Keep Your Company Safe From Economic Strikes

Brunschwig & Fils, a 111-year-old, family-owned brand of classic traditional home textiles, furniture and accessories, faced a serious financial crisis characterized by three difficult economic scenarios which struck so many in the home furnishings industry.

The first of the three strikes was the virtual collapse of the housing industry, which began in 2007 and further decreased Brunschwig's already-diminishing sales levels. The second strike was the general economic recession commencing in 2008, which continued to push the company's sales exponentially downward.

The third strike involved the company's high fixed and variable operating costs resulting from decades of market growth and high profits. Management efficiently cut excessive variable costs, such as labor and marketing. However, Brunschwig had more than 20 large showrooms in major cities, and it was not possible to reduce the expensive rents at many of these design centers. While some landlords were realistic, cooperative and flexible, others were less cooperative and totally inflexible, or perhaps uncaring of the plight of the weakened industry.

These three major factors led Brunschwig & Fils to file for protection under Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy proceeding allowed for the auction of the company to the best and highest bidder. Many potential acquirers expressed interest in this extremely valuable brand and product line. In a lively and well-attended auction, Kravet Inc. succeeded as the winning bidder and added Brunschwig & Fils to its many brands.

In these very unpredictable and difficult economic times, what can management and boards do to avoid having their company "strike out?" These simple but important steps can keep companies in the "safety zone":

o Diligently maintain and monitor a detailed business plan.

o With absolute certainty, project no less than cash equilibrium.

o Keep bank debt well below collateral limits and leave significant room for a rainy day.

o Unless absolutely necessary, limit fixed, long-term commitments (leases, rentals, fixed-asset purchases, long-term employee contracts, etc.). Always be aware that these must be paid even if the business diminishes.

o Be meticulous and timely in the production and review of financial statements. As a general rule, the previous month's results should be available and carefully monitored no later than the 15th of the following month.

o Be honest with yourself and your creditors. Where possible, seek the counsel of independent outside experts. Their perspectives are often helpful in evaluating your company's circumstances dispassionately.

Even in these turbulent times, applying conservative management techniques and paying attention to cash flow can help home furnishings companies continue to hit home runs and remain safe from striking out.

Chuck Benjamin is president of Benjamin Capital Advisors. He can be reached at

HFN Staff | News & Commentary

HFN provides detailed information on the key home classifications: Housewares, Tabletop, Floor Covering & Rugs, Furniture, Home Textiles, Lighting, Home Decor, Mattresses & Bedding, Gifts, Major Appliances and Consumer Electronics as well as Business, Finance and Retail.


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