Buying back on track?
Inventories lean, but retailers seek deals
By Clint Engel -- Furniture Today, April 25, 2009
High Point — Retailers shopping the furniture market here say buying is likely to get back on track despite continued economic turmoil.
Inventory levels at retail have crept down to manageable levels, and dealers say they now have some open to buy for everything from case goods to upholstery.
Unfortunately for some vendors, the emphasis — particularly from the big midpriced store chains — may be on deals, recognizing that suppliers have backlogs of goods they need to unload.
But retailers also say they'll have their eye out for new looks and ways to update their floors.
Some say they're placing more emphasis on domestic sources and suppliers with U.S. distribution centers and proven quick-ship capabilities, because the cost associated with flowing containers is too much of a gamble in this economy. And some say they will be looking to fill category and style holes left by former suppliers that have gone out of business.
"I think it's going to be interesting," said Jeff Seaman, CEO of Seffner, Fla.-based retailer Rooms To Go. "I think people are going to buy a lot of product and test a lot of product, and I think there's going to be a lot of activity."
At the October market, people were in a "state of shock," Seaman said. Wholesale prices were rising, driven by the cost of oil and other materials, even though retail business was suffering.
"On one hand, you had retailers with too much inventory and terrible business and, on the other hand, manufacturers with prices that were too high," he said. "Nobody was buying anything."
But since then, prices have fallen and retailers have worked down their inventories.
"I'm telling our guys to be ready," Seaman said. "I think you're going to see a lot of product. There's going to be interest, and in our case, we have a lot of room."
Jeff Hosking, president and CEO of Columbus, Ohio-based PMD Furniture Direct, agreed, saying retailers have been gun-shy for several months but are more ready to pull the trigger now.
"What we're going to do is what we always do — shop market hard and keep our eyes open for anything new and for product from a style or fashion point of view that makes sense," he said.
Hosking said PMD and its customers like product with stories behind them, whether it's hidden storage or other bells and whistles. That's not to say PMD won't be value-driven here. Buyers will be seeking promotional priced in upholstery — including sofas from $299 to $599.
Among PMD's stops will be United Furniture, where Hosking expects to see new product. In case goods, the retailer will shop existing vendors — including Acme, Harden and AICO — for a look at what's new. He's also still interested in sources with domestic warehouse programs.
"Pretty much the rule is if you can't ship me the goods (within a week or two of an order), I don't want to do business with you," he said.
Englewood, Colo.-based American Furniture Warehouse CEO Jake Jabs assesses business conditions as a rollercoaster this year, with sales down about 10% for the year to date. Many retailers are reporting similar and worse declines with only brief spurts of increased traffic and sales.
At market, Jabs said he'll look for deals, including closeouts similar to those he's already getting from distributors who want to dump product and clear their backlogs.
"A lot of times, when business slows down like it has, these 400,000-square-foot warehouses start looking pretty small," he said.
Like others, Jabs said he'll have more open to buy going into this market cycle. He said AFW's inventory is below average (about $27 million in goods vs. a typical level of about $30 million).
Among other things, he'll take a hard look at promotional upholstery sources, noting that one of his vendors has been shipping erratically. He's also interested in seeing what Coast to Coast Imports has to offer. Jabs said he was impressed with early photos from the accent furniture supplier, which was formed by three former Stein World executives, and that the category remains relatively hot.
Jeff Child, president of Salt Lake City-based R.C. Willey, said business remains "tough overall." He said his buyers will be at market looking for sharp pricing and product to drive traffic.
"Really value more than price points (is what we're looking for), but they play a part," he said. Motion upholstery remains a hot category, so that will get a lot of attention as will leather upholstery and entertainment centers.
Simon Kaplan, CEO of Dayton, N.J.-based Crest Furniture, which owns Value City and Ashley Furniture HomeStores in New Jersey, echoed the sentiment that business is tough, adding that, "People will buy, but you've got to give them a hell of a reason to buy."
The kinds of promotions that are working for his stores are tried and true — discounts, extended terms "and of course free delivery," he said.
Kaplan is heading to market with concerns that some manufacturers lately have been cutting corners on their products, resulting in returns. He said Crest will discuss any problems with its key suppliers here and look for additional sources because "it's important to remain progressive," he said.
"And you're looking for as good a deal as you can get," he added. "Today, you have to fight for the best deal you can get."
Kaplan also believes this will be a bit of a buyer's market because the retail pie is shrinking. Some retailers have closed and others have credit problems.
"If you have a good name relative to credit, that will be a key factor in how you are perceived," he said. "The manufacturers themselves cannot take big risks. There are so many (retailers) on credit hold, it's crazy."
The upscale Gorman's Home Furnishings in the Detroit area, facing an even worse economic climate that many retailers around the country, will be shopping the market hard for seven days, even though its inventories are in great shape and its four stores are well merchandised, said Tom Lias, president. He described this as similar to "going to the supermarket after you've eaten dinner, not before."
Still, he has some needs, including casual dining sets in the $999 to $1,499 range. Lias said Gorman's has lost a few vendors in that category, including Shermag.
Lias also hopes to find more contemporary upholstery, leaning toward transitional, and occasional and accent furniture in that same style vein in the retailer's middle price range — sofas for $999 to $1,499 for instance.
Gorman's CEO Bernie Moray said he and Lias have read about new looks coming from sources such as Drexel Heritage, Lexington Home Brands, Stanley and Henredon, so they will be stopping by those showrooms among others.
"We still want to be at the front end of style leadership," said Lias.
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