Did retail failures help soften recession's blow?
By Jay McIntosh, News editor -- Furniture Today, January 13, 2002
According to the latest estimates, U.S. furniture and bedding sales at retail fell by 2.5% last year, or about $1.7 billion. That's not small change.
But it looks like at least that much was accounted for in the failures or downsizing of several Top 100 retail chains in recent years. This would seem to have left more business to go around for the survivors, in a way softening the blow of this year's economic punch.
Since 1997, according to a report a few months ago by Clint Engel, our senior retail editor, nine Top 100 players have gone under or closed stores that had a total of $3 billion in sales.
Some of that retail space is gone for good — Montgomery Ward had roughly $500 million in furniture and bedding sales the year before its demise, and we haven't heard of any furniture retailers taking over Wards stores. Another portion has remained in the industry under new ownership, with competitors taking over some of the stores vacated by Heilig-Meyers (which downsized by $1 billion in sales), HomeLife ($680 million) and others.
Then there's the complicating factor of going-out-of-business sales, which deliver a final surge of business for these departing giants.
Still, the net reduction caused by the big-chain breakdowns is likely to meet or exceed the amount of the industry's 2001 decline at retail. Industry analyst Jerry Epperson thinks the rash of high-profile failures could explain why many retailers reported sales that were at least as good last year as in 2000, despite the industry's overall decline.
So does this leave the industry poised for a recovery? There are some signs of hope.
After every big retail failure, we always wonder if that was the last shoe to drop. There are still one or two chains rumored to be having trouble, but it seems like most of the weakest players have already fallen by the wayside. Obviously, the chance for a meaningful rebound improves if we can make it through this year without a catastrophic failure.
A related issue is the surge in GOB sales that follows the failures. The less merchandise sold at GOBs, the more business is left for stores planning to stick around.
And Epperson believes that retail inventories "are where they need to be or even a touch lean." This would be great news for U.S. manufacturers, who experienced a far worse sales downturn than retailers in 2001, largely because retailers were trimming their inventories, although the unceasing rise in imports also apparently played a role.
A panel of analysts surveyed for Furniture/Today's annual economic forecast (see page 40) expects U.S. furniture and bedding sales at retail to rise 0.4% this year and 2.6% in 2003. Furniture manufacturers' shipments are expected to rise 4.3% this year and 2% next year.
These are very modest gains. But we'll take them instead of a decline any year.
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