Analyst criticizes Furniture Brands corporate culture, lack of “transparency”

Furniture Brands International Inc. —  the Clayton-based parent company of Lane, Broyhill and Thomasville furniture — must  change an ingrained culture of friction between headquarters and operating divisions to regain its competitive edge, according to a longtime industry analyst.

Some of  Furniture Brands’  newest moves are ill-considered or late, said Budd Bugatch of Raymond James. Bugatch blasted what he called the company’s slowness to sell off HBF, its small but highly-touted office furniture division. The proceeds  from that upcoming sale  will  be 20 percent to 30 percent  smaller than they would have been only 10 months ago, he said.

Furniture Brands, the country’s second-largest  maker and importer of residential furniture,  is struggling to grab traction as sales  slide and profits bleed into red ink.  Business conditions in furniture stores are expected to stay tough into next year. The company’s stock is down 25 percent this year.

In the category of “disappointing” and “insensitive to the needs of the company’s shareholders,” Bugatch put Furniture Brands’ new policy of giving  limited financial guidance — disclosing only  full-year targets for sales and profits.

“We are…most disappointed by management’s lack of financial transparency, which displays a lack of understanding or insensitivity as to what the investment community needs and wants from publicly-held companies,” he wrote in a research note Friday. “As long as the company remains publicly-held, we believe it has a higher responsibility for transparency.”

Ralph Scozzafava, the company’s incoming chief executive, said last week that the new disclosure policy would “eliminate the distraction of constant reporting” and  allow the company to deliver “committment-grade numbers.”

Bugatch said several of the big restructuring initiatives the company unveiled at an investor conference last week — hiring a chief marketing officer and combining back-office functions —  had actually  appeared to be on Furniture Brands’ to-do list years ago. But were thwarted either by a fractured culture inside  the holding company or management’s indecision, he said.

Sharing  services across Furniture Brands’  variety of smaller companies — including Henredon, Maitland-Smith and Drexel Heritage — was the  plan of top management  five years ago, Bugatch said.

But W.G. “Mickey” Holliman, the company’s retiring chief executive, “had difficulty having that vision effectively executed by division personnel and attempts by his staff met with constant resistance,” Bugatch wrote.  ”In trying to get buy-in, the company weathered the embarrasing and costly departures of a number of executives, who got off the bus, even when they had only recently boarded.”

Now, for the company to successfully implement any new plan,  its divisions, “which stand to lose a high degree of autonomy, need to perceive a measure of shared pain as well as the potential for shared gain,” he wrote. “We do not believe that perception now exists.”

“Creating a one-company culture is really job number one for the next several years,” Bugatch said. “In our experience with the company, it has always been a ‘we’ (the operating division) versus ‘they’ (St. Louis) mentality.”