Q&A: Bob’s Discount Furniture CFO talks expansion and what sets chain apart
Bob’s Discount Furniture is thriving in a struggling retail sector and, based on its recent results, its business model is continuing to resonate with customers across the income spectrum, CFO Carl Lukach told Chain Store Age.
The Connecticut-based retailer’s third-quarter net revenue increased 10.3%, and comparable sales rose 3.8% on top of a strong-prior year comparison. Adjusted EBITDA grew 18%. Bob’s also set a new quarterly benchmark in store openings.
Lukach discussed Bob’s business model, real estate strategy, expansion plans and more in a recent interview with Chain Store.
What differentiates Bob’s from other furniture retailers?
There are a few aspects of Bob’s business model that set us apart. The center of our flywheel is value without comprise at everyday low prices, and our strategic pillars around the business protect that value. We define value as style, quality, experience and price.
Our first strategic pillar is our marketing strategy, which is uniquely narrow-and-deep assortment and allows our prices to be at least 10% below competitors’ lowest promoted prices. Our tiered “Good, Better, Best” model lets us serve a wide range of income levels and gives our customers the option to choose a product tier that fits their budget and their style.
Second, our supply chain capabilities allow us to be in-stock – approximately 85% of our assortment is on hand and available to be delivered in as little as three days.
And third, we’re well-positioned for an increasingly omnichannel customer. A meaningful portion of shoppers are using both our stores and digital channels to make purchase decisions and spending 20% more per order on average than single-channel customers.
All of this gives us confidence to expand the brand. We see whitespace potential for over 500 stores by 2035, with strong 80%+ cash on cash returns by year five.
How has Bob’s maintained its momentum amid a challenged economy?
We’re continuing to execute our strategy with discipline. Value is our anchor. And our "Good, Better, Best" assortment, combined with our focus on giving customers ways to shop across multiple channels, is helping us win over customers across income levels.
Has Bob’s noticed changes in customer spending?
Our business model is resonating with customers and generating profitable growth. Comparable sales growth in Q3 came from higher average order value (AOV), and customers continue to trade up into Better and Best.
Higher-income households, which we denote as $100,000 or higher, currently represent over 45% of our customer base. Importantly, we’ve also seen lower-income customers increase their AOVs and trade into our premium assortment.
What about store traffic?
Store traffic remains a headwind across the industry. Based on the data we analyze, we believe we are outpacing the industry and taking share in most of our markets.
We feel very confident in our store growth and market development plans, and our newest stores have continued to outperform initial expectations.
E-commerce traffic and conversion grew and contributed positively to comparable sales. Customers increasingly start in the store and finish online through OmniCart. We are continuing to take steps to protect our value position, invest in the customer experience, and manage costs with discipline.
What is Bob’s real estate strategy?
Our strategy is to develop markets, not simply open stores. We spend up to two years analyzing a market before entry, so that we arrive with density, a strong marketing plan and a clear understanding of the customer.
We open in both greenfield and infill markets. Infill stores tend to open with the highest cash-on-cash returns because the brand awareness, team and infrastructure are already there.
We are also building supporting infrastructure, like our Macon, Ga., distribution center, which is on track to open in spring 2027.
Approximately how many stores will Bob’s open in 2027?
We continue to target 10% annual unit growth, and we have strong visibility into the 2027 pipeline. The pipeline includes both existing and new markets, led by Atlanta, which will be our next major Southeast market.
Bob’s recently entered Tennessee. Is the company eyeing other new markets for 2027?
Yes. Next up is Atlanta in 2027, supported by our Macon, Ga., distribution center. We are very pleased with the customer response and initial productivity in Nashville, Tenn. Those stores build on our success in the Carolinas and validate the portability of our model in the Southeast.
Does the company still see a path to 500-plus stores by 2023?
Yes, we continue to target at least 500 stores by 2035. In Q3, we opened a record 11 stores, bringing our year-to-date openings to 20. We ended the quarter with 229 stores across 28 states, and we remain confident in our target of 10% annual unit growth.
As part of our long-term strategy, we regularly evaluate expansion opportunities across markets, and we see a long runway for profitable growth ahead.
