Broad River looks to ‘quarantine’ coronavirus damage
FORT MILL, S.C. — Charlie Malouf talks about Broad River Retail's business and an eventual recovery using the language of these turbulent times.
His perspective over the past few weeks of this pandemic has shifted from that of the patient to that of a doctor in the emergency room, he says. The patient — whether that's the business, the economy or the consumer — has suffered "true injury," has lost a lot of blood, will need time to "rehabilitate." And Broad River is trying to "quarantine" the worst of this coronavirus-related damage to the second quarter.
The CEO of the Fort Mill.-S.C.-based Ashley HomeStore licensee said he wasn't afforded much time to shift gears from celebration — with the grand opening of its 22nd store in Raleigh, N.C. — to virus-induced crisis management.
It was really just one day. President Trump somberly addressed the coronavirus crisis from the Oval Office on March 11. The ribbon cutting for the Raleigh HomeStore Outlet was March 12, and on Friday, March 13, Malouf was back in Fort Mill, a day early, with business partner and Chief Operating Officer Manny Rodrigues and senior executives preparing for what was coming.
"We went into full crisis management mode and have been doing that ever since — about four weeks," he said. "Our message to our team was really quite simple: We don't know how long this is going to last. It's probably not going to be a very fast deal, and getting through this is going to require shared sacrifice by all to ensure business continuity and brighter tomorrows for all of us."
Fortunately for Broad River, it entered this pandemic period on financially solid footing. The first 11 weeks of this year were the strongest in the retailer's history; it was off to a record pace. What happened next Malouf equates to what happened to American figure skater Nancy Kerrigan just before the 1994 Winter Olympics. She was at the top of her game, when suddenly she was blindsided, attacked with a police baton. (Perhaps it should be noted here Kerrigan recovered quickly and ended up taking a silver medal.)
"As an industry, as a country, as an economy, we've had blunt-force trauma," Malouf said. Broad River wasn't spared. It has already lost millions in expected topline revenues in these past few weeks, even as most of its stores have remained open.
It didn't start seeing a slowdown in sales and traffic until Saturday, March 14, but has taken "massive haircuts with each progressive week," he said. "If we were projecting to do $50 million in the second quarter, we're probably going to do $30 million, and we might call that a win."
That may sound grim, but Malouf's steady voice on the phone projects confidence without denying the seriousness of the situation. He said his mindset has shifted during this crisis from being the patient to the doctor, and he quickly added that he means this with all due respect for the "true heroes," the healthcare workers and others saving lives during this crisis.
"But as a metaphor, we're having to fix the patient, so to speak, and the patient is our business and all of the people who depend on our business," he said. "We have to make decisions that concern their health, their financial well-being and livelihood, and we can only support them for so long with limited funds coming in, so it's just really heavy."
Here's a glimpse into part of that crisis management plan and what Broad River is doing to make it through this tough time and prepare for a rebound.
For starters, it's staying open when and where it can. Malouf said there are five conditions it must meet in order to so. The first: It must operate safely, practicing physical distancing, and stringent new sanitation and hygiene protocols. And Malouf insists physical distancing (as opposed to social distancing) is the right terminology. Now is not the time to be socially distant, with older parents or other relatives, for instance, those in need of connection and help, he said.
Second, it wants to remain open if local and state governments allow it, and so far, in Georgia and the Carolinas markets it operates in, they have. (Malouf credited Rodrigues with deftly navigating all aspects involved with the company's ability to keep its stores open.) It also wants to remain open if its people want to work, if customers still want to come in and shop, and if staying open makes financial sense. That is, if the revenues justify opening.
"All those conditions would have to remain," Malouf said. "We wanted to give our people options. For those who were not comfortable, we gave them attractive furlough options, and this started before we knew what the stimulus plan would mean to folks."
As of midweek, 15 of Broad River's 22 stores remained open. Traffic is down, so the company reduced the number of people working, offering voluntary furloughs. It also reduced store hours, so stores could run on a single shift. "We continue to right-size to (fit) what we're seeing with sales and traffic," Malouf said. It also has gotten creative with contact-free delivery and/or drop-off delivery for those who want it. "You just have to be super careful — gloves, masks, sanitation."
