Burlington sells tufted rug facility
February 12, 2001,
MONTICELLO, AR -When Saeid "Stephen" Korhani becomes the new owner of Burlington House Floor Accents' recently shuttered tufted rug facility here this week, expect to see some major changes.
But one thing will remain: the name Burlington.
As part of the acquisition, Korhani has exclusivity for the use of the name Burlington Rug Corp., Burlington's license.
"We negotiated a deal with Burlington because we wanted to continue using their name on our rugs," Korhani said. "Burlington is the most well-known brand in the industry."
Burlington announced on Oct. 26 that it would shut down the Monticello facility because the company was exiting the tufted rug business as part of its restructuring "Five Point Plan"-which includes efforts to eliminate unprofitable businesses, improve return on assets and reduce overhead and operating expenses.
Under the new management, about half of the Monticello facility's 750 employees will be downsized initially.
"We expect to rehire everyone within a year or two," Korhani said.
The average rate of service among the facility's employees is 19.5 years. "They are a very loyal staff," Korhani said, citing one of the main reasons he decided to buy the facility.
Among those employees keeping their jobs are six members of the top executive team. One of those top executives is Roger Miller, formerly divisional vp of operations and manufacturing, who will be promoted to president. Miller and a group of the facility's employees originally wanted to purchase the facility from Burlington but backed out due to financial problems.
Korhani expects also to hire four more top executives from outside the company to the top management team. "These new people will come from my previous contacts in the industry," Korhani said.
Korhani, originally from Iran, moved to Canada in 1981, where he and his family created the Korhani Group of Companies-one of Canada's largest suppliers of area rugs. Korhani served as president of his family's company, which had two distribution centers of more than 200,000 square feet.
But Korhani decided to establish a separate company in the United States when he heard Burlington's Monticello facility was for sale. On Jan. 26, Burlington Industries and Korhani sealed the deal.
"It was the right move," Korhani said.
Because several months have past since Burlington closed the facility, there have been concerns that a large portion of the company's $70 million to $100 million business-what Burlington generated over the past two years, respectively, from the facility-is lost to the competition.
Hoping to grab back not just the lost market share but more of it, Korhani plans to implement new production and distribution strategies.
Korhani said Burlington Rug Corp. will expand its tufted offerings with new colors, designs and sizes-not just scatter, but also area rugs.
"Burlington had been limited in that department over the past two to three years," Korhani said.
Also, Korhani has plans of stretching the company's retail reach into more upscale stores, like department stores, by implementing machinery to produce woven rugs.
And finally, Korhani will use his expertise in the area rug business to develop an international division that would export rugs to retailers in Asia, South America and Europe.
However, Korhani promised, price points for his new and expanded line of Burlington Rug Corp. rugs will be unchanged.
"We have no intention of increasing prices," Korhani said. "In fact we plan on reducing production costs and operational expenses."
Korhani said he just wants to make the most of his new acquisition.
"Our current production capability is $120 million without the weaving implementation," Korhani said. "We plan to work to potential."