Rest Easy: Mattress Future is Bright

May 31, 2008  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on June 2008 It’s no secret that the economic forecast for retailers in 2008 is pretty grim. As we detailed in the April 2008 “Got ‘em?” issue of Home Furnishings Business, there are tough times ahead for furniture retailers.

But there is light in the darkness: For one area of the furniture business, bedding, the prognosis is ... not so bad. Actually, the signs are very positive. Recent research points to bedding as a category that should weather the storm of economic downturn.

NHFA: Bedding is Tops

According to the National Home Furnishings Association’s (NHFA) 2007 Retail Performance Report, the mattress category was a top performer in furniture stores in 2006, with inventory turns of 4.5 times, compared to an average of 3.0 times for all categories.

Bedding also had 341.1 percent Gross Margin Return on Inventory (GMROI) rating, coming in second only to motion furniture (not including recliners), which had a 363.5 percent GMROI. Compare bedding’s rating to the general GMROI for all home furnishings categories (237.9 percent) and you’ll see the resilience the category has enjoyed within the industry.

In total store sales, bedding came in third at 11.4 percent, behind upholstery’s 17 percent and bedroom’s 13.1 percent. But bedding’s gross margin was strong at 46.2 percent, second only to lamps and lighting, which had a slightly better 47.2 percent.

According to the NHFA research, small retailers did particularly well with bedding, with an average 500.2 percent GRMOI and inventory turns of 5.1 times. An impressive 19.4 percent of all small store sales were in bedding, making this the strongest category for such businesses.

Bigger stores fared well with bedding too: Those with annual sales in the $5 million to $25 million range recorded 47 percent GRMOI, while stores with more than $25 million a year fared best at turns, with an average of 6.6 times.

For more information on the NHFA report, go to nhfa.org.

Getting Moody Over Bedding

The NHFA stats aren’t the only indicator of not-bad times ahead for bedding: Moody’s Investors Service (moodys.com) recently released a special report that predicts the category will likely hold up better than other products in 2008.

While Moody’s overall outlook for home furnishings is somewhat negative, the firm expects mattresses to be the least-affected category during these tough times.

The reason: With the tightening of budgets due to a soft economy, and rising prices for gas and other necessities, consumers are going to cut back on buying products that are nonessential or can be put off until later.

These “nonessential” purchases include recreational products such as sports equipment, software, toys and game systems. Sales of appliances will be moderately affected, Moody’s predicts, more so than mattresses which are, obviously, a necessity. It’s also worth noting that Moody’s rated furniture as the second most vulnerable industry, ahead only of recreational products.

While consumers may not be as quick to replace older mattresses as they have been in the past, the fact remains: When they need new bedding, they’ll bite the bullet and buy new bedding, probably choosing it over less urgently needed purchases.

That’s good news, along with the NHFA findings, for the many furniture retailers who carry bedding. Armed with this information, you may want to boost your bedding offerings, and boost your promotional efforts to emphasize this highly profitable category.