Monthly Issue
From Home Furnishing Business
February 21,
2017 by Jane Chero in Economic News, Industry 
Many life events spur home furnishings purchases. But along with buying a new home, marriage, and having children, the time of the year plays an important part in overall furniture store sales (Figure 1). These sales are less important to other furniture distribution channels, for example, big box stores, but are the bread and butter of furniture stores. These event sales also serve the function of clearing out merchandise to make way for new styles.
Economic events can always alter consumer confidence, but the overall monthly ebb and flow of furniture store sales has changed through the years. Once the pinnacle of furniture purchases, the November/December holiday season has lost some of its sales glamour, not only for furniture but all consumer products as a total group. It is still the biggest season in total retail sales of consumer goods, but no doubt the 4th quarter has lost market share. For furniture stores, May and August have always been steady and strong, but March has emerged as a huge sales month. Online filing of income tax returns has resulted in quick returns for the end of February and especially throughout March.
Throughout the 1990’s and up until the mid 2000’s leading up to the Great Recession, November and December trended as the largest sales months for furniture stores, often combining to capture 18 percent to 19 percent of annual sales. The exception was in December 2002 and 2007 when economic downturns and uncertainty impacted furniture store performance in December. However, since coming out of the Great Recession, the entire 4th quarter has garnered less importance to the Furniture Industry. Table A tracks monthly indexed furniture store sales. Note that an index of 100 represents the average month (annual sales divided by 12 months). An index of 115, for example, indicates sales were 15 percent higher this month than the average.
Two decades ago in 1997, the 4th quarter far outreached the previous three quarters in furniture store sales (Table B). At 27.6 percent, the 4th quarter was 4.4 percent higher than the 1st quarter’s dismal 23.2 percent. Over the next 15 years, both quarter 1 and quarter 3 percentage of sales increased, while quarter 4 dropped below 25 percent. Although 2016’s holiday season performed better than 2012, quarter 3 rises as the year’s top-performing period.
Furniture store monthly sales center around calendar events and holidays. These events translate into the highest performing months in most cases.
1st Quarter
While the 1st quarter contributed less than 25 percent to furniture stores sales in 2016, tax refunds issued at the end of February and throughout March propelled sales upward impacting March significantly (Table C). January is negatively impacted especially in markets sensitive to winter weather. And with no big sales event to lure customers, it is the worst performing month of the year for furniture stores. February has the draw of big Presidents’ Day sales which helps the weather-sensitive markets recoup somewhat. However, consumers seem to be holding out until spring when income tax refunds arrive. In 2016, almost two-thirds of total annual refunds totaling $203 billion (out of $317 billion) were paid before March 25. March is the only month in the quarter that consistently out performs the average for all months, which is 8.3 percent of sales.
2nd Quarter
The 2nd quarter typically produces lower furniture store sales than the remainder of the year because of a historically poor performance in April. Memorial Day sales in May always produce excellent sales– an average of 8.4 percent throughout the past two decades. In recent years June has also performed above the average (Table D).
3rd Quarter
Since 2002, Quarter 3 has climbed to the best selling quarter of the year – mostly due to high August sales. The end of summer sales and the lead into Labor Day has kept the month of August percentage of sales at 8.8 percent until 2016 (Table E). Last year the Labor Day holiday weekend fell solidly in September which boosted it to the highest performing month of the 3rd quarter. Meanwhile July 4th events are producing average sales during a traditional consumer vacation period.
4th Quarter
Table F shows how market share of November and December combined has dropped from 19 percent in 1997 to 17.2 percent in 2016. While still commanding above average sales, the holiday season has lost some appeal as more consumers are choosing to take advantage of income tax refunds in the early spring and late summer sales. In addition, other consumer goods and electronics also compete for consumer dollars during the holiday season. Meanwhile, October has become the second worst performing month behind January averaging 8.0 percent of sales since 2002.
