2235 Staples Mill Road
Richmond, Virginia 23230
Fax: (804) 254-1493
Operating Revenues: $1.15 billion
Stock Exchanges: New York Chicago Pacific
SICs: 5712 Furniture Stores; 5719 Miscellaneous Home
Furnishings Stores; 6411 Insurance Agents, Brokers and
The Heilig-Meyers Co. has been described as the Wal-Mart of home furnishings. Partly by acquisition, partly by expansion, Heilig-Meyers grew so rapidly in the 1970s and 1980s that in 1986 it became the largest publicly traded home-furnishings retailer in the United States. It passed the $1 billion mark in annual revenues in 1994. By May 1995 Heilig-Meyers had 662 stores in 24 states and Puerto Rico. Most of these were in small towns more than 25 miles from a metropolitan market. Heilig-Meyers was selling not only furniture and accessories, but also bedding, small appliances, consumer electronics, jewelry, and seasonal goods. An important source of income was in-house credit. About 80 percent of its sales had been made on credit, principally through installment sales. It also offered insurance with its credit sales.
Heilig-Meyers was founded in 1913, when W. A. Heilig and J. M. Meyers opened a home-furnishings store in Goldsboro, North Carolina. These two Lithuanian immigrants had entered the retail business in 1911 by peddling piece goods to farmers settled around Goldsboro. The two men drove a horse and wagon over dirt roads to deliver merchandise, or even traveled on foot with the furniture on their backs.
In-house credit, along with effective cost controls, allowed Heilig-Meyers to survive the Great Depression. In its only year in the red, 1931, the company still only lost $5,000. By 1934 Heilig-Meyers had added stores in Kinston and Wilson, North Carolina. A fourth store opened in Raleigh in 1936 and a fifth in Rocky Mount, North Carolina in 1939.
The collaboration between Heilig and Meyers ended in 1946 with the Meyers family retaining control of the stores in Goldsboro, Wilson, and Rocky Mount. J. M. Meyers turned over direct management responsibility to his sons Hyman and Sidney. Hyman became president and general manager, and Sidney became director of merchandising. Their father continued, however, to be involved daily with all aspects of the business until his death in 1968.
Company headquarters were moved to Richmond, Virginia, in 1951.
By this time Heilig-Meyers had developed its operational philosophy of focusing on small towns and rural areas for its growth. Because newspaper circulation was limited in such locations, management chose to base its advertising on direct mail. The limited customer base meant that the company could not grow if it confined itself to selling furniture. Soon items such as jewelry, electronic goods, small appliances, lawn mowers, and bicycles were being offered as well. In 1965, when Heilig-Meyers had 14 stores, mostly in eastern North Carolina, it opened a central warehousing facility in Rocky Mount.
Heilig-Meyers had 19 stores early in 1970, when it merged with the nine-store chain of Thornton Stores of Suffolk, Virginia. George A. Thornton, Jr., founder of Thornton Stores, became chairman of the board of the combined company, a position he held until his death in 1980. Heilig-Meyers had 41 stores when it went public in 1972 to finance further expansion. The officers, besides Thornton, were Hyman Meyers, president, and Sidney Meyers and Nathan Krumbein (brother-in-law of Hyman and Sidney Meyers), vice-presidents. Heilig-Meyers had revenues of $22.1 million and net income of $1.5 million in 1972. In 1974, when it operated 55 stores in North Carolina, South Carolina, and Virginia, it had net income of $1.7 million on revenues of $34.4 million.
Part of Heilig-Meyers’s subsequent growth in the 1970s came by acquisition. The company purchased the assets of Granite Furniture Co. of Mount Airy, North Carolina, in 1975, and Bruce’s Furniture Stores of Easley, South Carolina, in 1979. It also bought furniture stores in Richmond, Danville, Virginia, and Kershaw, South Carolina. By 1980 there were 72 stores. Revenues had risen to $81.5 million and net income to $5.1 million. Management considered, but ultimately rejected, a 1979 proposal from an unidentified company to buy Heilig-Meyers for about $36 million in cash and notes. Two years later it turned down a $43.9 million offer from Citicorp Capital Investors Inc. of Chicago and Founders Equity Inc. of Washington.
The Meyers brothers and Krumbein sold much of their stock in 1983 and retired the next year, but remained directors. They turned over the management to two trusted executives still in their thirties, William DeRusha and Troy Peery, Jr.. DeRusha, the company president, subsequently became chairman and chief executive officer. Peery advanced from treasurer to senior vice-president and secretary and later became president and chief operating officer. DeRusha and Peery still held these posts in 1995.
