Upholstery: Few bright spots
Producers work hard to overcome retail sluggishness
By Gary Evans -- Furniture Today, December 24, 2006
High Point — Let's hear it from everybody in the upholstery business that had a wonderful year — a long, long pause . . .
This year has been a puzzler. Unlike 2005, there weren't any devastating hurricanes cutting off business in several states and no rocketing material costs caused by shortages in petrochemicals. Even the economy has been good.
The numbers aren't bad, either. According to Furniture/ Today research, 2006 sales for stationary sofas and chairs are estimated at $13.45 billion, compared to the previous Katrina year figures of $11.77 billion.
Despite these positives, however, many producers see 2006 as flat or below par, with inventory pipelines clogged and a number of retail customers struggling or going out of business.
A variety of culprits are to blame. Rising prices at the gas pumps pulled disposable income from the pockets of consumers who might have spent it on furniture. Interest rates, which had been at give-away levels, rose several times during the year. Rumors of the housing bust turned out to be true, especially in the fast-growing Sunbelt. And, of course, the Iraq war and the rising cost of credit cards also were factors.
But despite a general mood of sluggishness in the upholstery marketplace, there were some successes.
"The first quarter was wonderful," said Kerry Lebensburger, president of sales for Ashley's upholstery division. "Then business leveled off."
Ashley is still in the enviable position of posting double-digit sales increases for its business as a whole. The company expects to close the year with sales up 22%, moving another step toward its goal of $7 billion in total annual revenues by the year 2011.
Getting aggressive
"Our business hasn't been bad but it's not what we want," said Lebensburger. "We're taking the position that we have to be more aggressive than we've ever been. If you look at Las Vegas as an example, between Ashley and our Signature Designs, we're probably bringing out 25 new groups, not including leather," he said.
"We'll get very aggressive on product introductions and make sure we have product out there that sells. We're going to fight to get what we need."
Lebensburger dismisses the argument that high gas prices put a damper on furniture sales, pointing out that prices have gone down quite a bit recently without an uptick in furniture activity. But he does believe that the drop in housing sales has been a negative.
"The numbers don't really reflect what's going on out there in housing," he said. "People have simply pulled their houses off the market. The inventory of unsold houses dropped as a lot of these people got discouraged.
"The real problem for our industry is that we've lost the housing trade-up business with people selling their house and moving up to a nice house. That's really hurt a lot."
In addition, Lebensburger said consumers in certain regions have faced squeezes on their wallets, such as the soaring cost of insurance in hurricane-prone coastal areas. Changes in credit laws also have forced consumers to pay higher minimum payments, taking a chunk out of discretionary spending.
Newcomer J. Miles & Co., a midpriced upholstery maker, expects to be off 7% to 10% this year, according to its president, Greg Henderson. But, he added, "We had an aggressive target being a new company so we're not too concerned.
"We believe by June or July in the second quarter of next year we'll be ahead of our business goal. We set a three-year plan and a five-year plan, so we think we'll be okay."
Signs of life
In addition to his responsibilities with J. Miles & Co., Henderson also owns a Lane Home Store in Huntsville, Ala. "We're starting to see things pick up a little so that's going to do a lot for us if the retail market opens up," he said.
According to Henderson, retailers are showing a growing interest in custom upholstery and quick delivery — both of which are J. Miles' strengths.
"We hear people saying they need special order and they need it pretty quickly, and we see more people doing that," he said.
In addition, Henderson said, several of the company's "middle to smaller dealers want to increase their price points or add new price points, so we see that as a real good sign."
Chuck Massoud, president of Texas-based Massoud, agreed it "was a tough year" for the industry. "Fortunately, we've had two great growth years. I'd like to say that will continue next year.
"When I look at my old business versus my new business, the old business has grown for two years," he added. "You can always get new business and say you're growing while your old business is going away. We're balanced in those areas."
Part of the reason the industry goes through hard times is because it doesn't speak in a unified voice about furniture's "incredible retail value," Massoud said. "Until we all team up together in some form or fashion and quit marketing ourselves as just a commodity product and more of a necessity, it's going to be a struggle for the industry to grow at the clip we deserve to grow.
"We are a phenomenal value and we are not getting the message across to the consumer."
Even during the years-long boom in housing, the industry didn't draw the sales it should have, Massoud said. "I wish we could look back as an industry and see why we didn't capitalize on it. We need to look in the mirror and see what we can do to change some of this."
Creativity pays off
For Lee Inds., the year has been "phenomenal with double-digit growth," according to Norman Coley, president.
"We've really enjoyed the same success two years in a row, back-to-back. And I'm forecasting 2007 to be very similar," Coley said.
The North Carolina manufacturer plans to add 50 employees next year and expand its manufacturing capability by 100,000 square feet.
Besides being out front with creative product, Coley attributes part of the company's success to the care it gives to its customers. "We want to be the 'go-to' guys," he said, adding, "It not always easy and it's not always efficient for us. But we'll go that extra mile to satisfy them."
He said that the company's new 30,000-square-foot High Point showroom "has done wonders" in allowing the company to showcase its product. "We're being viewed in a whole new way and it's really helping us," Coley said.
He said the company is opening only select accounts.
"We're sticking with the guys who brought us to where we are, and they know we are committed to making them successful," he said. "We don't want to divide the pie up any smaller and dilute it. We just want to make our current accounts that much stronger."
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