Leather leaders load up for livelier '06
Many looking to build on momentum from Las Vegas, China
By Joan Gunin -- Furniture Today, December 25, 2005
High Point — Turning the page on an uneasy year marked by a restrained retail climate, wicked weather, war in Iraq, rising interest rates and, more recently, an iffy housing market and rising prices, most leather upholstery manufacturers look for improvements in 2006.
Aside from momentum gained from the debut of the Las Vegas market this summer and, in many cases, the advent of Chinese operations, most leather resources look on 2005 as generally bland in terms of business growth.
One bright spot for the category came from newer product configurations, particularly those addressing motion and home theater.
"There is so much going on in the marketplace that it's hard to capture," said Guy Holbrook, national sales manager for Classic Leather. Rising prices and increased interest rates "may quell people's purchasing power a bit," he said.
But if those factors work to keep people from buying bigger homes, perhaps they will invest in refurbishing their current home with better furniture, Holbrook said, adding, "There is an opportunity, especially at the higher end, to get some of that business."
With sales down slightly for 2005, Classic Leather was buoyed by business from its contract/hospitality/healthcare division, St. Timothy Chair. "Our contract, architect and design partners are doing a great job," Holbrook said. "We're working to convert that to the residential and retail side.
"We're hoping for an uptick in sales for 2006 to make up what we lost this year and get a little bit more," he said. "We're trying to find new and entertaining ways to interact with our dealer base and their decision-makers."
Fred Starr, president and CEO of Natuzzi Americas, said, "If the pent-up need for housing stays strong, it will have to be unleashed." Conversely, rising interest rates likely will have a negative effect.
"We think 2006 should be a good year," Starr said. "It is supposed to be an excellent year for the stock market, with higher equity in housing. The (leather) industry should grow 3% to 4% next year, based on some good things happening."
Chateau d'Ax experienced a good 2005, said Harry Cierler, director of North American operations, who expressed concern about consolidation at retail. "This year it worked out fine, but next year, I don't know," he said.
For 2006, Chateau d'Ax will focus on its motion program out of China, he said.
The last half of 2005 was reasonably strong, said American Leather CEO Bob Duncan.
"Since late July, (our) business at the higher end has picked up across the board and continues to stay strong," Duncan said. "We are going out on a high note, so I am cautiously optimistic. We feel pretty good about 2006, but a lot of things could make the economy shaky, so we're paying close attention."
Becoming better
The wave of imports hasn't hurt American Leather. "Our business model is very different than that of China's," he said, enabling the Dallas-based operation to become "that much better" in its differentiation and response.
West Coast-based custom producer Omnia is "still riding the crest from Las Vegas," said Murray Eastern, director of sales and marketing. "That momentum has carried us through a normally quiet period. We have been pleasantly surprised."
Consequently, the plant has never been busier, he said, expressing gratitude for the newly built facility that opened in July, increasing space from 90,000 to 130,000 square feet.
While Eastern said he has not seen any "breakout volume" for 2005 anywhere in the country, he expects a very large turnout for the next Las Vegas show in January.
Asian-owned HTL International is expecting to see 50% growth over 2005 in its U.S. business, said Stephen Barr, president of the domestic arm, and 20% to 25% corporate growth overall, largely from the motion and home theater pieces introduced in October.
Contemporary styling also has gained greater acceptance in the marketplace, he said, while HTL's Safari cover, a textured microfiber paired with leather for relaxed contemporary collage looks, continues to win followers.
"We are building design and European styling into our Chinese product in order to differentiate ourselves," Barr said.
Business in 2005 has come at a steady pace for Canadian-based Palliser.
"We saw obvious growth in categories like home theater," said Pablo Reich, vice president of upholstery sales and marketing. "Things were relatively steady compared to 2004, but home theater grew more significantly with the addition of more contemporary frames."
He expects the trends toward media rooms and more customized lifestyle configurations to continue.
Good but not stellar
"The last couple of years has been good but nothing stellar," Reich said, "and the decrease in consumer confidence in the U.S. did not help either the retailers or the manufacturers."
But Palliser has benefited from consumers' growing comfort with and awareness of better, higher-end, more sophisticated leathers, he said.
Latin America importer Primex International has experienced a banner year with double-digit growth, and hopes to replicate that in its new leather division, launched at the October market.
"There was some softening in the fall due to hurricanes and economics, so we're just getting a read on what our customers are feeling," said Vasso Unks, marketing manager. "The leather upholstery won't be on retail floors until March and in catalogs until April, but we got placements at the low end and the high end."
Primex's strength lies in specialty stores and catalogs, but it received great response from full-line furniture stores.
"We were pleased by how many people responded to our leather introductions," Unks said. "The Far East isn't necessarily the be-all and end-all; Latin America offers a good option in terms of time and delivery."
Steve Bailey, vice president of sales and marketing for Schillig USA, said 2005 has turned out more positively than he initially thought, even in the face of rising interest rates and housing market uncertainties.
"We are full speed ahead, with a lot of confidence for 2006," he said. "We are not being conservative. We think it will be ... a growth year."
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