Execs forecast positive outlook

'02 could see bedding back on track

By David Perry -- Furniture Today, December 9, 2001

HIGH POINT — The bedding industry is well positioned to stage a significant comeback next year and get back on its normal growth track. The category will continue to perform well on retail floors, giving retailers the profit dollars they have come to expect from bedding.

That's the assessment of more than a dozen leading bedding producers, who generally offer positive outlooks about the industry's prospects for the new year.

For one thing, the industry has nowhere to go but up next year. Final figures on the industry's performance this year won't be available for months, but the latest forecast from the International Sleep Products Assn. paints a bleak picture of 2001. The wholesale dollar value of adult mattresses and foundations is expected to drop 5.5% this year. Units are forecast to be down 7%. That would be the worst year for the industry in more than 20 years.

History shows that the bedding industry can sustain growth for long periods of time, particularly on the dollar side. So it's not unreasonable to think that 2002 could be the start of another long run of growth years.

And some of the economic variables should turn in the industry's favor. Interest rates are low — and could move even lower. That should be a strong stimulus to the housing market, which stimulates demand for furniture and bedding.

Consumer confidence has been shaky but is expected to rebound as the war in Afghanistan continues to proceed well. And consumers are focusing more on their homes as they turn inward in the wake of the terrorist attacks and the anthrax scare in the United States. That should be good news for bedding producers.

"I'm pretty optimistic about next year," said Charlie Eitel, chairman of Simmons. "Like a lot of people in the industry, I'm convinced consumers will cocoon. They will stay home and spend more time with their families. Any product for the home should benefit from this trend."

Added Paul Sullivan, executive vice president of United Sleep Products: "I think what is happening is that people are staying at home and focusing on the home. Hopefully they will buy a new bed or a new futon."

Producers with strong brands are particularly well positioned to benefit from this trend, in the view of Ed Lilly, Serta president. "The return to the home will be a more positive return to the brands consumers are comfortable with," he said. "Serta will have a good year."

Bedding retailers can capitalize on the trend by promoting the benefits of a good night's sleep, rather than simply touting a price story, according to Eitel. "We have a lot of evidence that when dealers send a message focused on the quality of life and the benefits of a good night's sleep they get very good results," he said.

Growth to come

Eitel believes the industry can post an overall growth rate next year of "somewhere in the 3% to 4% range."

Sealy Chairman Ron Jones has a similar view. "I believe the industry will see some positive growth in 2002 in the range of 2% to 4%," he said.

The Bush administration will do its part, Jones believes. "The good sign is that both the administration and the Congress appear ready to take some significant steps to fuel an economic recovery and the Federal Reserve has been aggressive in rate cuts," he said. "Also, the decision of the Treasury Department to cease selling 30-year bonds should give some fire to home starts and home refinancing."

Sealy will outperform the industry next year, something the producer has done consistently over the last five years, Jones predicted.

Spring Air President Jim Nation said he's looking for substantial increases for Spring Air next year, which would keep that producer running ahead of the industry's overall performance. He sees growth opportunities for Spring Air in the first quarter of 2002, noting that Spring Air's new product launch this year got rolling in the second quarter. He also sees growth opportunities for Spring Air in the fourth quarter next year.

Overall, though, Nation said the industry could be in store for another challenging year. He noted that the industry has a history of two-year unit declines, and said 2002 could well wind up as a flat year. "I think it will be difficult for at least another half year," he predicted. "Even with increases in the second half, we could be flat for the year."

Serta's Lilly agreed that "the first six months will be tough, but the second half will be better." Overall, he said, the industry could post a 2% dollar gain next year.

A question of when

Some producers are pointing toward the second quarter to see a bedding turnaround begin. "The first quarter will be a challenge for the industry," said Larry McKay, president of King Koil. "We are going to do well in the second, third and fourth quarters." King Koil should achieve "a substantial increase" next year by partnering with retailers and offering them a profitable line, he said.

King Koil will be rolling out a completely new marketing program by March 1, McKay said.

Another producer planning for a good year is Therapedic, according to President Michael Pino, who looks for business to improve noticeably sometime from the middle of the second quarter to the third quarter. He said his organization will do a variety of things to grow its business: "Therapedic will increase business in 2002 by continuing to build our brand name, by introducing innovative product, through niche marketing, and with a strong effort of motivating both the individual licensees and working closely with them on a national and international level."

