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From Home Furnishing Business

Editors Letter: Moving Forward with Uncertainty

by Bob George,

During the many years of my career I have never had as much concern about a forward forecast for the furniture industry than I do now. As a disciple of an analytical approach to forecasting, there was a confidence in the numbers using a regression analysis model with 23 current different variables. Impact Consulting/FurnitureCore, LLC., parent company of Home Furnishings Business, has produced both a wholesale and retail model projecting revenue at both a market (MSA) and product category level each quarter for 35+ years. The model is projecting a growth of 4.1% for 2021, significantly down from the past year. However, with the many extraordinary situations including a global pandemic, political transition turmoil, social upheaval and cyber invasions one can understand the concern.

Compounding these external factors is the recent performance of pollster’s success in forecasting what the consumer is thinking and what the consumer will do. That is enough to make one question the analytical approach.

However, both manufacturers and retailers must make decisions to move forward. Today, retailers must place orders for product delivery out 12+ weeks. Manufacturer's in turn are planning production often expanding capacity to meet this demand. While we are forecasting, we are like the chicken contributing eggs for the breakfast. Unlike the pig that contributes the bacon, it is not the same degree of commitment when no one shows up for the meal.

WHAT IS DRIVING THIS FORECAST?
THE DOMINANT FACTORS ARE: Personal Consumption Expenditures Furniture and Bedding. Despite the plunge in retail sales during retail shutdowns of many brick-andmortar stores in April/May, consumer spending on furniture and bedding flourished June through November. With additional stimulus money arriving in consumer bank accounts this winter, it is expected that the consumer will save a portion, but also spend. November 2020 year-to-date spending is up 8.1% over 2019.

Retail Sales (Online Shopping).
Non-store retailing and its subset, electronic shopping, were not subject to the government restrictions and gained tremendous market share throughout the pandemic. Even consumers not accustomed to online shipping embraced the experience, perhaps never to turn back. By November, non-store retailing grew 22.6% compared to 2019.

Retail Sales (Brick-and-Mortar Stores).
Furniture and home furnishings stores were hard hit during the pandemic but showed consistent and increased growth June to October. Based on preliminary retail sales data for the broad Furniture/Home Furnishings stores category, November slowed as consumer confidence fell. For the year, it is expected that furniture stores and also home furnishings store sales will be down 5% to 7% over 2019, quite an accomplishment given the obstacles.

Warehouse clubs and supercenters were allowed to remain open throughout the pandemic and were still showing good growth through the end of the year. The housing market suffered tremendously during March, April, and May, but perked up in June and has been going strong since. Housing starts, a predictor for 2021 are up 7.9%. November 2020 YTD and new home sales increased 19.1%. Existing home sales have driven home prices higher since July, with inventories low toward year's end.

Consumer Price Index. Prices for all consumer products nationwide were stable with 2020 November YTD growth up 1.2%. For furniture and bedding, prices fell through July, but have been working their way back. November YTD furniture and bedding prices were down only 0.1% Employment Situation. Perhaps the biggest unknown is if and how fast businesses will rebound from 2020. By November, there were over nine million fewer jobs than November 2019 and almost five million people considered unemployed. This does not count the discouraged workers who are no longer counted as part of the workforce looking for a job.

Consumer confidence was on the upswing in September and October (index over 101 each month) before falling to 92.9 in November. For the 11 months of 2020, the average confidence level was down over 30 index points, reflecting the strain of COVID-19.

Source: Impact Consulting Services' FruntiureCore.com industry model Note: Previous 2020 Q2 estiamte has been revised. *2020 Q4 throught 2021 Q4 is forecast Industry Growth Quarter Year Over Year Growth Over Same Quarter of Previous Year 2019 Q1 to 2020 Q3 with forecast 2020 Q4 to 2021 Q4 Furniture and Bedding The graphic above presents both historical and projected industry growth.







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