Furniture Insights: December Orders Up 12%

March 1, 2010  by in UnCategorized   

By Home Furnishings Business in economic news on March 2, 2010

New retailer orders for furniture rose 12 percent in December 2009; and factory shipments showed an increase for the first time since June 2006. That's according to the latest Furniture Insights survey of residential furniture manufacturers and distributors from the High Point accounting and consulting firm Smith Leonard.

While December 2009 orders didn't make up all the 21 percent drop in December 2008 orders from December 2007 orders, the trend continued in the right direction. The increase in December followed October results, which were flat with October 2008 and a 10 percent increase in November 2009 orders over November 2008.

For the month of December, approximately 62 percent of the participants reported increased orders over the same month a year ago. The 62 percent is up from 51 percent in November, 41 percent in October, 33 percent in September and 20 percent in August.

For the 2009 year, new orders declined 13 percent, but made up ground in the second half. At the end of June, year-to-date orders were down 20 percent from a high of 22 percent earlier in the year.
 
Shipments in December 2009 were 3 percent higher than December 2008, the first increase reported since June 2006. Still, December 2008 shipments were 22 percent lower than December 2007.

For the year, shipments fell 15 percent from 2008 when they decreased 12 percent from 2007 levels.
 
Backlogs fell 4 percent from November as shipments exceeded orders in total. Backlogs were 13 percent higher in December than they were a year ago at this time, which should help shipments in the coming months.
 
Receivables fell 1 percent from November levels and were down 8 percent from last December.

"Considering the decline in sales of 15 percent, but the slower decline in the last quarter, receivable levels continue to look pretty good on an overall basis," wrote Smith Leonard Managing Partner Ken Smith in the report.

Inventories were even with November and were down 26 percent from last December when they were down 6 percent from the previous year. For the two-year period, shipments were down just over 25 percent with inventories down over that same period about 30 percent.

"Considering the shift to more direct shipments to retailers, it appears that inventory levels are also in pretty good shape," Smith said.
 
Factory and warehouse employees were even with November and down 10 percent compared to December 2008, when they were down 17 percent from 2007 levels, or off 22 percent over a two-year period. Payrolls were up in December over November, but that is somewhat normal with the December vacation pay and some bonuses. Payrolls were also up 3 percent over last December, bringing the year-to-date payrolls to a decrease of 16 percent over last year when they were down 15 percent.

"With orders up or at least flat three months in a row, we do believe we may have hit bottom," Smith wrote in summary. "Admittedly, the comparisons to the fourth quarter last year were against very weak numbers, but at least it doesn't appear we were digging a deeper hole.

One of the harshest winters in years, however, came on top of the positive order trends in the last quarter of 2009; and consumer confidence also took a hit in February.

"We hope that this was affected by the lousy weather," Smith said of consumer confidence. "Such weather keeps people indoors and likely watching more news on television. We know from our own experience that there is not much that can bring you down more than listening to all the negative news."

Signs of improvement in the economy haven't yet affected consumers, he continued.

"With that said, spring time is coming," Smith said. "For those who have been hit hard with weather, attitudes will get better if for no reason other than the weather. Hopefully people being kept in will notice that some of their furniture actually does need replacing."

Smith also pointed to an upcoming last wave of tax credits for home buying, which could spur more activity in the housing market.