Smith Leonard: Year-To-Year Orders Down 3% in August

November 4, 2007  by in UnCategorized   

By Home Furnishings Business in on November 2007 New orders for residential furniture fell 3 percent in August 2007 compared to the same month last year, and remain 4 percent below the first eight months of 2006. That’s according to the October Furniture Insights report from the High Point accounting and furniture industry consultancy Smith Leonard.

For comparative purposes, August 2006 orders were 7 percent lower than August 2005, and at this time last year, new orders were off 1 percent from the first eight months of 2005.

After a majority of participants reporting increased order rates for July, the participants’ orders flipped in August with approximately 64 percent of the participants reporting declines in orders compared to August 2006. As with the July results, approximately 70 percent of the participants reported lower orders year-to-date.

Shipments in August were only off 1 percent from August 2006. August 2006 shipments were off 5 percent from August 2005. Only 53 percent of the participants reported lower shipments in August versus August 2006. Shipments were 20 percent higher than July shipments, somewhat normal due to most companies only shipping three weeks in July.

Year-to-date, shipments remained 6 percent below August 2006. Similar to last month, shipments were lower for approximately 71 percent of the participants. Backlogs were 8 percent lower than August 2006 levels, the same as last month. With shipments higher than new orders, backlogs fell 6 percent from July’s backlogs.

Receivable levels fell 2 percent from last August, in line with sales for the month, but off a little compared to year-to-date sales. Timing of shipments and the volatility of shipments per month can impact these levels, but overall, they appear reasonable.

Inventories were 11 percent lower than last August, the same as last month compared to July 2006. Inventories were even with July 2007 levels. Approximately 70 percent of the participants reported lower inventory levels, in line with those reporting lower orders and shipments. It appears that most companies are not building inventories in anticipation of business picking up.

Factory payrolls were 7 percent lower than August 2006, up from 6 percent comparing July 2007 to July 2006. Payrolls were 16 percent higher than July, but this reflects the effects of the normal July shutdowns.

The number of factory employees was even with July 2007 but down 12 percent from last August. August 2006 employees were down 6 percent from August 2005, continuing to reflect plant closings and lower business volumes for domestic producers.

Last month Smith Leonard reported that July results had shown some improvements with hopes that the industry may have bottomed out, but those results were not a trend as orders in August fell 3 percent from August a year ago.

From Smith Leonard’s conversations with manufacturers and retailers, business in September and October has not improved significantly, but the report indicated High Point Market was surprisingly up beat, with exhibitors surprised at buyer attendance and mood, and many compliments on improvements at the market itself, particularly regarding transportation and entertainment.

Most retailers continue to say their business is very sluggish and many sales are coming from discounting.

Smith Leonard predicted sluggish business overall into 2008, but said certain niches still are doing well.