gregg Richard said. “Now that they have a choice, they’ve proven to us that we were right. They’d rather buy from us.”

The firm is rolling out the mattresses more rapidly than planned, because Richard said the category has been “successful beyond my wildest dreams.”

“Because of the success last year, it was an all-out team effort to get these open as quick as humanly possible,” he said.

It might be an irony that mattresses are proving a way to wake up sales, which weakened in some categories. Customers still flock to P.C. Richard & Son for refrigerators, stoves, ovens and appliances, but some buy electronics, well, electronically.

“The electronics business isn’t what it used to be,” Richard said. “The computer, home-office category hasn’t been terrific, but we’re still doing fairly well. If our customers want something, we’ll be there to sell it to them.”

While to an outsider, selling mattresses may seem a departure, some bed frames and mattresses involve technology. And when people buy houses, they often need refrigerators, TVs and a place to sleep.

The firm, which says it’s “changing the way you buy a mattress,” sells Sealy Posturepedic, Stearns & Foster, Optimum and Tempur-Pedic as well as other brands.

“The most difficult part of the mattress business is operational,” Richard continued. “You need showrooms. We have them. You need great salespeople. We have them. You need advertising. We have it. You need a warehouse. You need trucking, home delivery, drivers and helpers. We have it. And we have the loyal customers.”

Other appliance and electronics retailers already went into the bedding business, such as Conn’s HomePlus, RC Willey, ABT, ABC Warehouse and BrandsMart USA.

“I talked to these guys. They said it’s a good business,” Richard continued. “I’m friendly with most of them. I kept pushing it off.”

The firm got requests for mattresses on customer cards filled out in stores. Then it tested the concept, tucking mattress “galleries” in the back of seven Connecticut stores a year ago. Mattress galleries sprouted in spaces used for stockrooms, rather than displacing items.

“We were able to break through the walls and make the stores a little bigger,” he said. “It required a lot of capital to get in the business. It forced us to look at every store. And when we went in to do the mattress galleries, we gave many stores a facelift.”

The company, which paid for renovations out of funds from operations, sells 20 different mattresses in its 10,000-square-foot Rego Park, Queens store and 35 in the 50,000-square-foot Riverhead store.

“Each store is different,” he said. “We have enough of a section, so our customers can make an educated decision.”

The retailer offers mattresses and bedframes ranging from under $200 to $10,000. Some frames offer massages, go up and down and include USB ports, phone plugs and chargers.

Although the firm says it will match others’ prices, it provides information about the product, including how it’s built, hand stitching, foam and oils. But comfort is king.

“It’s what you’re comfortable on, what you’re used to sleeping on,” Richard said.

He assumed customers would want to test mattresses, but he’s finding many choose convenience, buying online.

“I thought people would educate themselves, come into the store,” he said. “The business we do online without people ever lying on a mattress is amazing.”

Although some customers are surprised to see P.C. Richard’s softer side, Richard says his firm evolved, initially selling hardware, adding appliances in 1909 and by the 1930s and 1940s selling TVs.

“We started as a hardware store. We don’t sell hardware anymore,” Richard said. “We’ve changed our business model many times. Microwaves used to be a gigantic part of our business. VCRs. That turned into DVD players. CD players were big. It changed to the iPod and Wi-Fi.”

Executives have moved back and forth between appliance and electronics and mattress retail, bridging the two businesses. The former CEO of Bosch Appliances is president of Serta and a former Whirlpool executive is a top executive at Sealy Posturepedic.

“Lots of customers come in to buy a mattress and wind up buying something else too,” he said. “Maybe they buy a TV. It’s the advantage we have. We have lots of categories.”

P.C. Richard delivers on its promises, charging $49 for delivery, set-up and disposal of old mattresses, although it periodically offers free delivery.

And it’s expanding into the fitness business, selling Fitbits and trackers that measure steps, heart rate and calories, as well as home security and automation equipment, including smart thermostats and devices that use phones to unlock doors.

