September Factory Orders off 12%; Shipments Down 14%

December 2, 2008  by in UnCategorized   

By Home Furnishings Business in on December 2008 New orders from furniture retailers fell 12 percent in September compared with the same month last year, while factory shipments dropped 14 percent for the same time frame. Through 2008’s first three quarters, both new orders and shipments stood at 10 percent below nine-month levels last year.

That’s according to the latest Furniture Insights survey of residential furniture manufacturers and distributors from the High Point accounting and consulting firm Smith Leonard.

On a brighter note, orders were 15 percent higher than August 2008 orders, although an August-to-September bump is normal; and September was the fourth straight month that orders decreased by double digits compared to the same month a year ago.

Similarly, September shipments rose 3 percent compared with August, but it was fourth out of the last five months where shipments were below the prior year’s same month by 10 percent or more.

Backlogs improved 3 percent over August as orders exceeded shipments. Backlogs were 15 percent below September 2007, down slightly from the August year over year decline of 16 percent.

Receivable levels were 11 percent lower in September 2008 compared to September 2007. With shipments down 14 percent, the 11 percent decline was a bit out of line.

On the other hand, receivables were down 2 percent in September versus August in spite of a 3 percent increase in shipments.

“Overall, while we know everyone is concerned over retailer credit, it appears that we were not off too far in September,” Smith Leonard Managing Partner Ken Smith wrote in the survey report. “We are concerned that October results may not be as good.”

Inventories were even with August levels and down 4 percent from last year, results consistent with the August comparisons.

“So while these results are somewhat out of line with orders and shipments, it appears that we are not, as a whole, building inventories,” Smith wrote.

The number of factory employees was flat in September compared to August, when they were 3 percent lower than July. The number of employees was down 13 percent compared to September a year ago, the same as reported for August. September 2007 numbers were off 10 percent from September 2006.

Factory payrolls were up 4 percent over August. These payrolls were down 17 percent compared to September a year ago. With the number of employees down 13 percent, the differential appears to reflect some short-time being worked by the employees. Year-to-date, these payrolls remained 12 percent below a year ago. In 2007, the payrolls for the first nine months were off 8 percent compared to the same period in 2006.

“The results for August were not unexpected based on what we heard in late summer from various sources,” Smith wrote. “Unfortunately, we do not expect very much improvement for the rest of the year. As we noted in the reports on consumer confidence, there are many things on consumers’ minds these days, and buying articles they really do not have to buy is not really one of those things.”

Smith did note that the decline in existing-home sales appears to have leveled off in the last two months.

“Certain areas of the country seem to be showing some signs of life,” he wrote. “If the government can ever figure out how to deal with the mortgage crisis and calm those waters down, we think housing may eventually bottom out. Unfortunately, most of what we hear on the news is bad. It does appear the Black Friday was much better than expected, even considering low expectations. The question is how much did the retailers give up in profits in order to get the sales.”

Smith said the industry needs to keep in mind the fact that furniture is still being sold.

“People are getting married and moving to new homes and people are still having babies that need new furniture,” he wrote. “Kids are growing out of cribs and kids are graduating from schools and moving out from home. Even if Mom and Dad give them the old furniture, Mom and Dad have to replace the old stuff.”