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Producers optimistic about 2004

By David Perry -- Furniture Today, April 18, 2004

INDIANAPOLIS — Coming off its strongest growth year since 2000, the bedding industry is gearing up for its peak sales season this summer.

Wholesale bedding shipments traditionally peak in the July-September period, and producers are now putting their marketing programs in place for those critical months.

Producers' moods were upbeat at the recent Expo 2004 hosted here by the International Sleep Products Assn. The supplier show is shopped by all the major bedding producers in the United States, and draws others from around the world. That's not surprising since it is the world's largest show devoted exclusively to the bedding industry.

This year, the industry faces two issues that complicate producers' sales forecasts: rising prices for bedding components, primarily steel, and the costs of incorporating fire-resistant materials into bedding lines. Producers have mixed views on how those issues will play out at retail.

The good news, for now, is that the industry appears to have momentum as the second quarter revs up.

"We're off to a great start," said Bob Hellyer, president of Simmons. "We're bullish on the year. I think it will be a dynamite year for Simmons."

Helyer said bedding price pressures "will clearly have a negative effect" on the low-end of the market, which he defined as beds selling for $500 and below. Price hikes in that arena will "change the value equation as we know it today," Helyer said, producing "short-term, negative effects."

But if retailers sell the concept of better sleep, which Simmons emphasizes, they will escape the low-price game and will sell better bedding by talking about the benefits of better sleep, Hellyer said.

That strategy is working for Simmons, which has gotten a "phenomenal response" to its new cable coil line, retailing at $1,299 and up. In addition, Simmons' new Windsor bedding line, retailing from $3,500 to $10,000, "has started to take off," Hellyer added.

Serta President Ed Lilly doesn't think higher bedding prices will hurt business in the coming months. "I think 2004 will be an excellent year," he said.

Of the price hikes, he said: "Prices are determined by the market and the market will go up for everybody."

Serta is moving ahead with its rollout of bedding lines protected with its proprietary FireBlocker FR technology, Lilly said, adding the technology is being well received at retail.

Spring Air President Jim Nation said higher prices will lower the values in bedding, compared to what they were a year ago. "But the value equation in bedding will remain strong relative to the values in other industries," he said.

Nation remains optimistic about prospects for the year. "I think business is great right now," he said. "I think it will be a very strong year."

King Koil President Larry McKay said that higher bedding prices this year will reduce the strength of the offerings at lower price points. But he noted that bedding values have improved so much over the years that the new values will still be appropriate for the price points.

McKay is concerned that higher prices for bedding components could reduce the aggressiveness of promotions this year, but he remains optimistic about prospects for 2004.

"I think 5% growth is conservative," he said. "I'm pretty bullish on the year."

The International Sleep Products Assn. is forecasting a 5.6% increase in the dollar value of bedding shipments this year. Units are forecast to post a 3% gain. That would be the greatest unit gain since 1999, when units jumped 5.6%.

Gerry Borreggine, vice president of sales and marketing at Therapedic, said it's inevitable that bedding prices will be going up, but thinks all producers are in the same boat.

"When the water level goes up," he said, "everybody's boat floats at the same level. Prices are going up the same for everyone."

Given the relatively tough going the bedding industry has endured in recent years, some producers believe a wave of pent-up demand for bedding will soon be released. Borreggine isn't so sure.

"I don't think the release of the pent-up demand has reached the marketplace," he said. "The industry has hoped for that big buildup."

He also noted that, while business improved in some parts of the country last year, it remained tough in other regions.

Kerry Tramel, president of Lady Americana, said the steel price hikes are "extremely destabilizing. It's tough going to market with prices written in pencil."

He's concerned that consumers "won't find bedding as attractive" as other product categories. "What will retailers push?" he asked. "Will they push a $699 sofa or a $699 bed that has moved up to $799?"

And retail sales associates, he said, "are supposed to be as enthusiastic as they were last week about a bed that's $100 more."

Bemco President Daryl Tarbutton says the overall growth of the economy will be the key to how the price hikes play out.

"I don't think any price changes will have an immediate effect on sales," he said. "But it depends on how the economy grows. If it keeps on growing, it probably won't have any effect."

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