It sells home-office desks and some furniture used with TVs, but don’t expect the chain to turn into a furniture store.

“We’re not at this point selling dining room sets or couches,” Richard said. “We’re not looking to expand deep into home furnishings.”

The store expanded its slogan from the “appliance, TV, electronics giant” to “the appliance, TV, electronics, mattress giant.”

“The mattress business is very similar to our business,” Richard said. “The peak times are really the same holidays.”

The store competes with specialty retailers such as Bethpage-based Sleepy’s and department stores, but Richard believes his firm is simply expanding its niche.

“I’ve been competing with people for 105 years,” Richard said. “Most of them aren’t here. Competition isn’t new to us.”

There is a risk that a customer unhappy with a mattress could be turned off to the store and that online orders could be cancelled. But Richard isn’t losing sleep over possible problems, as the firm finds money hidden under mattresses.

“We’re in business to make customers,” Richard said. “We’re not in business to try to make an extra-quick buck for the short term.”

Survey: US business hiring picks up in May

U.S. companies stepped up hiring in May, a private survey found, evidence that employers remain confident in the economy even after it contracted at the start of the year.

Payroll processor ADP said Wednesday businesses added 201,000 jobs last month, up from just 165,000 in the previous month. April’s increase was the smallest in a year and a half.

The figures suggest that the economy is recovering after it shrank at a 0.7 percent annual rate in the first quarter. On Friday, the government will issue its official jobs report for May. Economists forecast it will show that employers added 227,000 jobs, and the unemployment rate remained 5.4 percent.

The ADP survey covers only private businesses, however, and frequently diverges from the official figures.

Construction companies added 27,000 jobs, ADP said, while manufacturers cut 5,000 jobs. The drop in factory jobs likely reflects the impact of the stronger dollar, which makes U.S. goods more expensive overseas and cuts into export sales.

Other recent reports have painted a mixed picture of the economy. Consumers remain cautious and are reluctant to spend their savings from lower gas prices, which are about $1 a gallon cheaper than a year ago. On Monday, the government said consumer spending was unchanged in April. Instead, the savings rate rose to 5.6 percent from 5.2 percent.

Yet Americans were willing to spend more on cars last month. Auto sales rose 2 percent in May to 1.64 million cars and trucks, according to Autodata Corp. That was the fastest sales pace since July 2005.

And a survey of manufacturing firms showed that factory activity grew at a faster pace in May than the previous month, driven higher by more new orders and greater hiring.

Overall, analysts expect the economy will expand at about a 2 percent annual pace in the second quarter. That would leave growth in the first half of the year barely above 0.5 percent, down from a 3.6 percent in the second half of last year.

Macy’s under pressure to sell NYC flagship, other stores, reports say

Cincinnati-based retail giant Macy’s Inc. is facing pressure to make some changes to its real estate strategy, Reuters reports.

Several hedge funds have asked Macy’s (NYSE: M) to sell more of its major stores and lease them back in a fashion that has benefited several other major retailers in recent months.

Macy’s and its financial advisers are listening to shareholders’ ideas on the matter but haven’t made any decisions yet. So far the company appears to be more interested in reducing its margins in its real estate portfolio as its management is concerned that a sale-leaseback strategy would burden it with expenses that would hinder its profitability and weaken its overall finances.

One of the properties hedge fund managers have highlighted for potential sale is Macy’s flagship Herald Square location in New York, but sources told Reuters that move is unlikely because of the location’s value as a tourist attraction and the role it plays in Macy’s identity and brand.

Macy’s owns 447 of its 823 stores along with several offices that have a total book value of $7.8 billion.

During the company’s first quarter earnings call, CFO Karen Hoguet said the company’s real estate strategy may have been carried out “over simplistically” up to this point and said a review of its holdings along with possible strategies is underway.

Macy’s operates 885 stores in 45 states, the District of Columbia, Dubai, Guam and Puerto Rico under the Macy’s, Bloomingdale’s, Boomingdale’s Outlet and Bluemercury brands