January Orders Rise 4%

April 1, 2010  by in UnCategorized   

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

New retailer orders for furniture rose 4 percent in January compared with the same month last year, according to the Furniture Insights survey of residential furniture manufacturers and distributors conducted by the High Point accounting and consulting firm Smith Leonard.

January 2009 orders were off 24 percent from January 2008. This year's January increase was slower than the 12 percent and 10 percent gains, respectively, in December and November, but Smith Leonard Managing Partner Ken Smith believed severe winter weather played a role, and expects that to be a factor in February numbers.

January shipments rose 6 percent over January 2009, following a 3 percent increase in December. While shipments were down 24 percent in
January 2009 versus January 2008, Smith noted that remember that December's increase in shipments was the first such increase since June 2006.

"Shipments in January were 10 percent lower than December 2009, but that was somewhat normal in the January to December comparisons," Smith said. "Approximately 62 percent of the participants reported increased shipments in January up from approximately 50 percent in December.

January backlogs were up 4 percent from December and 26 percent higher than January 2009, the fourth consecutive month that backlogs have increased over the prior year.

"We realize that some of this relates to imports and the time it takes to get through the system, but it is good to see backlogs increasing at least somewhat," Smith noted.

Receivables were 4 percent lower than January 2009 even with shipments increasing 6 percent in January. Receivables increased 1 percent over December in spite of a 10 percent decline in shipments.

"We continue to hear about slower paying customers, but we are also hearing more about requiring deposits, especially in the custom order business," Smith said. "We did have a few bankruptcies and going-out-of-business situations in 2009. Hopefully, no more significant ones are on the horizon."

Inventories increased 10 percent over December 2009 but were still 21 percent lower than January 2009. A number of companies took some down time in
December and many did not accept new inventory until after the first of the year.

"We continue to believe that inventories are in pretty good shape, especially after the last two years of heavy discounting in order to move slow moving and obsolete items," Smith said.

Factory and warehouse payrolls were 6 percent lower than January 2009 when they were down 25 percent from January 2008. Payrolls were down 21 percent from December, but Smith attributed that to year-end bonuses and vacation pay. The number of factory and warehouse employees was also down 6 percent from January 2009, when they were down 17 percent from the year before. The number of employees rose 3 percent from December 2009.

"For the third consecutive month, new orders in January increased over the same month a year ago," Smith said in summary. "After two years of significantly declining order rates, this news has been good news. Certainly, we are not making up much ground, but with some stabilization, this is allowing companies to at least attempt to adjust to current levels versus wondering how low it can go.

"The news we heard from Premarket was mostly very good. The retailers who came seemed to feel that business was improving--maybe not where they want
it, but improving. As we mentioned before, we believe the weather has clearly been a factor for most of this winter. Snow, rain, floods--you name it, we have had more than normal in most areas of the country. Hopefully as spring has come, consumers attitudes will improve, in spite of the mess in Washington. We also have heard from other retailers that business continues to improve. We hope that trend continues and should make for a good High Point Market."