CORT Special Report

Special Report: CORT Furniture Courts Academic Institutions

(BRK.A), (BRK.B)

With formerly generous relocation dollars in short supply in the aftermath of the 2009 recession, CORT Furniture has been aggressively seeking new markets. While relocation dollars still exist, “companies are no longer giving them out like candy,” says George Bertrand, CORT’s Regional Vice President for Operations and Sales.

Founded in 1972, and acquired by Berkshire Hathaway in January 2000, CORT’s primary business is providing rental furniture for homes, businesses and events (including trade shows), and providing relocation services. The company’s service area is the U.S. and the U.K., and annual revenues for all CORT operations exceeds $420 million.

Earnings in 2014 were roughly $36 million.

Seeking New Markets

With its core business hit hard by the 2009 recession, CORT expanded into the party rental business with the 2011 acquisition of the Seattle-based ABC Special Event Rentals, and the 2014 acquisition of another Seattle-area party rental business, AA Party Rentals. Party rentals now make up roughly $12 million in CORT’s annual revenues.

Academic Institutions Offer Opportunities for Growth

Another market CORT sees great potential in is providing furniture leasing to academic institutions.

Traditionally, academic institutions maintain huge inventories of furniture for dorm rooms that requires a high degree of maintenance and upkeep. These days, colleges and universities are increasingly aware that the on-campus quality of life is a major selling point to prospective students. They have upgraded athletic facilities with rock-climbing walls and rows of treadmills, and they have upgraded food services with gourmet entrees that are a far cry from the bland foods of yesteryear. They have also upgraded the dormitory experience, and in this area CORT is providing solutions that include furniture delivery service and ongoing maintenance.

Currently, only 14.3 percent of academic institutions are outsourcing their furnishing services, offering CORT a huge potential market for expansion.

According to CORT’s own survey, which they conducted with University Business Magazine, “budget restrictions” were the biggest impediments respondents cited in providing up-to-date and top condition furniture for students’ dorm rooms.

According to the survey results:

87 percent of respondents stated that budget and personnel restrictions are the biggest challenges facing their institution.

95 percent said the appearance and condition of their furnishings is important or very important to the maintaining the college’s image and integrity.

However, 37 percent described their furnishings as “outdated” and almost 20 percent said it’s “showing its age.

Out-sourcing their furniture needs to CORT is one way for institutions to keep their focus on academics, rather than on running a used furniture empire. CORT puts it simply. “Furniture leasing is a simple and affordable solution, especially as many colleges and universities are trying to meet increasing expectations with less available resources.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.