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Bedding: 2007 forecast a tough call

With business now sluggish, execs cautious about future

By David Perry -- Furniture Today, December 24, 2006

Looking to hold its own
Hot for '07

High Point — In the midst of a sluggish retail sales climate, senior bedding executives offer mixed views on the outlook for bedding in 2007.

Some said they see some favorable trends for the industry, such as consumers' willingness to spend more on better bedding, continuing in the new year. But others said they see an extremely tough year on the horizon, with little or no real growth likely.

"Units will be sluggish," predicted Philip Dobbs, senior vice president of marketing at sales leader Sealy. "The trend of investing in higher-quality mattresses will still be there." He sees a fight for business in 2007.

Tim Oakhill, senior vice president of marketing at Simmons, believes better days are coming. "I feel a momentum shift," he said, but also noted that Simmons, enjoying strong sales in 2006, already has "brought momentum to the category."

Brian Akchin, president of Fraenkel and an Englander licensee, sees a flat year for units in 2007. "I think sticker shock will hit with the addition of fire-resistant bedding in the second half of the year," he said. "We will find that when prices go up $100 at retail, it will scare some people off."

Looking to hold its own

Overall, 2007 is a difficult year to call. Several producers are cautious about prospects, given the lethargic state of business as this year drew to a close. But bedding often seems to find a way to more than hold its own in tough conditions.

A tough new federal flammability standard goes on the books in July, and it will mean higher prices for bedding consumers. Leading producers have said that retail prices will be going up from $50 to $100.

Producers offer a variety of opinions on what that will — or won't — mean to consumers. Some say that consumers simply don't know the bedding value equation and won't notice that FR has brought higher prices. They also note that the full range of bedding prices will continue to be offered to consumers.

Thus, they see limited impact on consumers.

But others think the addition of FR will hurt sales. They note that when bedding prices rise, unit sales often suffer.

In terms of marketing, producers don't seem inclined to tout an improved safety story to consumers. There is some feeling that to do so would only scare consumers away from the new FR-protected mattresses.

Whatever happens, the addition of FR protection will be boosting prices. And that should give dollars a lift, a number of producers said.

The International Sleep Products Assn. expects better days ahead. In its forecast issued this fall, ISPA sees moderate unit gains next year and in 2008, with dollar gains stronger.

Reflecting the tough year that has gripped the industry, ISPA forecasts an essentially flat 0.5% gain in unit shipments for 2006. Units were up 4% last year, and should be up 1.5% in 2007 and up 3% in 2008, according to ISPA.

Expected dollar growth of 7.5% this year is a reflection of the growing volume of high-end products, ISPA said. Dollar growth should be 8.5% in 2007 and 8% in 2008, the trade group said.

Furniture/Today's forecast for 2006, issued last December, envisioned unit growth of just 0.2% and dollar growth of 7.4%. Furniture/Today's just-issued Bedding Consensus Forecast calls for a unit decline of 0.1% next year, with a modest 5.4% gain in the dollar value of shipments.

The industry hasn't had a down year since 2001, but some veteran bedding executives aren't sure the new year will bring much of an upturn.

Ed Scott, president of Stylution USA, sees a flat year in 2007. He believes the addition of fire-resistant products, which will bring higher retail prices, will affect volume, and predicted that some smaller producers won't survive the move to FR bedding.

Scott also believes the industry is getting away from high-volume price points, leaving many consumers behind by focusing heavily on upper-end bedding. "We're making a postponable purchase that much more postponable," he said.

Neal Grigg, president of Carolina Mattress Guild, also sees 2007 as flat. In recent months, he said, there has been "a dramatic slide in business at retail. What's out there that will bring a change? The housing market won't turn around for a while.... It will be a hard-fought war to maintain volume, much less achieve growth."

Thad Pettyjohn, vice president of sales at Jamison, said, "I don't think the industry will be up by 5% in dollar growth next year. Units will be up no more than 1%.... The only way to grow the business is to take it from someone else."

Marc Werner, CEO of United Sleep, said retail "is very quiet across the country. I think a consumer durables recession is under way. It started in mid-March and is a byproduct of the full-closet syndrome."

Werner believes the industry is "bouncing along the bottom" of the durables recession now, and will experience better days next year. "The year 2007 will be good to people who appreciate the changing dynamics of the market," he said.

Hot for '07

What will sell next year?

Specialty sleep beds of all types should do well, producers say. The visco-elastic boom started by Tempur-Pedic continues to roll along strongly, and Select Comfort's savvy marketing moves have kept that company's airbeds selling briskly.

A number of producers see more growth in the latex category, in both latex-core and latex-topper configurations. Two new U.S. latex plants come on line next year and should fuel more interest in latex bedding.

Some bedding majors have signaled they are planning to be more aggressive at promotional price points next year, an indication of the overall tough business climate, and that these big players intend to gain market share in 2007.

But there also will be more high-end models in the market. Hypnos, for example, said it is doing well with its $20,000 sleep set, and Hollandia International, a new entrant in the U.S. bedding market, is touting sleep sets retailing from $10,000 up to $50,000.

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