December Orders up 15%

March 7, 2012  by in UnCategorized   

By Home Furnishings Business in economic news on March 8, 2012

Furniture retailers ordered 15 percent more furniture in December than in December 2010  per the latest Furniture Insights survey.

High Point accounting and consulting firm Smith Leonard conducts the monthly survey of residential furniture manufacturers and distributors.

Orders have increased in nine of the last 10 months, compared with the prior year, and May 2011 was even with May 2010. December's 15 percent increase also was the fourth consecutive double digit increase compared with the same month a year ago.

New orders rose 8 percent for the 2011 calendar year.

"As we have noted before, some of the increase is a result of price increases but most of those were put in around mid year with most averaging 3 to 5 percent, so we believe the overall increase was real," said Smith Leonard Managing Partner Ken Smith in the survey report. "This 8 percent increase compared to a 4 percent increase for 2010compared to 2009."

Shipments looked good as well, up 17 percent in December over December 2010 and up 10 percent over November. That compares with a 3 percent increase for December 2010 over December 2009. For all of 2011, shipments were up 5 percent over 2010, when they were up 7 percent over 2009.

Backlogs were significantly higher than December 2010, but were down 5 percent from November as shipments exceeded new orders.

"We suspect that shipments of imported products finally started catching up with orders placed a few months ago," Smith said.

With increased shipments, Smith was surprised to see receivable levels fall 2 percent in December.

"We hope this decline was a result of good credit folks versus year end write offs," he said. "Actually, we have been surprised by the number of bad debt write offs, or lack thereof, with this economy. From our conversations, we believe that most companies are being very careful about continuing to ship product when these customers have fallen behind in their payments."

Inventories fell 2 percent from November, probably due to the high level of shipments. For the year, inventories were down 1 percent.

Factory and warehouse employment in December 2011 was 4 percent higher than December 2010 levels; and 1 percent higher than November levels. December payrolls rose 7 percent over
December 2010--somewhat usual with year end vacation and bonuses paid in December.

In summary, Smith said December results are encouraging.

"While month to month comparisons can be skewed due to timing of orders, the good news was that
orders for the year were up 8 percent over 2010 when orders were up 4 percent," he said. "The increase in orders over the last 10 months has been good news for many in the industry.

"Unfortunately, not all of our participants have enjoyed this success as only 67 percent of the participants had increases in orders. On the other hand, another 16 percent of the participants
were only off 5 percent or less, so overall we think 2011 was a nice year considering where we have been."

He added that orders mean little if they don't ship, noting shipments rose 5 percent and backlogs grew nicely; and that the Census Bureau reported a 7.9 percent increase in retail
furniture sales.

"This marked the first time in along time that sales growth in the category did not come out near the bottom of the 13 categories," Smith said, noting that only sales growth at building materials and garden equipment and suppliers dealers (10.5 percent) and auto and other motor vehicle dealers (8.2 percent) had larger percentage growth rates.

"From all we could tell, the Las Vegas Market was well attended with reports that attendance was up quite nicely and exhibitors, for the most part, were pleased with the results of that Market," Smith said. "Consumer confidence has picked up in spite of the negative political ads, negative news from other countries and higher gas prices. We are concerned that the most recent seemingly ridiculous rises in price for gas at the pump is going to start to hurt confidence soon.

"€¦ Certainly, business could be better but we think we have come a long way from the hole we were in over the last few years."