In a perfect world, furniture store retail sales would produce 8.33 percent of sales per month. And while all retail entities have seasonal variations based on consumer life events, which are beyond the retailer’s control, and holiday sales, which are within its control, every month that falls short of this mark potentially sends consumers to other product markets. If the 4th quarter of 2016 had generated the percent of sales as the average of the 1990’s, an additional $1.3 billion in furniture and bedding sales would have shifted to the holiday season. Is this loss a result of a shift to other seasonal sales and events, or is it a decline in the importance of furniture purchases to the consumer in the 4th quarter?
February 21,
2017 by Jane Chero in Business Strategy, Industry
Furniture industry veteran Lorri Kelley became president of contemporary furniture resource BDI Furniture last summer, taking the reins from the company’s founder, Bill Becker, who is remaining with the company as design director.
Kelley, who was executive vice president of sales and marketing at Palliser Furniture immediately prior to accepting the BDI post, brings three decades of furniture industry experience to the job. She recently spoke with Senior Business Editor Larry Thomas and Editor in Chief Bob George about why she took the post and the challenges and opportunities BDI is facing.
Home Furnishings Business: What attracted you to the job?
Lorri Kelley: It was a true honor to be asked to step in and lead the company. I absolutely loved my role at Palliser. We were a fabulous team and I loved every minute of it. Palliser and BDI share a good number of the same retailers, so when I was traveling ... I could see BDI on the floors and was aware of their impeccable reputation. As Bill Becker and I started talking about this opportunity, I was very flattered, number one, and secondly, what was so exciting for me was that BDI had so many great retail partners. When I was asking them about their BDI experience, it was glowing. The remarks that I got from the retailers centered on about how much of a pleasure it is to do business with BDI, how much they respected the leadership, the thought that went into the product development, and salability of the styles. They loved talking about just how successful they were partnering with BDI. That is rare.
I was expecting the other shoe to drop. (laughs). So when I was asking what the company could do better, it was just ‘bring us more product,’ because the product sells. The service is exceptional. The quality is great. The designs are obviously good. And the relationships are good. BDI has that exact same philosophy, so it blended well with my own philosophy on how I build relationships with retailers.
HFB: Has it been a difficult transition to a design-driven company, given that many furniture manufacturers have more price-driven business models?
LK: It really hasn’t been a big change for me. Product design is critically important to the assortment. It certainly has to be product that is well designed with great quality, and the research is done to make sure what you are designing and bringing to market has a purpose and will be successful. So I didn’t really see a major diversion here when I joined BDI. This company is known for its exceptional design. One of its core values is driven by design and sweating the details to make sure we produce a product that is not only beautiful, but its functional and incorporates great technology.
HFB: What challenges and opportunities do you see for BDI?
LK: I think the opportunity is to partner with the right retailers and the right distributors to get the word out about BDI. I believe there are not enough folks who know a lot about the company and how beautiful the product line is, and how successful they can be selling it. We need to look at the business model and continue to expand on the product assortment, while not losing the eye for that great design and function. Getting in front of more retailers is one of the main reasons why we expanded our (High Point) showroom. By investing in a larger showroom -- we got lucky and were able to be right across the hallway so our retailers who had bought from us for a long time knew right where to find us – it gave us an opportunity to expand and give the product room to breathe, and showcase them in the manner that they deserved.
HFB: Do the large number of furniture markets make it more difficult to focus on good design since there’s pressure to unveil new product at every show?
LK: Right now, we show only in High Point, so it does alleviate a little bit of that pressure. In my past jobs, we tried to have something new for each market. It became a real challenge to determine what introductions are introduced at what time. At BDI, we have worked really hard with the product design and development team on implementing a process that allows us be a little more forward thinking, which allows for time to do homework, and make sure the products are brought out at the right time to fit the right opportunities. That process will help us to attack each of those High Point shows.
HFB: How are you addressing the apparent lack of interest in the home office category at many retail stores?
