The upscale furniture retailer with its flagship store in Edina's Galleria is being acquired by another Minnesota-based home furnishings company, the 13-store HOM Furniture chain.
Eighteen months after remodeling and downsizing its flagship Edina store, Gabberts Design Studio & Fine Furnishings has agreed to be sold to HOM Furniture in a transaction expected to be completed today.
Terms of the purchase were not disclosed. Coon Rapids-based HOM said it will continue to operate the Edina store under the Gabberts name and plans to expand the brand to other Midwest markets.
HOM is a privately held company with 13 stores in Minnesota, Iowa, Wisconsin and North and South Dakota. Company officials expect sales of about $200 million this year from the combined businesses.
The deal marks the end of a family-operated business founded in downtown Minneapolis by Don Gabbert in 1946. His son Jim, who succeeded him as chairman and CEO in 1987, is leaving the company.
Gabberts moved to Edina in 1959 and became the anchor for Galleria in the 1970s, when Don Gabbert added the location as a smaller, upscale alternative to Southdale Center. Although the recent renovation cut the size of the store by more than half, to 63,000 square feet, it remains Galleria's largest tenant.
Jim Gabbert said Thursday that changes in the furniture industry made it increasingly difficult for single-store operators.
"The increase in offshore manufacturing has made it more important to have buying power. HOM has that, and Gabberts did not," he said. Rising fuel prices also proved burdensome for furniture businesses such as Gabberts that do not have multiple distribution facilities.
Competitive challenges also came from relative newcomers to this market, such as Ikea, and from specialty retailers like Pottery Barn, Restoration Hardware and Crate & Barrel, which now occupies some of the space Gabberts vacated in Galleria when it downsized its store.
Gabberts suffered a string of losses during a period of record home construction and hired a turnaround consultant in 2005. The company closed two stores that year in the Dallas-Fort Worth area to concentrate on the Edina store.
A $3 million remodeling
In 2007, it spent about $3 million remodeling and downsizing the Edina store. Gabberts also reduced the number of vendors whose merchandise it carried to more sharply focus product offerings and to make the store easier for customers to navigate. The company eked out a profit that year.
Gabbert declined to say whether his store is making money this year. He said the decision to sell to HOM was made partly on the consultant's advice, and also because HOM had expressed interest in buying the business several times over the last few years.
Rod Johansen, HOM president and CEO, said the addition of Gabberts will give HOM an entry into the high-end home furnishings market. Most HOM merchandise is aimed at the middle and upper-middle segment of the market.
"There is very little overlap in our product lines," Johansen said. "Our aim is to leave Gabberts brand as it is today and have HOM stay as it is."
Johansen said HOM has no firm plans on how to expand the Gabberts brand. He said it's likely that Gabberts galleries will be added to some HOM stores in markets such as Rochester; Fargo, N.D.; Sioux Falls, S.D., and Sioux City, Iowa.
The combined operation will have more than 1,000 employees. Gabberts' 110-person workforce will be cut by about 10 percent as a result of the sale. Johansen said the reductions will come mainly from corporate operations with minimal changes in the ranks of interior designers and sales personnel.
Susan Feyder • 612-673-1723