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Fall 2008 1. Agio recently completed construction of a new facility with three floors of showroom space of 100,000 square feet, housing an R&D staff of over 300 in the Shunde District in the Guangdong Province of China. Agio has experienced tremendous growth over the last five years – both in the U.S. and worldwide. The construction of our new 14-story headquarters in China is a testament to that growth. The facility also allowed us to consolidate many of our non-production operations. The three showroom floors represent our ever-increasing investment in the specialty segment, the Reserve program and participating retailers. 2. What will retailers see from Agio and its product lines for next season at Casual Show? What consumer demand trends do you predict for 2009? For 2009, Agio is offering a multitude of new collections in both our reserve and regular specialty lines. Our reserve program will feature several promotionally priced wicker collections including our best-selling Panama group. We have also added three new alumicast collections which will be priced to offer excellent value for buyers. In addition, we are really excited about an array of seven-piece collections that feature large stone-top tables that will retail for $1,999 or less at specialty. To respond to consumer concern for the economy we want to be sure that we continue to create customer demand, and we’ve developed products and pricing that will meet that demand in 2009. 3. For those retailers not involved with Agio’s Reserve Program, (a very successful for Agio specialty retailers that gives them flexibility in purchasing, selection and freight), what can this program offer them in order to promote and maintain growth and momentum? We more than doubled our business in the Agio Reserve Program this past year, so dealers are really taking advantage of it. This year we hope to have most Reserve products ready to ship by October, which will give dealers in the southern part of the country an early start to their season. The Reserve Program basically allows specialty retailers of any size to “play with the big boys.” There are no real restrictions on the size of their orders as long as they fill a container with product. With 18 collections in the program and the flexibility to choose from a wide variety of styles and pieces, ordering a full container of product that will move on the showroom floor is very easy. We expect that more and more dealers will put more emphasis on Agio Reserve collections in the future, because they are selling better than virtually any other product available. Dealers are realizing that flexibility, variety and value add up to increased sales rather than having money tied up in overstocked products that just don’t turn. 4. How do you think the specialty retailer should regard Agio in the casual furniture industry today? Specialty retailers need to think of Agio as an important player on their business teams. We are the largest company in the industry and make 95% of our products in our own factories. With some 8 million square feet of manufacturing space, tens of thousands of experienced employees, and by far the largest R & D budget in the industry, we are an important resource now, and in the future will be even more so for specialty retailers. We are doing everything that we can to be an important resource that can help keep the specialty segment vibrant and prosperous in the industry. This is why we encourage retailers to take advantage of our proven success with programs like Agio Reserve. 5. What are you dong to keep your company fresh and relevant in the marketplace? It is all about design and innovation. We have a total of eight exclusive designers in our company. Six of them are full-time staff members, and the other two are exclusive independent designers. We design about 100 new chairs each year and dozens of other items that bring new ideas and excitement to the market. We are also innovating new programs for dealers that are unprecedented, especially for a direct import company. 6. How are you working with specialty retailers to help grow their business? No company offers more designs to specialty retailers than Agio. The fact that there are so many products available for exclusive distribution means that a dealer showcasing Agio should not have to worry about Internet competition. We have innovated some of the longest running programs in the business for savvy, successful retailers. The Agio Reserve Program has proven successful for so many small independents in this business, and continues to forecast as a program that will keep specialty retailers safe in an ever-expanding global market. 7. As a result of rising costs in materials, manufacturing and freight, significant price increases have made their way to retailers. While some delayed adjustments for as long as possible, many retailers moved ahead with increases mid-season. What is Agio’s stand on mid-season increases and where the industry is heading as a result of the economy? These are times when cost increases are an obvious fact of life. It is totally understandable that manufacturers may have to raise prices during the season. The most important thing a manufacturer can do for their dealers is to maintain robust business practices, so that success is attainable down the supply line. Agio decided not to raise prices during the season, which hurt us, but we decided to maintain the pricing commitments we promised our dealers. Changes in currency rates from January to February alone resulted in a 10% loss that filtered straight to the bottom line. Although these changes were painful and unanticipated, we are still looking forward to some double-digit increases on existing items in 2009 to make up for last year and hopefully meet our projections for the coming year. We expect the US dollar will continue to deflate against overseas currency by another 10% for at least another ten months. All of the research that we’ve done suggests that we can expect the Chinese currency to bottom out around 5.5 rmb to the dollar in 2010. Couple the weak U.S. dollar with the effects of oil prices on every phase of our business and it’s a fair assumption that we may see inflation like we have not seen since the 70’s. No one is exempt from having to pass on these cost increases, especially since many products and parts come from the Orient, and the effects of rising oil prices are felt worldwide. 8. Does Agio see any solution to the rising costs in the industry? What innovation will you as a manufacturer support in order to continue to propel the market forward? We have been living in a deflationary society for the last 25 years and it looks like the ride is over. It is obviously going to be a shock for those who were not active in business in the 70’s, when we experienced 13% inflation, 18% interest rates, and quarterly price increases. It is also important to remember that all of this is relative, and we will to the best of our ability design to price point so that our dealers remain competitive with the rest of the outdoor retail environment. China is the market basket for the world’s manufactured goods and the higher these goods are priced, the more competitively priced goods produced elsewhere will have to be. I don’t believe that the result of all of these changes will be new foundries or huge manufacturing facilities built for our industry in the U.S., so I think it’s important that we continue to innovate with product and pricing so that retailers can continue to prosper. 9. Do you think specialty retailers are giving consumers what they want? In all honesty, I believe that too many specialty retailers are marketing to the top 1/10th of 1% of consumers incomes. They are missing a huge market segment and opportunity if they are doing this. Specialty retailers should be aiming for the top 25% of all income groups and at the same time find a way to make this group feel comfortable with the overall selection and price points. The variety, flexibility and value built into our specialty collections give retailers the advantage of offering quality product to a diverse mix of income groups. 10. This year the media again focused on the concept of the “staycation” as the money-saving alternative to high travel costs. What opportunities or trends do you feel outdoor retailers may enjoy as a result of the “staycation”? Continued use of the term really illustrates that there is a definitive force that continues to propel our industry through good and bad economic times. When consumer confidence is down, the housing market will follow and subsequently take some time to rebound. Travel costs are through the roof, and European travel has become unattainable for most. There is, however, a resounding reaction among all homeowners, regardless of whether consumers can afford gas, travel, or a new home. Staying home and investing in outdoor living areas is relatively inexpensive, rewarding, and promotes family, well-being, and the contentment that comes with outdoor entertaining. This consumer behavior is not going away, and aging baby boomers will continue to drive this way of thinking, as will Generations X and Y behind them. In other words, the present situation could bode well for our industry as a whole, as more consumers decide to enjoy their homes and families. 11. How do you plan to perpetuate Agio’s success? Our business was up 9 percent for the 2008 season, which is substantial when you consider our $400 million base of business. Much of that growth we attribute to our specialty retailers and the Agio Reserve Program. Everyone in our company knows that our next big goal is to do $100 million worth of business with specialty dealers. When we get there, hopefully in the next year or two, I will be confident that specialty dealers will once again have a strong and vibrant future in this industry. That is our goal. If we take care of our customers, our growth will take care of itself. |