August Furniture Orders, Shipments Down Double-Digits

November 3, 2008  by in UnCategorized   

By Home Furnishings Business in on November 2008 Retail orders for new goods from furniture vendors and factory shipments both fell 16 percent in August from the same month last year, the third month in a row of double-digit drops in orders. That’s according to the October edition of Furniture Insights, the monthly survey of furniture manufacturers and distributors from the High Point accounting and consulting firm Smith Leonard.

August order levels pushed the year-to-date decline up to 10 percent for the first eight months. Some 86 percent of

the participants have reported lower orders than the first eight months, and word on the street at High Point was not to expect significant rebounds in orders in September and October.

While August shipments outpaced July’s by 8 percent, that is somewhat normal with the normal three week work month due to the holiday in July. Year-to-date, shipments declined 9 percent from the same period a year ago. As with orders, some 86 percent of the participants are reporting lower shipments than last year, with several down significant double digits.

Backlogs also were down 16 percent from last year and were down 7 percent from July. Backlogs are at seriously low levels.

Receivable levels fell 6 percent from August 2007. While not far off from year-to-date shipments declines of 9 percent, the

decline is not as much in line with the last two months declines in shipments.

“We know there is some extended dating going on, but we are also hearing a lot about delinquent payments from retailers,” wrote Smith Leonard Managing Partner Ken Smith of receivable levels.

August inventory levels fell 4 percent from last year’s levels and were even with July levels. The 4 percent decline was the same as the decline reported in July.

“We suspect that with orders continuing to decline, inventory levels may be a bit high,” Smith wrote.

The number of factory employees fell 3 percent from July bringing the total number compared to last year down to a 13

percent decrease. This decrease was up from a 10 percent decline in July and 9 percent in June.

Factory payrolls in August were 18 percent below August 2007, up from 10 percent last month. Factory payrolls were up 13 percent over July but that increase was due to the shutdown for most companies over the week of the 4th of July.

In summary, Smith noted that the October report’s statistics don’t reflect current conditions.

“October has not been good to the nation in general with the whole financial mess we are in – including the stock market, banking relations and just about all the areas in the financial world,” he wrote. “At least the last week of October brought overall good news to the stock market. The market started the week at around 8,300 and finished off the week at 9,325. According to Bloomberg, this was the biggest weekly gain since 1974. October saw the largest drop in the S&P 500 since 1987, but the rally at the end of the month was certainly some good news among all the bad we have been hearing.”

Smith said the October High Point Market seemed to beat most exhibitors’ low expectations, which admittedly were low, but that orders, which normally drop at the beginning of the month, fell more so than usual.

“We are very concerned over the credit situation for both retailers and manufacturers and distributors,” Smith wrote. “In the good ole days, when the economy was tough, we could talk to the bankers, who understood the big picture and were willing to work with companies until overall business conditions improved. Unfortunately, that is not what we are seeing today. We hope that the government will put pressure on the banks to take some of the money they are putting into the system and push the banks to loosen up. Otherwise, we believe they will force some companies into bankruptcy that really do not need to be there.”

Smith did note good news: lower gas prices, and the end of negative campaigning after the national elections end.

“That has got to help consumer confidence,” he wrote. “When you can’t turn on the TV or radio without hearing everything that is wrong with the nation, the economy and anything else you can think of, it has to bring everyone’s confidence down (mine included). We’ve got a lot to fix in the nation before we will see a good deal of improvement in the furniture industry. Most likely, not all will survive. But for those with staying power, we believe that when times do get better, those survivors will do well. We just need to make sure our bankers understand that.”