BY GARY JAMES
Investment banker still intrigued by bedding business he’s studied for 40-plus years
Wallace W. “Jerry” Epperson Jr. has long been a passionate student—and fan—of the bedding industry. His research on sleep products stretches back more than 40 years, when he and Mike Sherman, founder of Gaithersburg, Maryland-based Association Research Inc., teamed up to create the first economic model for the International Sleep Products Association. Since then, Epperson has been a regular contributor to ISPA’s industry forecasts, as well as a popular speaker at the association’s EXPOs and conferences.
Co-founder and managing director of Mann, Armistead & Epperson Ltd., an investment banking and advisory firm based in Richmond, Virginia, Epperson has been intimately involved in some of the bedding industry’s biggest financial deals. He and his partners helped Corsicana manage its sale to an outside investor in 2015. Over the years they’ve also worked with Simmons, Serta and other leading brands and licensees on acquisitions and divestitures.
An early introduction to furniture
Epperson was born in 1948 in Victoria, Virginia, about 70 miles south of Richmond. His father, Wallace Epperson Sr., was a railroad conductor whose route took him straight through the heart of the state’s busy furniture production district. Ed Lane, founder of Lane Furniture, was a big customer and sometimes would ride in the caboose to take a short trip with Epperson’s dad.
“I didn’t realize it growing up, but that’s really how I got my start in the furniture business was through my dad’s contacts,” Epperson says. “When I was at UVA and working on a paper for one of my courses, I reached out to Mr. Lane and Mr. Lane couldn’t have been nicer. Here’s a millionaire founder of a very large business and he basically said, ‘Tell you what, you talk to my son B.B.’ Later, as an analyst for Scott & Stringfellow, I would call on B.B. in a business capacity.”
Today, after nearly a half-century of involvement with the furniture and mattress industries, Epperson is recognized worldwide for his accurate, in-depth coverage of suppliers, manufacturers and retailers. He also has been acknowledged by several industry, research and Wall Street associations for analysis of the furniture and bedding industries. On several occasions, the U.S. State Department has asked Epperson to travel to the Pacific Rim and Europe to assist countries in better understanding the U.S. home furnishings business.
Epperson earned a bachelor of science degree in commerce from the University of Virginia and an MBA from the College of William & Mary. He started his career in 1971 as a furniture analyst with investment banking firm Scott & Stringfellow, where he spent five years before joining Wheat, First Securities Inc.
One of Epperson’s first projects at Scott & Stringfellow was an analysis of the performance of publicly owned companies involved in home furnishings. At the time, the furniture industry was in a period of rapid growth and drawing a lot of interest from Wall Street, and Epperson’s report provided insights into earnings and profits that weren’t previously available. To compile the document, he pored over mountains of financial reports, industry publications and other resources but, most importantly, he spent hours and hours talking to executives in every facet of the industry.
When Epperson moved to Wheat, First, he created a similar report called the Furnishings Compendium and then, after launching Mann, Armistead & Epperson in 1991, he started the popular Furnishings Digest newsletter. In each case, Epperson provided the home furnishings industry with information it couldn’t get anywhere else. In addition to providing value to industry executives, the newsletter proved to be an effective marketing vehicle for Epperson’s firm.
“If you’re a major private equity group or a major corporation and you’re looking at doing something in the furniture and mattress industry and you want to learn about it, you can come here (to our office) and we can show you documents that explain the different sectors to you,” Epperson says. “What we put in our publications isn’t even half of what we know—it’s just a preview to let you know that we know what we’re talking about.”
High regard for sleep
While Epperson tracks developments related to the entire home furnishings industry, the mattress business has held a special place in his heart.
“The mattress industry is unique,” he says. “It does so many things well that the furniture industry and the home furnishings business as a whole could learn from if they would study it more closely. I wrote a whole report on this subject about 10 years ago, but it comes down to this: Even though the entire mattress industry basically has only rectangular slabs to sell, it still finds effective, creative ways to explain the benefits of products to consumers and draw them into stores.”
Because the sales challenge for mattresses is tougher than for furniture, where styles, sizes and colors are more easily seen and compared, the bedding industry has to work harder to tell its story to consumers, Epperson says. To bring mattress features, which are largely hidden, to life, producers have developed creative sales tools, such as construction cutaways that show the performance characteristics of specific layers and diagnostic machines to help consumers determine which mattresses might be the best fit for their bodies and sleep preferences.
Sleep products manufacturers and retailers also have worked harder than their furniture counterparts on service issues, Epperson says. “They get the product to the consumer fast since if someone is buying a new mattress, they usually want to sleep on it right away,” he says. “And they manage product flow in a very efficient way so stores carry only a minimal level of inventory.”
The result? Inventory turns, margins and profits generally are higher for bedding than they are for furniture. “Mattresses remain the most profitable sale in a furniture store, and many other types of retailers see this same profitability and are increasing their assortments,” Epperson says.
