Motion hopes for rebound
Pricing will be a key issue in new year
By Larry Thomas -- Furniture Today, December 25, 2005
High Point — A year ago, producers of motion furniture and recliners were hoping that 2005 would not bring another round of increased gasoline prices, higher raw materials costs and low consumer confidence.
Unfortunately, all of those negative factors — and more — came to pass, making for a year that many producers would like to forget.
No one could possibly have factored $3 per gallon gasoline, a 60% increase in foam prices and several devastating hurricanes into their business plans for the year. So when those things occurred, contingency plans were the rule.
As skittish motion and recliner mavens look ahead to 2006, they don't want to believe this unusual, possibly unprecedented, series of events could occur again. But now they know that nothing should be ruled out.
"The environment is quite puzzling," La-Z-Boy President Kurt Darrow said in a recent conference call with securities analysts. "We've heard a lot about pent-up demand (but) nobody has been able to define 'pent-up' or the length of time associated with it."
It's anybody's guess whether this pent-up demand will be unleashed in 2006, but it's safe to say that producers, for the most part, are being cautious and conservative with their plans.
"We see a very cautious consumer," Darrow said. "We're still concerned about macro issues like that."
Darrow and others said pricing will be a key issue in the new year at both wholesale and retail. The huge run-up in foam prices caused most producers to implement a variety of surcharges and wholesale price hikes during the last four months of 2005, but consumers won't notice most of those increases until January or February, at the earliest.
Pressure on key prices
Some executives believe the price hikes will put pressure on the popular $399 retail price point for recliners and $699 for motion sofas, but other producers are taking extraordinary steps to make sure dealers still can hit those prices with reasonable margins.
"We're hitting them hard ... and that's one of the reasons our business has been pretty good," said Chuck Tidwell, vice president of merchandising and product development at Franklin, whose line features numerous items at entry-level price points.
Those price points aren't as critical to midpriced and upper-end producers such as Flexsteel and Barcalounger, but price nevertheless is a central part of any discussion with a dealer, executives said.
"Even with our emphasis on special orders ... price has become a big part of what people are talking about," said Mark Hedden, merchandise manager for Flexsteel's recliner and motion lines.
Other key trends include:
• Retailers may be tiring of the simple faux suede fabrics that have dominated the non-leather cover segment in recent years, but the fabric's durability and cleanability remain a major selling point with consumers.
As a result, a new generation of faux suede fabrics has moved onto the scene, and producers say they have met with some success in recent months.
The new generation includes suedes with a thick padded backing that has been dubbed "sponge Bob" by its detractors, and some that use embossing or other styling details to give the furniture a slightly more upscale look.
"Everyone is trying these new styles because they want something different in suede," said Hillary Phillips, cover coordinator at PeopLoungers.
PeopLoungers had great success at the October market with a sectional covered with faux suede that was embossed, and Phillips said similar fabrics are likely to be used on products introduced at the Las Vegas market in January.
• Retailers aren't tiring of leather, however, and the influx of cut-and-sew kits from China and South America is enabling producers to hit price points once reserved for fabric covers.
Plus, fully assembled motion products are being imported from China in increasing numbers.
"We're now able to get some pretty stylish things from China," said Flexsteel's Hedden. "Our whole leather program continues to do extremely well."
Producers say brown and black, and their many variations, remain the top-selling leather colors, but red has developed a sizable niche and brighter colors such as white, yellow and green are garnering more interest.
• The room-package selling strategy made popular by retailers such as Rooms To Go is helping recliner producers sell more of their chairs as part of larger seating groups.
Producers say many retailers are displaying a recliner with a stationary seating group in hopes of "sneaking in" a motion piece as part of the sale.
"We're doing particularly well with several of our high-leg recliners, and people don't even know they are recliners until they try to lean back in them," Hedden said.
Hedden and other executives say they don't expect recliner departments to disappear from retail floors, but they clearly see more sales of their products in room settings.
• The continuing quest for "something different" in a core furniture category such as motion has led to the development of a myriad of niche products.
The most obvious, and most successful, of these is home theater seating, but producers also have developed everything from chairs for video game players to recliners for extreme sports participants.
Such items often allow producers to cultivate alternative retail channels, a strategy that Catnapper, for example, executed flawlessly when it obtained a licensing agreement with Realtree, the best-known producer of camouflage products for hunters.
Don't laugh. Catnapper's recliners with camouflage covers are big sellers at Bass Pro Shops, one of the nation's largest retailers of hunting and fishing gear. The chairs have sold so well that Catnapper recently added them to its quick-ship program.
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