Everyone at Broad River has taken a pay cut in one form or another, via furloughs, reduced hours, reduced salaries or a combination. "The principle of shared sacrifice is evident among all of our memory makers (that's what Broad River calls its associates), so we can lessen the pain for all of our people and come out strong on the other side. We need to have a strong company so we can be in a position to grow again."
Several inspirational stories have surfaced since Malouf called for this shared sacrifice. Take, for instance the Founders Scholarship Fund, established in 2018 to provide college scholarships to children of the company's employees. Early on during the COVID-19 crisis, Malouf went to his former business partner, co-founder Jonathan Ishee, explained what was happening and asked if the company could divert some of the scholarship funds to help recently impacted employees. Ishee's response as Malouf recalled, was, "Whatever you need to do, and I'll put in another $100,000."
So Broad River is now preparing to send its own emergency relief checks to furloughed employees, possibly hitting their accounts before the CARES Act relief arrives.
Malouf said he's had associates approach him after learning what their pay reduction would be and offer to take on a little more of a hit in order to help an associate less prepared for the financial strain.
It's been heartwarming. "It's been everyone pitching in, and that's the only way out of this thing," he said.
The Top 100 company has taken other steps to lessen the financial blow during this crisis. It pushed out the opening of a customer call center planned at its new facility in Four Oaks, N.C., for instance. It recently put a pause on new hires. It suspended unnecessary travel and deferred other deferrable expenses. It pushed out the opening for two stores that were under construction. It's negotiating and re-negotiating with all of its landlords — constantly.
Malouf also gets on a daily (sometimes twice-a-day) call with executives from Ashley Furniture Inds. and other top licensees. "And, we are actively working on several amazing projects and sharing best practices through this pandemic," he said. "It's been incredibly helpful and encouraging for all of us. I'm very confident in Ashley's leadership and its ability to help us navigate through this storm."
Malouf said Broad River isn't trying to turn a profit in this second quarter but rather trying to break even. "We're trying to survive so we can thrive again, and I'm very confident we'll be able to do that," he said. "We've been able to manage our stores, protect our people, keep everyone safe, keep business flowing, and I'm very confident when this turns, we will not have depleted all of our cash or our access to cash."
Broad River entered the coronavirus pandemic in the best cash position it has ever been in, and that will help it weather the storm, he said. "What we're trying to do, and our message to our banks and our people is, we're trying to quarantine our soft financial results to the second quarter. That's how I'm trying to wrap my head around this. I'm taking that negative word, 'quarantine,' and using it in a positive way."
Meanwhile, Broad River has opened its second distribution center in Four Oaks, holding orientation for 33 new associates there last week. The facility has been receiving product and made its first deliveries this week. Having two distribution centers online helps Broad River "de-risk" should something happen to one or the other during this health crisis, he said.
"And we're loading both up with inventory," Malouf said, "because we believe when this turns, the demand could turn quickly, and we want to be poised to get our people back to work, get our people paid very quickly and our guests taken care of."
Malouf said he's hesitant to "crystal ball" the timing and nature of an eventual recovery, but he doesn't think it's going to be the sharp, so-called "V-shaped" rebound some economists were forecasting early on. He thinks it's more likely to be "U-shaped."
"When you take this sort of blunt-force trauma, there's true damage that's being done. There's true injury," he said. "The patient has lost a lot of blood, and I think we are going to need to heal and recover. I think it's going to take some time to rehabilitate."
Ask him again in 60 days, he said. "If we're still dealing with what we're dealing with now, then all bets are off. But in 60 days, if it feels like American life again, maybe it wasn't as deep a wound, and we stitched it up pretty well and got people back up and going."
Either way, Malouf said he's not so much fixated on the macro economy right now as he is on his own business and the things he can control.
Every year, Broad River chooses a word that its entire team can rally around. Last year it was "purpose." This year, it's "united," which, perhaps, couldn't be more appropriate given the circumstances.
"We can't wait to bring all of our people home," Malouf said. "Our goal is to be reunited and bring our people home as soon as we can."
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