One of the biggest changes Epperson has observed during his long career in home furnishings has been the emergence of new channels of distribution. In the 1970s, he says, there were only two places to buy mattresses and furniture—department stores and furniture stores because “they were the only ones that offered financing and home delivery.”
Today, however, consumers can buy bedding almost anywhere—from mass merchants and warehouse clubs to sleep shops and specialty stores to online sellers. “That’s been good for business because it means more visibility and advertising for the entire industry,” he says.
Educating the public
In addition to the substantial marketing dollars that leading bedding manufacturers and retailers invest in building individual brands, Epperson notes that the industry also benefits from the work of the Better Sleep Council, ISPA’s consumer-education arm. “The Better Sleep Council is a godsend,” he says. “It provides consumers with a trusted source for all kinds of information about mattress constructions and features and the value that the right sleep environment can play in obtaining a good night’s sleep.”
As a longtime member of ISPA’s Statistics Committee, Epperson also appreciates the value of the association’s statistics program. In addition to its work on ISPA’s annual Mattress Industry Trends Report, the committee oversees the association’s Bedding Market Quarterly and semiannual Mattress Industry Forecast, as well as the Cost and Wage surveys.
“ISPA is the key source for detailed data on the mattress industry,” Epperson says. “It’s one of the most important services that the association provides.”
According to Epperson, the factors that drive demand for mattresses include household formations, housing turnover, income gains and the composition of the population. While millennials still struggle with college debt—and fierce competition for jobs—they also stand to benefit from the largest wealth transfer the country ever has experienced—as much as $30 trillion, by some estimates. Eventually, that will translate into a wave of new business for the entire home furnishings industry as more millennials buy homes and have children, Epperson says.
“This year, so far, bedding hasn’t been nearly as good as we had hoped,” Epperson says. “Consumers aren’t buying mattresses at the same pace as overall economic indicators—like household formations and job and income growth, which are both trending positively—would say they should be. But that demand is there and eventually we’ll capture it, whether it’s in 2018 or 2019.”
Epperson expects fourth-quarter sales numbers to show some improvement. “The first half of the year is never as good as the second. People tend to buy new homes in the spring and summer, then furnish those spaces in the fall,” he says.
The fact that the home furnishings industry is so dependent on holiday weekends and other seasonal promotions also can skew results.
“The mattress industry is as guilty of this as anyone,” he says. “We train the consumer to wait for the next big sale rather than giving them compelling reasons to buy now because their mattress is worn out and in need of replacement.”
Far too often, Epperson says, bedding retailers focus on promoting price rather than mattress features and benefits. This is a huge missed opportunity because the industry “has all these wonderful things it can discuss about today’s products and how the latest designs and technologies support better sleep and health,” Epperson says.br
In recent years, sleep manufacturers have done a particularly good job of keeping their lines fresh and exciting, Epperson observes. “Every market, everyone has something new and different to share,” he says. “They are constantly looking for new ways to enhance comfort and support and improve the sleep experience.”
While a lot of buzz has been created during the past few years by online boxed-bed sellers, Epperson doesn’t believe the category will rise much beyond its current 10% or so share of the overall market.
“It may be the ‘pet rock’ of today,” he says. “Everyone is talking about it, but some of that enthusiasm will fade over time and it will maintain a steady share.”
In Epperson’s opinion, the market for boxed beds is mainly limited to two groups. The first is consumers under 30 years old, who generally can sleep on anything. “Young people like the convenience of buying online,” he says. “They like the fact that they can buy from home without visiting a store and, if they don’t like the bed, they can send it back for a full refund.”
The second target market: Consumers looking for an easy-to-buy, inexpensive bed for a vacation home or second bedroom.
Beyond those groups, Epperson says, boxed beds are a tough sell. “If you’re over 30 and this is your main bed, most of us need something with much more personal support and comfort than the typical boxed bed can provide. As we age, hip and back issues emerge and that requires more than the one-size-fits-all product mix offered by the typical boxed-bed specialist.”
Innovation holds the key
With the arrival of components such as gel for cooling; hybrid beds that combine the features of innersprings, memory foam and latex; and the integration of new technologies such as sleep sensors and adjustable surfaces, manufacturers continually present consumers with compelling reasons to replace old bedding with something new and improved, Epperson says.
“At market, the bedding guys are always showing me something new,” he says. “They never stop tweaking and improving their lines, whether it’s a new cover, a fresh foam innovation or an added feature.”
That innovation extends across every price point range and mattress type, Epperson adds. “One of the great things about the mattress industry for the last two decades is we’ve taught the American retailer they can sell $3,000, $5,000 and even $8,000 mattresses if you clearly explain to the consumer the benefits that come with each price level,” he says.
Thanks to the efforts of the BSC, as well as individual manufacturers and retailers, consumer education is one area where the mattress industry truly stands apart, Epperson says.
