Steinhafels seizes moment with bold expansion

From its humble beginnings as a small Milwaukee furniture store that opened 80 years ago, Pewaukee-based Steinhafels Inc. today has 17 stores and expects sales of nearly $150 million this year.

Now, the company is in the midst of one of the most significant expansions in its history. Steinhafels acquired three former American TV & Appliance stores, located in Oak Creek, Appleton and Madison, which will be converted to Steinhafels stores. The Oak Creek and Appleton stores will open soon, and the Madison store is expected to open in two to four years. The total cost to acquire and remodel the three former American TV stores could reach $30 million.

“It’s a very aggressive and bold move right now,” said Steinhafels president Gary Steinhafel, part of the third generation of family leadership of the company. “But I think our timing is perfect. Consumer confidence is up. Unemployment is down. The housing market is beginning to rebound. From a timing standpoint, we think that we’re positioned ideally to capitalize on both the combination of pent-up demand, the loss of the American TV business and in the case of Appleton, the opportunity (for Steinhafels) to enter a new market.”

The company is making other investments in its business. Steinhafels recently remodeled two of its stores, at a total cost of $2.5 million. The company also is planning a $10 million expansion of its distribution center and a $500,000 remodeling of the store at its Pewaukee headquarters complex along Interstate 94.

Renovations are underway at the former American TV store that will become a Steinhafels.

American opportunity

American TV & Appliance, an iconic Wisconsin retailer, announced in February that it was going out of business after 60 years. The company had nearly 1,000 employees and three stores in the Milwaukee area.

The demise of American presented an opportunity for Steinhafels, which purchased American TV’s Oak Creek, Appleton and east side of Madison stores for $12.75 million, or $4.25 million each. The American TV stores are large, each more than 100,000 square feet. Most furniture stores in the U.S. have about 40,000 square feet of space, Steinhafel said.

As it planned to go out of business, American TV approached Steinhafels about the deal and, in addition to the real estate, also offered to sell parts of its business.

Steinhafels wants its brand represented in the converted stores.

“We did take a serious look at their appliance business,” Steinhafel said. “It was a good business, and we gave it serious consideration.”

The company decided to pass on buying the American TV appliance business because it did not want to borrow more money to take it on, Steinhafel said.

“We are a very debt-averse company,” he said. “We just did not have the stomach for the debt to acquire a very successful appliance business.”

However, the opportunity to acquire the three American store locations, all positioned near the interstate, was one that Steinhafels could not pass up.

The company began work as soon as possible to remodel the Oak Creek and Appleton stores into Steinhafels stores. The company is spending between $5 million and $6.5 million per store on the remodeling projects. The projects involve a complete redesign of the exterior of the stores and a gut and rebuild of the interior.

“They’re going to be beautiful stores, representative of our brand,” Steinhafel said. “They will look like a Steinhafels. We did not want to move into an American building. We wanted our brand to be represented. We decided that given the strategic locations, it made sense. Because we are a company that likes to own our real estate, we felt strongly about investing our money into these buildings as if we were building them from scratch.”

The Appleton store will open this month, and the Oak Creek store will open in February. Each store will have about 70 employees, including some former American TV employees. The company has a total of about 700 employees, including the employees for the new stores.

The Appleton store gives Steinhafels its first entry into the Fox Valley market. The company hopes the store’s location near the Fox River Mall will help make it a regional destination. For now, Steinhafels does not plan to add any other locations in that region.

“We feel that if we have one great store in the valley, customers will drive as long as the experience is positive and we give great service,” Steinhafel said. “We think that because (furniture) is a major purchase we can be a regional draw. We will focus our efforts on executing one great store (in the region).”

The Appleton store is expected to open in time for Black Friday, the day after Thanksgiving.

“Black Friday is such a huge retail day, and we felt the draw of the mall will pull an audience from a very large area, and we wanted to have exposure during that critical retail cycle,” Steinhafel said.

Like the Appleton store, the Oak Creek store will be completely transformed inside and out. A significant number of windows will be added, which will change the exterior appearance of the building and dramatically increase the amount of natural light inside.

Oak Creek officials were glad to see that the American TV store in that city would not remain vacant for long, said Mayor Steve Scaffidi.

“I can’t think of a better use for the building than what Steinhafels is going to be doing,” Scaffidi said. “In many ways, it’s going to be an upgrade. It’s just a great company and a great family.”

Steinhafels already has three stores in Madison. Earlier this year, the company completed a $1.5 million renovation of its largest Madison store, located at 2164 W. Beltline Highway on the city’s south side. The company also has a mattress and bedding store near West Towne Mall on the city’s west side, and a 28,000-square-foot furniture and mattress store within East Towne Mall on the city’s east side.

Steinhafels owns a 14-acre vacant site near East Towne Mall where it had planned to build a new 100,000-square-foot store to replace the store in the mall. However the acquisition of the nearby former American TV store at 5215 High Crossing Blvd. changed those plans.

“We’ve been waiting for the economy and the right opportunity to break ground on that store (near East Towne Mall),” Steinhafel said. “But when an opportunity came along to purchase an existing store at a favorable price, that had been a furniture store, we chose to do that.”

Now Steinhafels plans to sell the vacant site near the mall and replace the store in East Towne Mall with a store in the 117,000-square-foot former American TV building on High Crossing Boulevard. The company wants to sell the vacant site near the mall before it proceeds with the remodeling of the former American TV location, so the new Madison Steinhafels store will probably open in about two to four years, Steinhafel said.

“We’re waiting to sell the property,” he said. “Once we do, we will take the proceeds and roll them into renovating the (former) American store.”

When the store opens in the former American TV building on the east side of Madison, the company will need to increase the size of its main distribution center.

