Residential Safe Outlook: Interview with Steve Allred, CEO of Liberty Safe

Liberty Safe is a leading designer and manufacturer of branded residential safes for the storage of valuables and gun safety. The company sells premium safes and related products through the largest independent dealer network in the industry and through farm goods, sporting goods and home improvement retailers. Liberty was founded in 1988 and operates from a state-of-the-art manufacturing facility in Payson, Utah. The Company currently employs 395 dedicated team members.

Stephen L. Allred is the CEO and President of Liberty Safe and Securities Inc. Steve joined Liberty Safe in March 1994 as an Operations Manager. Over his 28-year career at Liberty, Steve has led cross-functional operations teams, ranging from Materials and Production to Quality systems. Prior to Liberty, Steve worked at Teleflex Defense Systems, a major division of Teleflex, Inc., and Rocky Mountain Machinery Company, a manufacturer and distributor of mining and construction equipment.

“Despite facing significant challenges… sales grew by approximately 30% during the year.”

You’ve been a member of the Liberty Safe team for over 28 years and have seen the business evolve over that time. How was 2021 for Liberty?

Steve Allred: 2021 turned out to be a record year for Liberty. Despite facing significant challenges throughout the year, including raw material inflation, supply chain disruptions and labor availability challenges, the company ended 2021 with a record level of sales and EBITDA. Sales grew by approximately 30% during the year, which speaks to how capable and effective our team is, as they were able to manage through record swings in steel prices as well as labor shortages due to COVID-19. In addition, our team successfully navigated the transition in ownership in August; we think the partnership with Monomoy brings great new opportunities for our company, so we are excited to move forward together.

Are there any broader themes or trends you’ve seen develop in your industry over the past few years?

S.A.: The number of people interested in at-home secure storage is growing. The strong housing market and deurbanization trends have certainly supported the increase in demand that we’re seeing for safe storage products for valuables at home. Additionally, we’ve seen the number of first-time gun owners grow, likely stemming from the past few years’ social and political instability, and they have shown a keen interest in secure gun storage. More generally, we see a greater interest in products that are “Made in America.” Fortunately, as the biggest American-built supplier of safes in the market, we are uniquely positioned to fill that growing demand.

“Strong and tenured supplier relationships in the U.S. helped us procure steel supplies at attractive rates when supply and prices were in flux for others in the supply chain.”

How does Liberty go to market, and who are your customers? Have those dynamics changed over the last few years?

S.A.: Liberty’s customers are homeowners interested in safely storing their documents, valuables and firearms.

We sell to these customers through a three-fold go-to-market approach. Liberty has built the largest independent dealer network in the industry that provides unparalleled delivery and service support for our type of premium product. The business is further enhanced by key national account customers, such as Tractor Supply and Bass Pro, who partner with us to offer consumers a robust in-store and online safe program. We support these national account partners with inventory management and supply chain solutions that help them optimize category performance in a way not possible with offshore suppliers. The more recent development in how we go to market is the development of a powerful ecommerce website, which is unique in that it leverages the fulfillment capability of our dealer network to deliver a heavy product to consumers in a professional way. No other website in our industry can provide this kind of service to end-consumers. The large safes sold on our website are fulfilled through our large dealer channel.

How has Liberty been impacted by global supply chain disruptions? How have you been able to navigate that challenge?

S.A.: Liberty’s focus on “Made in America” allowed us to circumvent many global supply chain disruptions that interrupted competitors’ businesses. That said, the company did face inflationary pressures in its procurement of steel, higher domestic freight rates, labor availability and wage inflation. Since the company’s inception, to ensure that we produce the highest quality safes, we have intentionally sourced most of our key materials, such as steel and sheetrock, domestically in the United States. Although it represents a small percentage of overall sales, the associated trans-pacific freight costs reached close to $30k per container, causing us to de-emphasize the sale of those products and re-focus customers on our domestically manufactured products. For the materials sourced in Asia, we were able to move some of that volume to domestic suppliers and build up some safety stock that helped mitigate some of the disruptions. Our strong and tenured supplier relationships in the U.S. helped us procure steel supplies at attractive rates when supply and prices were in flux for others in the supply chain. I want to promote my team, which did a great job with sourcing overall. We were not only able to keep the factory running and meet demand but also break production records in 2021.

Following the acquisition by Monomoy, we implemented more stringent inventory management processes to reduce our finished goods balance. To date, we have been able to reduce days of inventory held by approximately 17; unlocking this additional capital will allow us to continue investing in growth and product innovation.

Rising input and commodity costs hit most manufacturing businesses in 2021. How did you navigate that challenge?

S.A.: The rising and volatile material costs last year were certainly a challenge for us. For example, the price at which Liberty purchased steel in 2021 fluctuated by more than 150% when comparing the lowest and highest price paid. We are fortunate to have a strong brand name and a customer base who are loyal to our commitment to “Made in America” and superior quality. I don’t think that any of our competitors escaped the impacts of inflationary pressures last year. While we did have to implement price increases in 2021 to keep up with cost inflation, we were able to limit the impact on the consumer thanks to our domestic production capabilities. Additionally, we were timely and proactive with our network and partners with the changes, so they saw very little impact to demand.

In addition to offsetting inflationary pressures with price, we are proactively exploring value engineering projects. While we’re always innovating our safes’ designs and manufacturing processes, we are looking at ways to leverage new technologies to reduce material and labor costs while maintaining our high-quality standards.

“Trans-pacific freight costs reached close to $30k per container”

Are there any industries/product areas that you are looking to expand into?

S.A.: We are pursuing opportunities to expand our products this year, including smaller home safes and personal security vaults. A new customer segment that we are exploring is home builders — a safe or vault door could be a feature in new home construction.

Are there any tailwinds that you see coming that Liberty will benefit from?

S.A.: In recent months, we’ve seen some relief with steel costs dropping, but we don’t believe that the supply chain disruptions and inflationary pressures will disappear during 2022 altogether. The cost of manufacturing and shipping from Asia will likely continue to be a problem for our competitors this year and will, therefore, present an opportunity for us. Particularly as end-user demand appears poised for continued growth, at least in the near-term based on backlog and consumer insights. Retailers will look for a reliable and consistent source of product to sell, so our unique position as a domestic manufacturer of scale should provide an opportunity to take some market share.

“The cost of manufacturing and shipping from Asia… present[s] an opportunity for us.  Particularly as end-user demand appears to look poised for continued growth”

What are Liberty’s expectations for this year? What is most exciting for you in 2022?

S.A.: Expanding and continuing to optimize our production capabilities, and the additional revenue that it will unlock, is very exciting for us. Building on the increased production throughput that we’ve already seen from operational changes made in the second half of 2021, I am excited to see how we can further improve processes to maximize production.

Further developing our distribution network to reach new demographics is another exciting focus area for 2022. We are looking to expand the coverage of our dealer channel, grow a couple of young box store partners, and add new national account partners to our customer portfolio in 2022. Additionally, as mentioned, we recently launched a new ecommerce platform. This is a fast-growing sales channel for us and an area that, in partnership with our dealer network, we know we can step on the gas a bit more this year. So, we’re excited to see what we can turn it into over the next couple of years. We are looking forward to setting another company record for Liberty this year.