LK: I actually look at that as an amazing opportunity. There have been very traditional companies like Aspen and Hooker that have driven a lot of the office business in the traditional executive office settings with the bookcases and the big executive desk. We’re seeing that consumers, particularly younger ones, and even the Baby Boomers, are shifting away the more traditional styling to something that is cleaner. Gone are the days where you need lots of file cabinets because we’re keeping documents electronically. And as a result, people are wanting work spaces that are better suited for mobile devices or tablets. That provides us with a great opportunity.
I also believe that retailers are beginning to shift into the more transitional to contemporary styles. Actually, one of our most successful office collections, the Corridor collection, I would classify as more of a softer contemporary, even making the statement that it could be defined as transitional. But we do see the beginning of a shift away from the big, home office … into something that’s more modular, certainly cleaner, and takes up less space.
HFB: Do you see BDI expanding into other categories such as bedroom and dining room?
LK: I believe in focusing on your core competencies. I think there are a lot of opportunities for us yet in the categories where we have a leadership role, like office, entertainment, media cabinets, occasional, storage and shelving. I think there’s great opportunity for us to continue to focus on expanding that assortment. We want to continue to maximize the categories where we do have a leadership position. For right now, the team is focused on finding ways to continue to own those categories.
There’s a lot of (new) pieces that I think make great sense at it relates to those areas — such as work tables. Not conference tables, but work tables that still allow flexibility. There are a lot of rooms in homes where you need a nice work surface or multi-function cabinets for basic storage. And shelving, I know that has tremendous opportunities. And for media pieces, we’re still watching what’s happening with electronics. We’re constantly looking at how we can take those media cabinets and expand them to address the ever-changing audio and TV markets.
Additionally, I believe that if you design a cabinet that is beautiful, it can serve many places in the home. So we’re designing cabinets in that credenza category that allows for multiple uses within the home. Maybe you might want to use it as a dresser, or you like more eclectic styling.
HFB: Will there be a lot of distribution issues if BDI expands into more traditional furniture stores?
LK: BDI already sells a lot of traditional retailers. And we do a wonderful business with contemporary stores and small to mid-size independents. I don’t really see that changing. I do think there is a market for a softer, transitional styling -- maybe softer contemporary is a better way to say it -- that might broaden the appeal, but again, I don’t really see a distribution issue. We’re very protective of the brand, and we want to make sure we’re partnering with the right retailers who understand what we do. We’ll look at other opportunities that may come up, but I really see us looking to continue to be important to our current partners.
HFB: Does it present any special challenges being a female CEO in a male-dominated industry?
LK: I started in this business when I was 25 years old. I am just used to … being in an industry that has a lot of men in executive positions. There are a lot of very smart women in our business that are serving in a lot of different roles. A lot of people outside this business don’t understand that (because) it’s still dominated by men, even though women are making the buying decisions.
From my perspective, I have been very blessed throughout my career working for some really, awesome men. If there was ever a hint of (sexism), I never really felt that at all. Never did. Not one time. That taught me a lot. n
December 13,
2016 by Jane Chero in Economic News, Industry
A Disappointing 3rd Quarter
For the Furniture Industry
The first quarter of this year in the furniture and bedding industry started off continuing the 5 percent plus growth over the previous year for all quarters in 2015. But as the year wore on, subsequent quarters did not perform to those levels. Quarter two fell to 3.7 percent growth and quarter three fell to 3.0 percent growth over the same quarters of 2015 (Table A). Year-end sales in 2015 totaled $92.5 billion. Third quarter year-to-date industry sales reached $71.5 billion, a 3.0 percent increase over the first three quarters last year.
These numbers reflect a weakening furniture store sales growth (which includes lifestyle retailers) and are in line with the government’s reports of personal consumption expenditures. Retailers are hoping for a bump in consumer confidence in the fourth quarter to help ramp up growth.
