December Furniture Orders Rise

February 28, 2011  by in UnCategorized   

By Home Furnishings Business in economic news on March 1, 2011

Furniture retailers ordered 1 percent more furniture in December, according High Point accounting and consulting firm Smith Leonard's latest survey for furniture vendors.

The December results of the Furniture Insights survey reversed a trend of decreases in orders from September through November. December 2009 orders were up 12 percent from December 2008, so while small, last December's increase compares with a good increase the prior year.

Furniture orders for all 2010 rose 4 percent over 2009, when orders fell 13 percent from 2008.

December shipments were 3 percent higher than December 2009, and 5 percent higher than November, compared with a flat November to November comparison. For the year, shipments were up 7 percent over 2009, when they were off 15 percent from 2008. Shipments in 2008 were 12 percent lower than shipments in 2007, so the industry gained some of the ground it lost over the last few years.

With shipments exceeding orders for the month, backlogs fell 5 percent from November levels. Backlogs in December were 3 percent lower than December 2009, as shipments exceeded orders for the year.

Receivables increased 3 percent from last December, in line with the increase in shipments. Receivables fell 4 percent from November in spite of the increase in shipments.

"Overall, it appears that receivables, at least prior to the Robb and Stucky bankruptcy, were in pretty good shape, in spite of the economy slowing payments," said Smith Leonard Managing Partner Ken Smith in the survey report.

Inventories were flat compared with November 2010 levels but rose 22 percent from December 2009, when inventories were down 26 percent from December 2008.

"As we have noted before, it appears that inventories were building in anticipation of a good recovery," Smith said. "When that slowed in September to December, inventories appeared to grow to levels that are a bit high based on current business levels."
 
December factory and warehouse payrolls rose 7 percent from December 2009, and were 20 percent higher than November, a reflection of vacation pay and year end bonuses. For 2010, payrolls increased 9 percent from the prior year, pretty much in line with the 7 percent increase in shipments and the increases in inventory levels.

Factory and warehouse employment fell 1 percent from November and 3 percent from December 2009. December 2009 employee levels were 10 percent lower than the number of employees in 2008.

"After four long years of declining orders and sales, our participants finally had a year where both sales and orders were up for the year," Smith said in summary. "It has certainly been a long hard grind over that period. From 2005 to 2009, orders and sales in total have declined some 30 percent. While some of the dollar decline has been due to lower prices of both imported and domestically produced goods, such a decline certainly took a toll on the industry."

Smith noted that while 2011 has started with improved consumer confidence and an improved economy in general, unrest in the Middle East (and some states in the U.S.), cause concern, especially in oil prices.

"Adding to that, commodity prices are increasing substantially in certain areas," Smith said. "It looks like we are in for some inflation which is going to have to drive up prices. Weather in December, January and February has also dampened retail sales, especially in furniture as people had to deal with all of those issues.

"We were sad to hear the news about Robb and Stucky. Their bankruptcy not only affects those jobs, but clearly has not been good for several manufacturers and distributors. Clearly many of their markets were hurt extremely bad by the housing collapse. All that said, Spring is not too far away. In spite of the above negatives, consumers do seem to feel better about the economy. While job growth is not what we want or need, it seems that the fears of losing jobs is not as rampant."

Smith expects 2011 to be a "somewhat better" year for the furniture industry than 2010, noting improved corporate profits should increase job stability.

"Hopefully, the Middle East mess will be at least more stable than it currently is and oil prices will settle down," he said. "We do not expect the first quarter to be anything to write home about, but if we can keep the economy at least plugging along, 2011 should see some improvement. The good news is that most companies have 'right sized' themselves (not fond of that phrase), so if you could make money last year or at least hang on, 2011 should be somewhat better--notice we did not say any 'easier.'"