“Sleep is something that we all care about,” he says. “It seems like almost every day there’s a new study that talks about the impact that good sleep can have on productivity, happiness and longevity.
“It’s a subject that’s on everybody’s mind these days, and the industry does a very good job of spreading the word about these studies and pointing out the critical role that the right mattress and pillow can play in getting a good night’s sleep.”
Epperson’s life shaped but not slowed by childhood illness
In 1950, when bedding and furniture analyst Wallace W. “Jerry” Epperson Jr. was 2 years old, a polio epidemic swept through southwestern Virginia. Seeking help for an ear infection, Epperson’s parents took him to the nearest clinic at Farmville Hospital, about 40 miles away. Several weeks later, they received a letter from the hospital indicating that during the day Epperson was treated, there was another child in the clinic who turned out to have polio.
Soon after that, Epperson began to fall down. He was taken to the quarantine ward at the Medical College of Virginia for treatment. “I was there for six or nine months with all these other kids who were fighting polio,” he said in an oral interview with the American Home Furnishings Hall of Fame in 2015, following his induction as a member. That hospital stay was followed by countless surgeries and several summers in Warm Springs, Georgia, where President Franklin D. Roosevelt went for treatment.
For years, Epperson wore two leg braces and walked with crutches. In high school, he got to the point where he could walk with one long leg brace and corrective shoes. “I was able to stay that way until I reached about 50,” Epperson says, adding that since then he has lost his ability to walk on his own.
Despite the magnitude of this health challenge, Epperson has not let it stand in his way. For decades, he traveled frequently across Asia, Europe and North America, visiting furniture manufacturers and retailers to gather insights into the latest industry developments. The High Point Market in High Point, North Carolina, still is a regular destination for Epperson, who uses a motorized scooter to quickly move from showroom to showroom. He attends other markets and industry gatherings when he can and recently made the cross-country trip from his home in Richmond, Virginia, to the Las Vegas Market in Las Vegas.
A different path
“My father taught me that because of the polio, I was going to have to use my head and I couldn’t work in the furniture factories in (our area) or in the textile factories or in the tobacco fields,” he says. “I couldn’t work on the railroad, like my father, either. I had to use my brain if I was going to go anywhere.”
Throughout his life, Epperson has looked for ways to stay as active as possible. During his time at the University of Virginia, for example, he managed the men’s basketball team, a position that enabled him to visit all of the Atlantic Coast Conference schools and earned him a varsity letter.
“In my four years, I got to be on a first-name basis with Dean Smith of UNC-Chapel Hill and all these other great coaches,” he says. “It was just wonderful to be right on the floor and seeing what was really going on.”
In one game against Maryland, when he was head manager, Epperson found himself suddenly serving as coach. “First, the team’s trainer received a technical foul for yelling,” Epperson recalls. “Then our coach, Bill Gibson, got a technical. Then we got a third technical on the bench.”
That third technical foul resulted in the coach being ejected from the game. As he was leaving the floor, Gibson turned to Epperson and said, “OK, you’re the coach now.” So, with his team down by 20 points and everyone a bit shell shocked, “Coach” Epperson called for a timeout, refocused his players and sent them back on the court for the final two minutes of play. Unfortunately, they lost.
While Epperson’s at an age now when many of his peers are retiring, he continues to work regularly in his office and attend furniture markets and other industry events. He doesn’t expect his level of activity to change anytime soon.
“I still love what I do and I also love whom I do it with,” he says. “I’ve spent 25 years with the same partners. They’ve been with me every step of the way. They are the best investment bankers in the industry.”
Always time for family
An icon of the industry, Epperson was honored last summer by the Anti-Defamation League’s National Home Furnishings Industry chapter at a gala dinner. In accepting the award, Epperson shared some of his family history, recalling how meaningful the support of friends and neighbors was as a young child first dealing with his illness. In his comments, Epperson also thanked his wife, Kathy, to whom he’s been married nearly 50 years, calling her “the wonderful woman who gave up her career in medicine to give me the best children anyone could ask for.”
These days, the Eppersons try to spend time when they can at their weekend getaway, a restored farmhouse on the Virginia coast. Built in 1899, the house provides the perfect spot to gather and relax with their daughter, Kelley Parks; son, Wallace “Will” Epperson III; and granddaughter, Julia Parks.
Back home in Richmond, Epperson has another hobby he continues to enjoy when he has time (and space): collecting memorabilia. His office walls and bookshelves are filled from top to bottom with collectibles, including intricate models of classic ships, such as the Titanic and U.S.S. Enterprise; miniature furniture and hand-carved bears; and the artwork of the cartoonist Carl Barks, creator of the Disney Ducks, a fictional family of cartoon ducks related to Donald Duck.
“Part of the fun is the discovery,” Epperson says. “I’m always looking for something new and interesting to add to my collections.”