The next-hot-thing Internet stock is… Brea-based Krause’s Furniture Inc.
Get this: Major venture players, including firms Thomas H. Lee, Putnam Internet Partners and GE Equity, have sunk a combined $19 million into Krause’s to fund its e-commerce initiatives.
“It just sort of fell into our lap,” explains Bill Gibson, Krause’s spokesman. “They were looking for somebody to do fulfillment.”
Thomas H. Lee, in particular, has been an active investor in furniture-selling web sites, and therein lies the story, says Gibson.
Furniture is being sold on the web in increasing quantities, but few independent manufacturers can handle the volume. It’s a lot easier to throw some graphics up on a web site than to actually make and ship the stuff in a timely manner, and without excessive damage in transit.
Moreover, most of the major furniture makers in the United States sell to franchises or retailers, who would take great umbrage at seeing the same product hawked over the web. Most manufacturers cannot afford to compromise those existing relationships.
Fine, but online furniture sellers need gobs of furnishings, delivered on time, to meet demand.
To the rescue comes Krause’s. It has only company-outlet stores. Therefore, it can sell over the web with no problem,there is no base of retailers to complain. And, at $130.4 million in annual sales, Krause’s has the horsepower,the factories,to actually produce and ship the goods.
Krause’s stock had risen to more than $5 a share at the beginning of the month in recent AMEX trading, up from $1 late last year. It has since dropped back to the $3.50 range last week. The company has lost money for five straight years, and analysts predict 2000 will be another loser.
One interesting note: The chairman of Krause’s is Philip Hawley, whom some will recall from his days as chief of Carter Hawley Hale Inc., the demised department store chain. He declined to comment last week.
Spokesman Gibson hinted that there is perhaps even more going on behind the drapes at Krause’s. “There may other items that Krause’s could make or distribute to web retailers.” n
Cole is a columnist for the Los Angeles Business Journal.
