From Home Furnishing Business
Editors Note: What Goes Up Must Come Down
by Bob George,
In the early stage of the pandemic, there were discussions about what would happen when the restrictions were lifted and the world returned to normal. As months extended into years of restrictions, concerns about the period of exuberance gave way to concerns about surviving. The graphic below illustrates the path that we have traveled.
The furniture industry has been one of the industries that has benefitted from the pandemic. However, a lot of the growth has been price increases driven by suppliers that were impacted by transportation and material costs. The top line created volume variances that enhanced financials. As many retailers have ascertained, we have grown in terms of dollars but not units. A detailed discussion is in this issue’s Statistically Speaking article It Took Rising Inflation to Finally See Industry Price Growth. According to our sister company FurnitureCore’s Industry Financial Best Practices, this substantial growth has increased NET INCOME by 260% for the top quartile of retailers and CURRENT ASSETS by 85%. It has also created some potential problems with INVENTORY growing 27% and CUSTOMER DEPOSITS by 125% and CURRENT LIABILITIES 55%.
The obvious hope is for this growth trend to continue, but now as never before the industry is nervously anticipating a downward trend. The industry has gone through a war with both winners and losers. The strategy moving forward from this war is critical. The feature story, Know When to Hold ‘Em, Know When to Fold ‘Em, addresses some considerations.
We hope we continue onward but those that have been around for more than a “bit” know what goes up will ultimately come.