Upholstery prices in play
Rising foam costs bring hikes, surcharges
By Gary Evans and Larry Thomas -- Furniture Today, October 18, 2005
At the Market — The increasing cost of raw materials, especially foam, is forcing upholstery manufacturers to reconsider their pricing structures and hope that "partnerships" with retailers are as strong as they thought.
Although declining to be specific, a number of manufacturers said they planned to remerchandise their lines, add surcharges, and pass at least part of the price hikes on to dealers shopping the market this week.
With retail soft, stationary and motion upholstery vendors are reluctant to hike prices on products, fearful that it might disrupt sales to both retailers and consumers. But with recent foam cost hikes of as much as 40% — and another increase expected in weeks — the price of building a sofa or a chair has risen significantly.
Manufacturers said they can't absorb all the cost hikes and are counting on retailers to be understanding.
Ashley, one of several companies on allocation by foam suppliers, is passing some costs along in the form of surcharges. Kerry Lebensburger, president of sales for the company's upholstery division, said the charges would be lifted when raw materials return to a normal level.
The problem is that nobody knows when, or if, that will happen.
With foam prices fluctuating rapidly, "It's been real hard to get your pricing right," said Cindy Goss, merchandising manager for Klaussner. She noted that the company has its own foam plant and isn't on allocation, but still faces the shortage of TDI (toluene diisocyanate), an ingredient used for making foam.
"We've tried to stay in our price points," she said, adding, "There are some things we have had to remerchandise."
Broyhill President Harvey Dondero said the company has been able to maintain foam supplies but is adding a surcharge.
"Foam has gone up like crazy," he said, adding: "I think the whole industry has put in some kind of surcharge pricing. We're doing a surcharge because we don't know where it could end up — it could be higher. We're going to price our product in line with our normal costs and then surcharge everything."
Mark Smith, vice president of Smith Furniture, said that when steel prices increased earlier this year, the company re-engineered its products to use an Ultraflex seating system and reduced the use of steel significantly. He said the company would seek alternatives to foam as well, as long as those alternatives were equal or better than the product used.
"We're being as creative as possible," he said.
Producers of motion furniture and recliners are in much the same predicament as their stationary upholstery brethren.
"It has affected the whole industry very dramatically," said Chuck Tidwell, vice president of merchandising and product development at Franklin. "I would describe it as a catastrophic problem."
Instead of an across-the-board price increase, Tidwell said Franklin has opted to attach a surcharge to each piece. That gives the company the flexibility to move the additional charge up or down, depending on the current price of foam and other raw materials.
Motion furniture major Catnapper, on the other hand, opted to re-price virtually every piece in its showroom just a few days before market. Don Hunter, senior vice president for major accounts, said price hikes typically were $5 to $20 per piece, but some newer items in the line had no increases because the higher raw materials costs were figured into the original price.
Hunter said the company has had no problems getting foam because its principal supplier, Hickory Springs, hasn't put the company on an allotment.
"I'm very comfortable with our supply situation," he said. "There's not a fear factor at work here."
Ken Salm, senior vice president of sales at Douglas, said one of its foam suppliers, Foamex, put the company on an allotment. However, the company found other suppliers in Mexico that could make up the difference.
"We anticipate no interruption in supply," said Salm. "We have plenty of merchandise to sell."
He said Douglas has opted to attach a surcharge to most upholstery items because of the unpredictability of foam pricing.
"You don't want to quote somebody a price, and then have to change it before they go home," Salm said.
Greg Roy, vice president and general merchandising manager at Lane, said foam supplies haven't been interrupted, but said the company is getting hourly updates on the situation from its upholstery factories in Mississippi.
"It's a frustrating problem to deal with," Roy said. "But we haven't had a supply interruption. We feel very fortunate with our situation."
He and others said it's too soon to tell if the price hikes will cause retailers to abandon popular opening price points such as $399 for recliners and $599 for motion sofas.
"It's going to put a lot more pressure on everyone, that's for sure," Roy said.
There is some concern that rising prices for U.S.-made goods will open the door to imports by equalizing price points.
One importer of upholstery from China, Universal Furniture, is "not really affected" by any foam shortage, said Roy Calcagne, senior vice president/general manager, upholstery division.
"As a vertical operation (in China), we produce our own foam. We have no issues as far as supply and only minimal price increases," he said. "There will be some increases in the U.S. due to shortage of supply but we are in a great position to service dealers."
| Acknowledgements | ||
| Leather editor Joan Gunin contributed to this story. | ||
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Upholstery prices in play
Oct 19, 2005 -
Foam costs push up upholstery prices
Nov 13, 2005
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