He said the industry could record dollar gains next year as high as 8%.

"All the indicators point to a growth situation next year," asserted Todd Nieting, Symbol's vice president of sales. "But I don't think that will happen quickly. I think the first quarter will be a roller coaster. There is still plenty of uncertainty out there."

Englander President Roger Jasperson, who believes business will start to pick up in the second quarter, said bedding will bounce back next year. "People will only lay back for so long," he said. "I'm certainly looking for an increase in 2002. With interest rates being where they are, there are a lot of people able to get into the home market. That spawns bedding business."

Something else that spawns bedding business is heavy retail promotion. And the producers say there will be plenty of that in 2002.

"When the furniture store wants action," Jasperson noted, "they run a bedding ad. It always seems to pull."

"Bedding is always being promoted," agreed Gene Schayer, president of Lady Americana Associates. "If anything, the industry will be more aggressive next year so we will avoid the dip in business we saw this year."

Weathering the storm

The war against terrorism is a new factor for bedding producers to include in their assessment of business prospects for the new year. The producers are encouraged by recent developments in Afghanistan.

"Once the Afghan war concludes and people start feeling better, the economy will come back," predicted Daryl Tarbutton, Bemco president. "That should happen sometime in 2002. Business could be pretty good again."

But there is a lingering concern about the unknown. "We are assuming that there will be no surprises in the battle against terrorism," said Ed Scott, Restonic president. "If there is another major incident, that could put a monkey wrench in the industry's plans. I don't think that will happen."

His overall assessment of 2002: "I don't think it will be a boom year. We will have a better year than this year. But we may not get all the (lost business) back next year."

Chittenden & Eastman President Don Robb said that the industry did a good job of weathering the tough times this year. "With the exception of a few big bankruptcies," he said, "we've had a pretty resilient group of bedding retailers. The retailers we have now are basically survivors. They manage their inventories well, and they don't get in trouble."

And when the economy picks up next year, those retailers should do particularly well, Robb suggested.

"I believe Sealy will continue to significantly outgrow the industry as we have done consistently over the last five years. I also believe we will experience growth in our domestic as well as in our international business."

Ron Jones,chairman, Sealy

"I'm pretty optimistic about next year. Like a lot of people in the industry, I'm convinced consumers will cocoon. They will stay home and spend more time with their families. Any product for the home should benefit from this trend."

Charlie Eitel, chairman, Simmons

"The return to the home will be a more positive return to the brands consumers are comfortable with. Serta will have a good year."

Ed Lily,president, Serta

"I think it will be difficult for at least another half year. Even with increases in the second half, we (the industry) could be flat for the year."

Jim Nation, president, Spring Air

"I expect a substantial increase next year for King Koil. The first quarter will be a challenge for the industry. We are going to do well in the second, third and fourth quarters.

Larry McKay, president, King Koil

"Bedding is always being promoted.

If anything, the industry will be more aggressive next year so we will avoid the dip in business we saw this year."

Gene Schayer, president, Lady Americana Associates

"I don't think it will be a boom year. We will have a better year than this year. But we may not get all the (lost business) back next year."

Ed Scott,president, Restonic

"Therapedic will increase business in 2002 by continuing to build our brand name, by introducing innovative product, through niche marketing, and with a strong effort of motivating both the individual licensees and working closely with them on a national and international level."

Michael Pino, president, Therapedic

"People will only lay back for so long. I'm certainly looking for an increase in 2002. With interest rates being where they are, there are a lot of people able to get into the home market. That spawns bedding business."

Roger Jasperson, president, Englander

"I think what is happening is that people are staying at home and focusing on the home. Hopefully they will buy a new bed or futon."

Paul Sullivan, executive vice president, United Sleep Products

"Once the Afghan war concludes and people start feeling better, the economy will come back. That should happen sometime in 2002. Business could be pretty good again."

Darryl Tarbutton, president, Bemco

"All the indicators point to a growth year. But I don't think that will happen quickly. I think the first quarter will be a roller coaster. There is still plenty of uncertainty out there."

Todd Nieting, vice president of sales, Symbol

"We've had a pretty resilient group of bedding retailers. The retailers we have now are basically survivors. They manage their inventories well, and they don't get in trouble."

Don Robb,chairman, Chittenden & Eastman