Smith Leonard: Orders, Shipments Continued to Fall in March

June 2, 2008  by in UnCategorized   

By Home Furnishings Business in on June 2008 New orders for furniture in March fell 11 percent compared to the same month last year, reflecting ongoing sluggishness in the furniture industry. That’s according to Furniture Insights, the monthly survey of residential furniture manufacturers and distributors from the High Point accounting firm and consultant Smith Leonard.

That was on top of poor performance in March 2007, when orders were 4 percent lower than March 2006. New orders for March 2008 were 2 percent higher than February. This increase was somewhat lower than normal as March is typically higher than February.

Year-to-date, new orders were reported to be 8 percent lower than the first quarter of 2007. The first quarter of 2007 was 5 percent lower than the same quarter in 2006, resulting in a 12 percent decline over the two year period. For the month, 83 percent of the participants reported lower orders compared to last year. With only a few exceptions, those reporting increases were only up very slightly. For the quarter, just over 80 percent of the participants have reported declines in orders compared to the previous year first quarter.

March 2008 shipments fell 9 percent compared to March 2007, when shipments declined 6 percent from March 2006. Similar to orders, 83 percent of the participants reported lower shipments. Shipments were 5 percent higher than February 2008.

Year-to-date, shipments are now 7 percent lower than the first quarter of 2007, when they were down 6 percent from 2006. Some 78 percent of the participants reported lower shipments in the first quarter. With orders down more than shipments so far this year, Smith Leonard does not expect shipments to improve significantly in April.

With shipments exceeding orders, backlogs fell again in March, down 2 percent from February, but down 10 percent from March 2007.

Receivable levels fell 6 percent from March 2007 and were down 4 percent compared to February, even though shipments were higher in March than they were in February. With shipments down 7 percent year-to-date, the 6 percent decline in receivables appears to be in line after being somewhat out of line in January.

Inventory levels fell 7 percent in March compared to March 2007, in line with the decline in shipments. While the decline appears in line with shipments, the survey report questioned, with so many of the shipments now direct from Asia to retailers, why inventories are as much in line as they appear to be.

The number of factory employees fell 1 percent from February and 7 percent from last March. In February 2008, the number of factory employees was down 8 percent from February 2007. Factory payrolls fell 13 percent compared to March 2007, when payrolls were down 11 percent from March 2006.

While factory payrolls were 9 percent higher than February, that was likely the result of more days in the month. Year-to-date, factory payrolls are down 10 percent from last year.

On an unadjusted basis, sales at furniture and home furnishings stores were down 3.4 percent from March and down 2.7 percent from April a year ago. For the first four months of the year, sales were reported 4.3 percent lower than the same period a year ago.

Smith Leonard hopes that April High Point Market orders will help to improve results over the next few months, but with few reports of good business and with orders down so much, believes it will take some time for shipments to catch up.

“Our hopes that we had somewhat bottomed out last year and might be somewhat flat in 2008 while waiting on economic conditions to improve, have not been realized so far this year,” the report read. “It is pretty obvious that inflation in so many staple areas is hurting retail. ... We believe it is just going to take time to get through all of this. The housing/ mortgage situation is bad enough, but adding to that are the problems that oil prices are creating with not only gas prices but also so many other products increasing as well, as freight costs are adding to most everything. Consumers’ disposable income is being chewed up.”