Housewares maker cooks up profits by trimming fat
Boston — Record earnings have been pie in the sky for many companies during the recession, but for General Housewares Corporation, they've been pie on the plate , ready to eat.
Last year, this maker of cookware, candles, and tabletop giftware watched profits jump 29 percent, to $3.4 million, and sales grow 18 percent, to $72.8 million. Four years ago net income was $1.8 million and sales totaled $47.7 million. In June of this year the company hopped from the American Stock Exchange to the New York Stock Exchange, and two weeks ago, Merrill Lynch, Pierce, Fenner & Smith added General Housewares to its ''emerging growth companies'' list.
John Muller Jr., president of the Stamford, Conn.-based GHC, describes his company as ''a niche market'' firm. It is now the only manufacturer left in the United States that still makes enamel-coated steel cookware. Its Colonial Candle of Cape Cod division ranks No. 1 in sales in the US.
Candles and cookware are only segments of business for such competitors as Lenox, Hallmark, and Revere. For General Housewares, they are strong main lines - ''bread and butter,'' says Jerry Levine, a Merrill Lynch analyst. For this reason ''GHC continues to maintain a larger share of the market'' in its products.
Things didn't look this good back in 1974, though. ''They ended up the year with essentially zero net worth,'' says Seth Mandel, an analyst for the Value Line Investment Survey, which also follows the company. Mr. Mandel said its book value per share was below zero. Now it's around $7.50 - ''a real success story, '' he said.
Since then General Housewares has trimmed fat. It dumped lines that were no longer profitable - including the sale of its Leisure Furniture Group in 1980. It began a campaign to reduce costs. The Carter administration chipped in government relief in early 1980 when it placed duties on porclein-on-steel cookware imports. The Reagan administration this year extended those duties until 1984.
The company's profits and sales exceeded forecasts last year, primarily because of continued cost-cutting efforts and a strategy to bring out new, higher-quality products.
In 1979, president Muller said, the company spent 10 percent of capital on cost-cutting efforts. In 1982, it expects to spend 45 to 50 percent. The main improvement has been a new three-furnace system to reduce fuel costs.
Last year, new products accounted for about 11 percent of total sales. The company's higher-priced gourmet cooking product line - one roaster sells for close to $200 - did extremely well. Last year's introduction of the ''country gear'' concept - giving place mats, napkins, and tablecloths a country look - also did well. GHC has since carried the theme into its enamal products.
Mr. Muller says ''country'' is ''hot'' now with designers, ''and we are planning to ride on the hot designers' coattails.''
Last year may have been hot for the company, but the first six months of this year are on a low simmer. Sales are down $2 million. Income after taxes, however , has climbed 5 percent, to $865,000.
Analysts and GHC management say the company's cost control measures, improved margins, and new products have managed to keep it in good condition, compared with the economy. Mr. Levine at Merrill Lynch expects earnings to increase 5 to 7 percent this year.
But the first six months hit the housewares manufacturing business harder than expected.
''We've been saying for quite a while that housewares is recession-proof, then recession-resistant, and now the recession is longer and harder and is beginning to catch up with housewares,'' says Richard Hochman of the National Housewares Manufacturers Association in Chicago.
''We're a mature business, I don't want to kid you,'' said Mr. Muller. ''We're not microchips.'' So to reach the revenue goals GHC wants, new products, higher pricing, and cost control will have to continue to be priorities, he said.
General Housewares is taking another plunge in the new products area. As a licensee of the Museum of American Folk Art in New York, its giftware group is introducing linens, candles, and ceramic products modeled after early American quilts and art. The folk line is already splashed over the first pages of the Bloomingdale's catalog.
The company's strategy is to move toward more color coordination and a complete line of higher-quality products for the table - including silk flowers, a product introduced last year. And as far as acquisitions go, ''We are looking at a lot of things and talking to a lot of people,'' Muller says.
With more people entertaining at home, an increase in the number of young households, and growth in disposable income expected during the next decade, ''We think we are in a position just right . . . to really do well in the 80s,'' the president says. Apparently, the analysts think he's right.