Furniture Store Sales
Furniture stores, which include all lifestyle furniture retailers, posted a dismal 1.3 percent increase in the third quarter of this year compared to the same quarter in 2015 (Table B). Retail store sales are at an average quarterly growth of 3.2 percent – down from a 5.7 percent growth (2014 to 2015). Furniture Store sales increased from $14.3 billion in the second quarter of 2016 to $14.9 billion in quarter three, an increase of 4.3 percent.
Personal Consumption Expenditures
Personal Consumption Expenditures for furniture also experienced a third quarter slump this year – increasing 2.1 percent over the same period in 2015. Over the previous six years, third quarter year-over-year growth averaged 4.4 percent. (Table C).
Economic Influencers and Catalysts
Real GDP. The furniture industry, aside from demographics, is driven by economic influencers and catalysts. Gross Domestic Product the measure of goods and services in the U.S., is chief among them. Real GDP growth has continued to decline since the first quarter of 2015 when growth was at 3.3 percent. Growth in 2016 has been steady, but slow, with quarterly averages between 1.3 percent and 1.6 percent (Table D).
Payroll Employment. The number of employed workers (non-farm) was at its highest level in history in October of this year at 149 million. However, employment growth this year has slowed throughout each quarter. In 2015 growth averaged 2.1 percent year over year, but has fallen to an average of 1.4 percent increase in October of this year (Table E).
Consumer Price Index. For furniture and bedding, prices have been relatively stable, falling less than 1 percent from the prior year’s quarter, until the second quarter of this year. In 2016 Q2 prices were down 2.8 percent and in 2016 Q3 down 3.1 percent (Table F).
Unemployment Rates
Over the last five years, the Unemployment Rate has declined rapidly – dropping from 9 percent to 5 percent (Table G). From 2011 to 2015, the third quarter each year has decreased an average of 1.0 percentage points. Although only slightly moving 0.2 percentage points from 2015 Q3 (5.2 percent) to 2016 Q3 (5.0 percent), employment is now at pre-recession levels.
Consumer Confidence
Consumer Confidence has not moved more than 6 points in any quarter over the last two years hovering from 95 to 101 (Table H). A confidence level of 100 usually indicates neither extreme confidence nor lack thereof. The year 1985 was chosen by the Conference Board as the base index of 100 because that year showed neither a peak nor trough in the business cycle. Consumer Confidence was at its highest in the year 2000 at 139. Conversely, Consumer Confidence was at its lowest of 39 at the bottom of the last recession in 2009.
Housing Industry
Nothing impacts furniture industry growth perhaps more than home sales both existing and new.
Existing Home Sales. Home re-sales experienced healthy first and second quarters this year growing 5.0 and 4.2 percent from 2015. However, 2016 Q3 dropped 0.4 percent from 2015 Q3. At an annualized rate, third quarter existing home sales totaled 5.3 million units. (Table I).
New Home Sales. Part of the third quarter decline in existing home sales this year is offset by new single-family home sales that surged 23.1 percent in the third quarter to an annualized rate of 599 thousand units. After double-digit growth in 2015, 2016 year started with very slow growth in the first quarter of 1.6 percent. The second quarter rebounded, however, to 14.5 percent increase followed by the third quarter surge (Table J).
Housing Starts. Despite the strong third quarter in new home sales, housing starts did not keep up the momentum. Single-family unit starts increased by only 1.9 percent from 2015 Q3 to 2016 Q3 (Table K). Third quarter annualized starts totaled 759,000 single-family units. On a positive note, September starts were at the highest level since last February and the year should end with over 13 percent growth.
For multi-family units, the picture is not so bright. After a flurry of building in 2014 and 2015, starts are off significantly this year. While the first quarter of 2016 experienced 5.2 percent growth, the second and third quarters have posted negative growth of 9.5 percent and 7.7 percent respectively (Table L).
Many economists are projecting new single-family home building and sales to be strong in 2017, with moderate growth in existing home sales. Much of home buying is by first-time home buyers, the young Millennials who are finally making their move to be the consumers the furniture industry and many others have been waiting to see. But political and economic uncertainty can throw a wrench in at any time.
