Daily News

From Home Furnishing Business

Smith Leonard Offers Insights on the Last Month in the Industry

October 31, 2023  by HFBusiness Staff in Business Strategy, Industry   

As you probably recall, new orders from June 2020 up until later that year were at historically high levels as demand was at unheard-of levels. The August increase brought order levels year to date back to just about even with the same period of 2022.

Year-to-date August 2022 orders were down 29% after being up 29% in the same period for 2021. If that isn’t confusing, do not even try to think about the impact of price increases and later decreases in freight costs as well as other factors.

Backlogs fell again, down 51% from August 2022. It appears that most are now getting the backlogs back to more normal levels.

Receivable and inventory levels also appear in line, with inventories down 32%. Factory and warehouse payrolls continued to decline in August as would be expected based on the declining overall business.

Sales at furniture and home furnishings stores were down 5.9% from September 2022. On an unadjusted basis, sales at these stores were down 4.4% year to date.

Overall, the residential furniture business is probably sluggish at best. And there seem to be many reasons. While the overall economy seemed to grow at a strong pace in the third quarter, some of those measurements do not really reflect what consumers are seeing and doing.

Yes, they are still spending but the rising costs of living clearly have an impact on furniture spending. Add to that the rising mortgage interest rates, there are just not enough dollars left in consumer budgets to pay for deferrable purchases.

The leading economic indicators have declined for over a year and a half. Nine of the indexes ten components have either declined or were flat in September.

The Conference Board forecasts that the trends are such that a shallow recession is expected in the first half of 2024. If that is true, the residential side of the business may face more turbulence as many would say certain parts, if not most parts, are already in somewhat of a recession in 2023.

On the other hand, we thought the October High Point Market was well attended, and once again, the “mood” of Market was very good. Great new product was shown. Even though many echoed the thoughts that attendees loved our product and were very happy with our showing, the only problem was the “they must have forgotten their pens.”

But that great product will sell eventually as consumers come back to the stores or their designers suggest they just have to have some of the new product. People came and some will buy. We hope that this “slow down” ends soon, but think one needs to be prepared to ride it out a bit longer than most probably think.