Warning: A few storms could be on horizon
David Perry, Executive editor -- Furniture Today, February 25, 2002
I hate to be the bearer of bad news, especially since I went out of my way in my column last week to look on the positive side of things, but there are a couple of storm clouds on the horizon for 2002.
They have been picked up on the radar screens of more than one bedding CEO. Frankly, I'm not sure how (or even if) these storms will materialize. But it is worth our while, I think, to reflect on the warning signs.
We have reported in detail on the industry's general view that bedding will return to its growing ways this year, with both units and dollars rebounding from declines in 2001. The official forecast from the International Sleep Products Assn. calls for a 3% gain in dollars and a 2% gain in unit shipments.
But history suggests that unit forecast might be on the high side, one CEO says. Unit declines tend to occur over a two-year period, this CEO notes.
He's right about that. A look at ISPA's archives reveals that units declined in 1981 (-4.4%) and 1982 (-4.8%), and then again in 1989 (-1.5%) and 1990 (-1.3%).
If that history repeats itself, we will see another unit decline in 2002. And that, my friends, would mean another difficult year for the industry, a year of tough competition for a shrinking bedding market.
That doesn't mean, by the way, that producers and retailers won't be able to post sales gains. The industry has shown an ability to sustain dollar growth even in the face of unit declines.
Remember our four down years for units (1981, 1982, 1989 and 1990)? In only one of those years — 1982 — did dollars also decline. As an industry, we are selling better bedding and bigger bedding, two factors that keep dollars moving north.
Both those trends remain strong this year. And the increasing emphasis on high-end bedding, which also helps sell the beds positioned beneath those top-end models, is another plus. We expect meaningful dollar growth in 2002.
Another potential storm cloud relates to the fallout of a difficult year in 2001. Some believe the full consequences of 2001's problems won't be felt until this year. In other words, companies weakened by a lousy 2001 will finally pay the piper this year, i.e., go out of business, restructure or do something equally dramatic.
Unless we see the demise of some more major retailers, I'm not sure that some smaller retail failures would be that big a deal. We like to say that the strong are getting stronger and the weak are going away.
Still, it is worth watching the industry closely to see if these storm clouds materialize. Consider yourself duly warned.