In 2002, Steinhafels built a 420,000-square-foot headquarters facility on a 60-acre site at a highly visible location southeast of I-94 and County Highway F in Pewaukee. The facility includes a 130,000-square-foot store, about 200,000 square feet of warehouse/distribution center space and about 50,000 square feet of office space and additional facilities including a prep area, a photo studio and an employee fitness center.

The company plans to expand its main distribution center in Pewaukee by adding up to 100,000 square feet of space, which would cost up to $10 million. The efficiency of the distribution center is critical to the profitability of the company, Steinhafel said. If the distribution operation is inefficient, it will waste money and make it difficult to make money selling furniture.

The company also plans to remodel the store at its Pewaukee headquarters complex. Last year, it completed a $1 million renovation of its Kenosha store and earlier this year it completed a $1.5 million renovation of its store on the south side of Madison.

The Pewaukee store renovation will add new hard surfaces, including tiles and additional hardwood and laminate floors, to reflect modern home designs.

“People still use carpets, but more and more homes are using hard surfaces,” Steinhafel said. “Our stores need to reflect that.”

Humble beginnings

Steinhafels began in 1934, when John E. Steinhafel (Gary Steinhafel’s grandfather) and Arthur Mueller opened a furniture store called Mueller-Steinhafel Furniture at 3565 N. Teutonia Ave. in Milwaukee.

“It was a very bold move, towards the end of the Depression, with no money,” Gary Steinhafel said. “It was very small. I think it was a burned out grocery store. It was meager. It was very entrepreneurial, hard-working, six days a week they worked. They hired people from the local parish. It was a very, very humble beginning, like hundreds of other furniture stores in the area.”

Mueller died in 1944, and Steinhafel bought out his share of the business. After World War II, Steinhafel wanted his children to participate and be partners in the business.

“One by one, they joined the business,” Gary Steinhafel said.

John Steinhafel retired at age 63 and passed along the business to his children.

“I think that was one of the most generous and thoughtful decisions that he made,” Gary Steinhafel said. “Too often, someone starts a business and their kids have to wait many, many years before they end up with the business. This gave the second generation the opportunity to work together, which they did harmoniously, which is part of the testimony of the values of our family. We may be different individuals, but we pull in the same direction. We don’t move forward unless we are unified. It has served us well both in the second generation and the third generation.”

When Gary became president, his main thought was, “don’t screw it up.”

Steinhafel added, “It has taken 80 years of hard work and dedication to get where we are today. I have a genuine appreciation of the dramatic sacrifices that were taken by both the first generation and the second generation to turn a business over to a third generation that had a great group of employees, had no debt and had a great reputation in the community. That is the absolute most enviable opportunity.”

The company remains completely family-owned, with six family members in the business, including IT director Andrew Steinhafel, who is the first of a fourth generation of family member involvement in the company.

“It gave us great pleasure when (Andrew) decided to join the family business, because we would like the business to stay in the fourth generation,” Gary Steinhafel said.

Customers like to interact with company leaders whose last name hangs outside the store. Steven Steinhafel, Gary’s cousin, is the company’s customer service general manager.

“There are many times when a customer has a problem, they want to talk to a Steinhafel, and we have a Steinhafel (Steven) who heads up the service department who is not afraid to talk to those customers,” Gary Steinhafel said.

Gary’s brother, Thomas Steinhafel, is a sales leader for the company.

“He just loves to sell,” Gary Steinhafel said. “That is his passion, and he’s really good at it. Having a Steinhafel still actively talking to customers every day grounds us.”

Keys to success

Steinhafels has open dialogue with about 15 non-competing retailers from around the country to share best practices.

“Networking with other retailers has been a huge advantage for us,” Steinhafel said. “We’re humble enough as a company to know that we don’t have all of the answers, and we look for retailers that are better at certain elements, and then we try to emulate them. We’re always looking for ways to improve efficiency and the customer experience. So many companies focus on top line sales they forget operational competency.”

The company takes pride in having low employee turnover, which ultimately results in better operations and better service for its customers, Steinhafel said.

“You have to attract and retain quality co-workers,” he said. “Retail is a very labor-intensive business. Successful retailers, in my opinion, have low turnover and pay their co-workers a good wage. Turnover is terribly expensive. Unfortunately, I think a lot of retailers, they don’t pay a lot of money, the turnover is so great that the customer experience isn’t that good. We want to have customer experience that is extremely positive. So we work really hard to do that.”

The company will continue to look for growth opportunities, Steinhafel said.

“We are always looking for opportunities to expand,” he said. “What will determine the pace at which we can expand will be the profitability of the company. We reinvest all of our profits back into the business. The family does not take money out of the business. That’s how we have been able to survive and grow even during the tough economic times.”

The future

At age 61, Steinhafel said he still loves his job and has no plans for retirement, even though he splits time between his Milwaukee home and the 10,000-square-foot dream home that he and his wife, Jocelyn, built in North Carolina.

“This is not a job for me,” Steinhafel said. “It’s something that I truly love to do. The day that I wake up and I am not excited about coming to work is the day I won’t come to work. I don’t have to work. I want to work. I’m very proud of this company. I love this company. When you talk about retiring, it’s hard to say. I tell my wife, ‘My girlfriend is this company.’”

The company’s leaders are excited and optimistic about the company’s current growth initiative and its future, Steinhafel said.

“These are really exciting times,” he said. “We’re not fearful of growth and of the future. We’re optimistic, we’re relaxed. We’re confident. As long as we keep our customer first we will survive and we will grow.”

Steinhafels Inc.
Headquarters: Pewaukee
Stores: 17, plus more opening soon in Appleton and Oak Creek
Expected 2014 sales: $150 million
Employees: 700

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