Attacks undercut rebound
But housing strength, low interest rates could help
By Gary Evans -- Furniture Today, October 14, 2001
HIGH POINT — The furniture industry was getting a tantalizing hint of economic recovery, but the terrorist attacks and their aftermath seem to have blown any rebound right out of the water.
"It was kind of spotty but OK up until Sept. 11, and then things pretty much shut down," said Doug Campbell, vice president and controller of Oklahoma City-based retailer Evans Furniture.
Campbell's comments have been echoed countless times throughout the industry, although many felt that, if a recovery had started in late summer, it was off to a very weak beginning. The question now is what effects the U.S.-led counter-strikes in Afghanistan will have on future business.
For Jerry Hux, owner of Beverly Hall Furniture Galleries in Atlanta, August and September were not up to expectations, but the retailer was seeing signs of an uptick, especially around Labor Day. "Certainly the attacks put a real damper on the pace of business," he said. "They took all of the focus off life at hand."
Out of curiosity, Kelly Von Hemert, an owner of Von Hemert Interiors in Costa Mesa and Laguna Beach, Calif., checked sales report from Sept. 11 to month's end. "It looked pretty good," she said. The stores had a strong Labor Day sale and, said Von Hemert, "We were getting new business. A lot of people were thinking about Thanksgiving, and we were getting orders for dining rooms."
But from Oct. 1 to last week, business slumped. "It was probably because of all the bad news," she said. "We're not seeing a recovery."
Neither is Mike Dugan, president of high-end manufacturer Henredon.
"I do not think the recovery had started, even though business seemed to be gaining momentum during the Labor Day sales period," he said. "The catastrophic events of Sept. 11 stunned consumers, and the subsequent stock market plunge knocked them out."
On the other hand, Steve Kincaid, president of producer Kincaid, believes the recovery was under way. "Back in the summer, business picked up," he said, and was positive until terrorists attacked the World Trade Center and the Pentagon.
"The first week, people were pretty much in shock," Kincaid said. "Two weeks after, it was slow. We do sense it coming back now. It's gradual. People are getting out and shopping a little more."
Cody McGarraugh, a furniture analyst for brokerage Stifel, Nicolaus, believes there were signs before Sept. 11 that the industry may have bottomed out.
"It appeared that business was slowly improving," he said. "Looking at overall consumer spending at retail, especially within the durable sectors, there has been amazing resilience since Sept. 11 that may help prove that a real bottom is among us."
Many believe that consumers expected U.S. attacks in Afghanistan, and that some uncertainty may have been relieved when the stikes began. But consumer anxiety over more potential terrorist actions, especially amid reports of anthrax cases in Florida, could go a long way in heightening subsequent uncertainty.
More incidents at home, said Dugan, "could spook people all over again."
"It's too early to tell," said Beverly Hall's Hux. "But you know if you can't do (business) in September and October, you have to wait until the next big selling period in January. That's the scary thing. January is a long way off."
Campbell at Evans Furniture said, "I don't see anything that's going to be real helpful in the foreseeable future. People are reluctant to commit to big-ticket items when they've got to buy gas and groceries."
There are some bright spots for the industry, many believe, including lower interest rates and continuing strong housing activity.
"I think there's going to be some pent-up demand," said Kincaid. "At some point, that's going to kick in and be the start of a major recovery. We're headed that way."
Analyst McGarraugh said lower interest rates will boost mortgage refinancings. "I personally believe that refinancings will be the largest stimulus simply because it lowers consumers' monthly budgets," he said. But he worries about the swelling ranks of the unemployed.
The $60 billion economic stimulus package that President Bush is pushing would be a big help if it gets through Congress, several noted. And the industry also may benefit by people spending less on travel and vacations and more on their homes.
Bernie Moray, chairman of four-store Gorman's in Southfield, Mich., said, "I think people will be staying home with their families more or entertaining more (at home). That gives them a greater opportunity to look around their house and see what they need to improve. I think we've seen the best traffic we've seen (since the attack) over Columbus Day."
Henredon's Dugan agrees: "In the long run, there is a silver lining to this massive cloud. Consumer spending patterns will most definitely change, and travel expenditures, which are 10 times bigger than furniture expenditures, are not going to come back for a long time. There's going to be a redirection of emphasis toward the home. This can only mean more dollars being spent to make living quarters more comfortable and beautiful."
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