Is recovery under way?
Business 'feels better,' but gains uneven
By Jay McIntosh and Clint Engel -- Furniture Today, March 10, 2002
HIGH POINT — Buoyant reports from regional markets and some positive retail sales numbers in the past two months could be the first signs of a long-awaited industry recovery.
But the gains are still spotty, with uneven month-to-month sales and persistent weakness in certain products and price points.
Several manufacturers and retailers polled last week said the rebound hasn't been robust enough to warrant boosting capacity or hiring more employees. Even though most remain optimistic for an upswing later this year, they are waiting for the improvement to become more solid and consistent.
"It feels like it's turning, but it hasn't turned the corner," said Jim Gabbert, chief executive officer of the four-store, upscale Gabberts in Minneapolis and Dallas-Fort Worth.
There are healthy signs, he said, including a rising stock market. But Gabbert isn't ready to declare victory.
At least a few companies, however, are placing bets on a rebound. Top 100 retailers Havertys, Art Van and Aaron Rents are among those who have made or plan to make significant investments for growth.
"It's really strong this time of year because of the tax refunds," said Gil Danielson, chief financial officer at Aaron, whose Sales and Lease Ownership (rent-to-own) division has enjoyed good sales in January and February, following a 5% same-store sales gain in the fourth quarter.
Tax law changes have helped. The average U.S. taxpayer's refund has been 12% higher than last year, according to the Internal Revenue Service. That could be a factor in supporting the promotional to medium price points, which seem to be enjoying more of a rebound than the higher end. Manufacturers at regional markets in San Francisco and Toronto in January were happy with higher attendance and brisk orders. In Tupelo last month, exhibitors were thrilled with what market organizers said was record attendance, 9% higher than the old winter mark, and with heavy order-writing.
"It appears the recovery, at least in the middle and upper-middle price segments, is developing somewhat earlier than expected," said Mickey Holliman, chairman and chief executive officer of manufacturer Furniture Brands International.
He said business improved for the company's midpriced lines, including Lane and Broyhill, in January and February, and "recent incoming orders at Thomasville are beginning to show somewhat better year-over-year comparisons."
Business is still soft at FBI's premium end, including Henredon, Drexel Heritage, Pearson and Hickory Chair, he said.
Excluding the effect of acquisitions, Holliman said Furniture Brands expects first-quarter sales to be flat compared with 2001, with "modest growth" in the second quarter. In January, the company wasn't expecting any gains until the second half.
The 48-store Breuners Home Furnishings Corp., which owns Huffman Koos, Breuners and Good's Furniture, also has been getting mixed signals, said CEO Joe Reddington. Sales for the Lancaster, Pa.-based company were stronger September through November than they were December through February.
Delivered business was up in January because of strong written sales in the calendar fourth quarter. And February was up "but only a few points," he said.
"It's pretty flat. That's the way I'd describe it now," Reddington said.
Still, there have been bright spots. Motion upholstery, bedding and leather have done extremely well since the September terrorist attacks, as consumers seem to be focusing on specific categories and the family room, he said. The weakness has continued primarily in high-end wood.
"Dining room, bedroom — those businesses are definitely the softest," Reddington said.
He and Gabbert both said they weren't considering any significant new investments to accommodate better business. But Reddington said BHFC is being "slightly more aggressive" in marketing. "You can't be passive in this environment," he said.
Retail sales last month were mixed. Posting gains in same-store sales were Atlanta-based Havertys, up 8.2% over February 2001, and Pier 1 Imports, up 17.2%. The Bombay Company, however, said same-store sales were down 15% from a year ago.
"The corner was really turned around Sept. 1, and business has continued to gain momentum since that point," with the exception of a week to 10-days following the terrorist attacks, said Jay Slater, president and CEO of Havertys.
He noted the 104-store, midpriced to upscale chain has continued to pour capital into expansion, including the purchase and lease of eight former HomeLife stores and the recent opening of a former Roberds unit in Atlanta.
Havertys planned to expand even if business had remained flat, "but we feel a lot more optimistic now that we've seen business come back as it has," Slater said.
Sales at Ethan Allen also have remained relatively healthy, declining just 3.2% in the six months ended Dec. 31.
"I have been somewhat surprised at the overall resilience of the consumer," said Farooq Kathwari, chairman and CEO of the manufacturer and retailer. "I think there has been a major shift in the attitude of the consumer."
Unlike previous generations, he said, today's consumer doesn't worry much about a severe recession or depression. Because they're confident the economy will rebound, they're more willing to keep spending, a factor that has probably supported the robust U.S. housing market, he said.
Art Van Elslander, chairman and CEO of 28-store Art Van Furniture, based in Warren, Mich., said business has been good but inconsistent. October was flat, November and December were up, January was flat, and there was a double-digit sales increase in February.
"It's hard to say (if business has turned), but in my opinion, I think we're going to be able to capture more market share," said Van Elslander.
Art Van has expanded aggressively, remodeling several stores last year and making a big addition to its distribution center. It plans more growth this year, he said.
In the West, 23-store McMahan's also is continuing to invest in existing and new stores.
"Our business has remained consistently strong since early summer, with same-store increases every month except September, when we were flat, and October, when we were slightly down," said Taylor Ganz, vice president of the Los Angeles-based retailer.
"Business at all price points on the West Coast appears to be good, and retailers out here are generally optimistic," Ganz said. "There is no question in my mind that this section of the country was affected by 9/11 far less than the rest of the United States."
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