DeRusha won an award and high praise from the Wall Street Transcript in 1984 for his management. A leading industry specialist cited Heilig-Meyers for “the number one management team in the industry.” He credited the previous management with having put into place a successful system of how the stores should be run, down to the smallest detail. Another industry analyst said that in 1982, a year of severe economic recession year, “Their earnings only flattened when others typically went down 20,30, 50 percent. They’ve never closed a store in their 72-year history as a result of nonperformance…. What we could say has changed is that they’ve adopted a more rapid expansion program.”
The Heilig-Meyers system of operation called for placing stores in communities of 50,000 or less, where competition from other retailers was limited to local stores. After saturating the market in Virginia, North Carolina, and portions of West Virginia, the company turned in the 1980s to South Carolina, Georgia, Alabama, Mississippi, and Tennessee for expansion. In fiscal 1985 (ending March 31, 1985), when there were 127 stores, net income reached $11.7 million on revenues of $167.9 million. A board of investment analysts told the Wall Street Transcript in 1985 that Heilig-Meyers had become “the premier investment play in the retailing side of the [home furnishings] business…. They have established a tremendous record—20 percent compounded growth rate in earning and 15 percent compounded growth rate in sales.”
Part of this growth was by acquisition. In 1984 Heilig-Meyers bought a Bristol, Tennessee, furniture company and a West Virginia supply company that it merged into a subsidiary. The purchase of 14 Royal Jackson stores in 1985 for $9.3 million opened up the Mississippi and Alabama markets. In 1986 the company bought the 74-unit Sterchi Bros. Co. for $44 million. These acquisitions brought Heilig-Meyers’s total to 216 stores in 175 towns.
Although Heilig-Meyers was selling household goods ranging from VCRs to bicycles and lawn mowers, in addition to furniture, DeRusha told a interviewer for Dun’s Business Month in 1986 that “We’re really in the distribution and credit business.” Some 90 percent of the company’s 300,000 customers were using its credit plans to make purchases on time, paying annual financing charges of up to 24 percent. Income from credit came to 16 percent of total revenues. In defense of the company’s practices, DeRusha pointed out that many of its customers could not pay cash, that there was no minimum monthly payment or penalty for late payment, and that it offered delivery within a week plus a unique repair service.
Heilig-Meyers placed great emphasis on its intensive training program of three to five years for developing its store managers. Once promoted to this level, company personnel were earning $32,000 to $38,000 a year, with an incentive program based on store performance that could double their salaries. As a result, the Heilig-Meyers manager was the highest-paid person in some towns.
In 1987 Heilig-Meyers purchased 22 stores in North Carolina, South Carolina, and Georgia from Reliable Stores Inc. for about $22 million in cash. It was also planning to open 20 to 25 new stores during the year. By early 1988 the company had 258 stores in 11 states, with its reach extending into Florida and Kentucky. Revenue came to $303.5 million in fiscal 1988, and net income to $15.5 million. The following year revenue grew to $351.6 million and earnings to $17.1 million. By the fall of 1989 the 277-store chain had entered the Midwest for the first time, in Ohio.
In February 1990 Heilig-Meyers bought 34 stores and warehouses in Tennessee, Kentucky, West Virginia, and Virginia from Reliable Stores for about $35 million. Over the next year it also acquired six stores from Holthouse Furniture Corp. and nine from The Furniture Center, Inc., for $5,639, 000 and $10,621, 000, respectively. Revenues reached $447.8 million in fiscal 1991, and net earnings $18.3 million. Later in 1991 the company bought five more Furniture Center stores for $2,782, 000 and 42 stores from WCK, Inc., for $14,384, 000.
By 1992 Heilig-Meyers had set a goal of 50 new stores a year. In that year it acquired 13 stores from Gibson McDonald Furniture Co. for $13,736, 0000, four stores from Reichart Furniture Corp. for $739,000, and 14 stores in Pennsylvania and West Virginia from Wolf Furniture Enterprises for $6,799, 000. Of Heilig-Meyers’s 401 stores, 60 percent were less than four years old. There were five distribution facilities, each designed to serve between 90 and 125 stores within a 200-mile radius.
Heilig-Meyers purchased McMahan’s Furniture Co. for $65 million in 1993. This acquisition added 92 stores: 65 in California, 12 in Arizona, seven in New Mexico, four in Texas, three in Nevada, and one in Colorado. The company entered the Chicago area by purchasing 11 L. Fish stores. This acquisition of Fish’s four downtown and seven suburban stores was a departure from the company’s traditional focus on smaller markets, but DeRusha said they were a good geographic fit for Heilig-Meyers, which had been expanding in the Midwest. Also in 1993 the company began sponsoring a racing team in NASCAR motor-racing competition.
Noting that about 80 percent of its sales were being made on company credit cards, an industry analyst declared in late 1993 that Heilig-Meyers had emerged in recent years as the country’s most profitable furniture retailer. Its market capitalization of $1.6 billion was said to be the biggest in the business. The only question was whether the chain, with 470 stores, was running out of room to expand at its recent annual profits growth rate of 30 percent. After Heilig-Meyers reported sales up 31 percent and profits up 45 percent in fiscal 1994, a professor at American University wrote that the company recorded installment purchases in revenues before sales were final and glossed over a negative cash flow of $75 million. Heilig-Meyers’s treasurer replied that “The whole report is completely erroneous and full of inaccuracies.”