December 12,
2016 by Jane Chero in Industry, Special Events
The industry has progressed for another year. The year, 2016, was quite different from 2015, as the industry slowed its growth to under 4%. No matter the change, we believe certain key factors remain important in measuring the strength of a retailer. The key methodology is presented below:
Market Share – 46 percent
The estimated industry sales from various published sources for each retailer is divided by the estimated retail volume for furniture and bedding sales in each of the markets in which they participate, whether Metropolitan Statistical Area, Micro Statistical Area, or Rural. Sales of appliances, electronics, and housewares are excluded.
Revenue – 20 percent
This category is based on estimated industry sales for each retailer based upon public published records or estimates based on certain retail parameters.
Retail Expansion – 15 percent
This category measures both store expansion and market expansion. The new stores or new markets are based upon public records.
Social Engagement – 19 percent
This year’s index considers social signals, website metrics, and third party scoring platforms to arrive at a ranked list of home furnishings retailers with the strongest online engagement.
First, we pulled data from Alexa, Facebook, MOZ, OpenSEO, Twitter, and Pinterest for the retailers in our database. The following shows the specific measurements:
Source Metric
Alexa US
Facebook Check ins, Likes, Talking About
MOZ DomAuth, External Links, MozRank
OpenSEO Google BackLinks, Google Page Rank, Google+ Likes
Twitter Followers, Likes, Tweets
Pinterest Pins, Followers
You will note that there were additions and deletions to the factors used. Specifically:
Retail Expansion – A major strategic element today is retailers adding new stores within their markets and expanding beyond their markets.
Industry Involvement – While impacting many retailers, the top performers belong to an association or buying group, resulting in little change in the performance ranking.
Social Media – Pinterest was added in recognition of its increased importance to communication with the consumer. Klout score was removed.
From that data, we used a basic ranking methodology, assigning a numerical value to the ranked list of each metrics. We assigned a one for each record within a specific metric, with one being the “best” score for the highest number of Twitter followers or the highest number of backlinks or the highest Pinterest score.
For all measurements except Alexa, the highest values resulted in a lower score, i.e. the highest Google Page Rank would result in the lowest score. Alexa ranks websites globally and nationally based on estimated website traffic, and the lower the score, the more popular the site.
Thus we arrived at 14 individual scores calculated for each metric. The highest two scores for each retailer were dropped to eliminate any outliers and then, we took the statistical average of those 12 scores. Ranking the scores from lowest to highest created the Power 50 Online Engagement Index for 2016.
Enjoy the lists.
December 12,
2016 by Jane Chero in Economic News, Industry
As with the nation, the constant question is, “When will we get out of the morass?” Finally in 2012, industry sales for furniture and bedding reached 2008 levels only to inch forward, with 2015 finally seeing growth above 5%. The excitement was short-lived with growth slowing below 4% with the most recent quarter below 2%.
The forecast that follows shows a rebound to 4.5%, which is in line with others in the industry. However, I must admit that our forecast was done a week before the Presidential Election, with the expectation of the results baked in.
Since the election, we have reviewed our forecast and cannot find any justifiable reason to modify it. We share this predicament with others. The anticipated drop in the stock market happened, but reversed within 48 hours. Mortgage rates have increased because of uncertainty, which will impact our industry, but not as much as consumer confidence.
As a nation, the consumer population is segmented into age groups that are buying furniture and those that are out of the market. In fact, many demographic groups have not returned since the great recession.
Obviously, the promise of doubling the GDP with new job growth is music to our ears, but what action will produce this change?
The thought of tariffs on imported goods, whether the Far East or Mexico, will impact distribution. Does this signal the return of domestic production? If so, where will the capital investment come from for the new plants? More importantly, from where will the workers come?
There are more questions than answers. What is sure is that the facts are real. As a magazine serving the industry, we are committed to understanding and informing.