CIT's Oelschlaeger: 2003 looks like turnaround year
Larry Thomas, Business editor -- Furniture Today, January 6, 2003
Terry Oelschlaeger has heard more than his share of hardship stories in the furniture industry the past couple of years, but he's convinced his shoulder won't need to serve as a crying towel nearly as much in 2003.
Of course, that's what all the "experts" were saying a year ago, and 2002 turned out to be anything but a record-setter. But Oelschlaeger, who oversees the furniture industry's biggest factoring operation at CIT Commercial Services, believes 2003 really will be the year of the turnaround.
What's different about this year?
According to Oelschlaeger, the difference is retail. The demise of HomeLife, Heilig-Meyers, Montgomery Ward and many smaller retailers finally has worked its way through the system, and the retail base that's left is financially sound.
"Generally, furniture retailing is in pretty good shape," said Oelschlaeger, senior vice president and regional manager at CIT's Charlotte, N.C., office. "Right now, some of the best risks for lending and credit underwriting are in furniture retailing."
Although Oelschlaeger didn't quantify his prediction, his perspective is noteworthy since CIT provides factoring services for more than 80 furniture manufacturers. And one of the most important jobs of a factor is evaluating the creditworthiness of the retailers who want to buy the manufacturers' products.
If the retailer doesn't pay, the factor is the one who winds up footing the bill.
In 2001 and 2002, Oelschlaeger said CIT "took some very large losses that our clients would have taken" had they not retained a factor, but he doesn't foresee a repeat performance this year.
"We think the long-term outlook (for furniture) is good, but it's not going to be a nice straight-line graph. There will be some ups and downs," he said. "But there simply are not a large number of furniture retail companies who we think are about to go out of business."
Oelschlaeger, like many furniture industry watchers, was a bit puzzled by the industry's mediocre performance in 2002, but said some people may have had unrealistic expectations. Since the most recent recession was one of the mildest in history, there's no reason to expect the expansion that follows will bring about a huge upswing.
But by the same token, he dismissed speculation the economy will go in the tank again this year and create a so-called double-dip recession.
"We see continued growth of larger, more powerful regional retail chains ... possibly at the expense of the mom-and-pops," he said.
CIT's furniture industry client base represents sales of more than $2 billion, and that gives Oelschlaeger and his colleagues a virtual front-row seat from which to observe the industry.
"With that kind of breadth, we've got a pretty good idea of what's going on in the industry," he said.
"As a lender, we see up close and personal what makes these companies tick."