There was no change in the Heilig-Meyers strategy in 1994. It announced plans to open 70 to 90 stores during fiscal 1995, exclusive of acquisitions. Seventy-seven stores were added during 1994, including eight acquired Nelson Bros, units in the Chicago area, bringing the total to 647. Near the end of 1994 Heilig-Meyers announced plans to acquire Puerto Rico’s largest-volume furniture retailer, Berrios Enterprises, for $85 million. The deal gave Heilig-Meyers 17 more stores and its first presence outside the U.S. mainland.
For fiscal 1995 (ending February 28, 1995), Heilig-Meyers reported that sales had reached $956 million and total revenues $1.15 billion, an increase of 33 percent over the previous fiscal year. Net earnings were $66.8 million, up 21 percent. The company planned to open at least 50 new stores and to aggressively seek acquisitions that could take it beyond the 700-store mark in 1995. By then a sixth distribution center had opened in Moberly, Missouri, to serve its stores in Illinois, Iowa, and Missouri, and a seventh, in Fontana, California, to serve its California stores. According to company executives, expansion would continue to center primarily on small-town markets in the Southeast and Midwest. The company’s long-term debt was $370.4 million at the end of fiscal 1995, up from $248.6 million at the end of fiscal 1994. Dividends had been paid in every year since 1975.
In 1995 Heilig-Meyers stores generally ranged in size between 10,000 and 30,000 square feet. The company owned 80 of its stores at the end of fiscal 1995, leasing the rest. Prototype stores, first introduced in fiscal 1993, featured the latest technology in display techniques and construction efficiencies. Existing stores were being remodeled on a rotational basis, with 38 remodeled in fiscal 1995 and about 50 slated for renovation in fiscal 1996.
During 1995 about 59 percent of Heilig-Meyers’s sales were derived from furniture and accessories; 12 percent from jewelry, small appliances, seasonal goods, and miscellaneous items; 11 percent from consumer electronics; 10 percent from bedding; and 8 percent from appliances. These percentages had not varied significantly over the past three fiscal years. There were distribution centers in Orangeburg, South Carolina; Rocky Mount, North Carolina; Russellville, Alabama; Mount Sterling, Kentucky; Thomasville, Georgia; Moberly, Missouri; and Fontana, California. Three were owned by the company and the others leased, as was the corporate headquarters in Richmond. A fleet of trucks operated by the company delivered merchandise to each store at least twice a week.
Service centers in Fayetteville, North Carolina, Moberly, and Fontana provided repair services on virtually all consumer electronics and mechanical items sold in Heilig-Meyers stores. These centers had the capacity to process 500 repair jobs a week and were also authorized to perform repair work under certain manufacturers’ warranties. Most repair orders had a turnaround of one week.
Heilig-Meyers was accepting major credit cards in all of its stores and, in addition, offering a revolving credit program featuring its private-label credit card. The company was extending credit for terms up to 24 months, with the average installment term about 17 months. During fiscal 1995 finance income amounted to about 17 percent of total revenues. Heilig-Meyers also offered property and life insurance, and in some states disability insurance, with its credit sales.
Monthly direct-mail circulars reaching about ten million households accounted for about half of Heilig-Meyers’s advertising expenses in fiscal 1995, while television and radio commercials, produced centrally, were aired in almost all of the company markets.
Buchanan, Lee, “Heilig-Meyers Sees 700 Units,” Furniture/Today, November 14, 1994, pp. 1, 18.
Craft, Leslie, Jr., “What’s in Store for Heilig-Meyers?” Furniture/Today, October 5, 1992, p. 16.
Engel, Clint, “Heilig-Meyers to Buy 17 Puerto Rican Units,” Furniture/Today, December 26, 1994, pp. 1, 51.
——, “Heilig-Meyers Hones Strategy,” Furniture/Today, March 27, 1995, pp. 1, 46.
Epperson, Wallace W., Jr., “Heilig-Meyers Co.,” Wall Street Transcript, December 3, 1984, p. 76114.
“Furnishings/Residential & Commercial,” Wall Street Transcript, September 16, 1985, pp. 79200-79202.
Hackney, Holt, “Heilig-Meyers: The Vulture Play in Home Furnishings,” Financial World, December 8, 1992, pp. 18-19.
Levy, Robert, “Heilig-Meyers: Selling Big in Small Towns,” Dun’s Business Month, June 1986, pp. 56-57.
Schroeder, Michael, “The Sherlock Holmes of Accounting,” Business Week, September 5, 1994, p. 48.