In a sad turn of events, Art Van, the once legendary furniture store died this week in Warren, Michigan. What happened you ask? If you listen to industry insiders, they will tell you Art Van was the victim of private equity oversight.
Based on my conversations with several people that know the circumstances around this much better than I do, the big move into Chicago was a huge money suck with less than desirable results. E-commerce competition, average marketing programs, big changes to stores, mass chaos in leadership and a drastic move away from what actually propelled them to greatness, were all big contributors. Another factor in the bankruptcy filing might have had something to do with the fact that Thomas H. Lee Partners funded the purchase, in part, by selling off the stores and leasing back the real estate. An additional cost burden to Art Van during a very uncertain time in retail.
One of the biggest factors driving the success of Art Van was its employees and after the acquisition by private equity, there were some major changes in the leadership team. So major that “the company lost eight of its top nine executive leaders in fiscal years 2017 and 2018 through unplanned and, in many cases voluntary departures.” Whatever the reason, they lost a lot of the people that created the culture, and when you lose the culture, your just another store. If that’s all you are these days then you better sock some money away because you’re going to have a short run. Don’t get me wrong, Art Van still had some really great people working in the company after they sold, but I’m told the focus of the business was just different.
To summarize what I’ve heard from those who worked with the private equity owners, it was mostly about the spreadsheets and the bottom line. Very little consideration was given to the intangibles, but from where I sit, the intangibles are where the magic happens and the magic is what actually drives the sales, keeps employees happy, and consumers compelled to shop with you. How is it possible that these private equity guys just don’t get that? Or do they get it and just DON’T CARE or think that it matters enough to be a factor? Hey guys, read any good leadership books lately? Ever? Consider this from Crain’s Chicago Business; “A study by industry publication RetailDive found that nearly 21% of 125 retailers acquired by private-equity firms since 2002 wound up in bankruptcy. Hundreds of thousands of jobs vanished as stalwarts such as Toys R Us, Sports Authority, Linens’n Things, RadioShack and Payless Show Source” had to file after being acquired by private equity.
If you’re lucky enough to create some magic in your business, the bottom line takes care of itself. Not my opinion; just look around at some of the leaders in our category; in any category.
Art VanElslander created a culture that put the consumer in the middle of everything they did, attention to detail on merchandise and in-store experience, and a real heart for the community that drove their success. When you grow like Art Van did, and then you pour money back into charitable organizations serving your market, then you connect to people; to consumers, in a very important way.
Art and his people made that place an industry icon. Thousands of employees fed their families because of Art’s team executing his vision, suppliers made millions selling to them, and many furniture stores around the country visited Michigan hoping to borrow ideas on how to accomplish something great in their own community. And just like that, the private equity hacks helped to destroy a great business putting over 3,000 people out of work. How many times have we seen this happen in the mattress industry?!?
I raise my glass in a toast to everyone that built Art Van Furniture. You did an amazing job and should be proud of what you accomplished.