Growth likely to slow for Canadian stores
By Michael J. Knell -- Furniture Today, January 22, 2007
Ottawa — Canadian furniture stores saw brisk growth in 2006 and most observers agree growth will continue this year, albeit at a more modest pace.
That should soothe anxious exhibitors awaiting buyers at this weekend's Canadian Home Furnishings Market in Toronto.
According to Statistics Canada, furniture store sales in the first nine months of 2006 came to C$6.97 billion, up 7.3% over the comparable 2005 period.
Furniture stores are defined as stores where furniture represents 50% or more of revenue, although the reported sales are of all categories. Household appliances and consumer electronics account for about 30% of the revenue.
Kubas Consultants, a Toronto-based firm specializing in retail, estimates that furniture store sales came to C$9.7 billion in 2006, up 7.8% from the previous year. The firm is projecting 2007 sales at C$10.3 billion, a gain of 6.5%.
Kubas estimates 2006 sales for home furnishings stores — another category of retailer, selling everything from flooring to decorative accessories, lamps and similar goods — at C$5.4 billion, up 14% from 2005.
Home electronics and appliance specialists enjoyed an estimated 9.2% advance to C$11.2 billion last year.
Growth will be slightly slower this year in both sectors, Kubas projects — 9.9% for home furnishings stores, to $C6 billion, and 8.6% for white and brown goods merchants, to C$12.2 billion.
However, furniture retailing continues to outpace total retail, which the consultants estimate grew at 6.3% each year in 2005 and 2006 and project will grow another 4.9% in 2007.
"This (smaller gain) is partly due to lowered expectations for GDP growth, mostly in the first half of 2007," said Kubas.
A slowdown in the housing market, which has been hot for several years, also is expected to dampen demand for furnishings.
Growth is expected to be relatively modest in Ontario and Quebec, which between them account for more than half of retail sales. Furniture retailers are likely to fare best this year in western Canada, particularly British Columbia and Alberta, whose red hot economies are driven by high prices for oil and gas.
Furniture stores, of course, aren't the only channel in which Canadian consumers buy furniture. According to Stefan Wille, president of the Aktrin Furniture Information Center, total consumer spending on furniture and bedding in the country was an estimated C$10.8 billion in 2006 and should grow by 4.4% in 2007. Those spending figures include sales taxes, which average 14%.
The question remains whether retailers will descend on the Canadian Home Furnishings Market this weekend with a strong open-to-buy. The sales numbers seem to suggest they will, although western Canada stores are likely to have deeper pockets than their eastern counterparts.
Meanwhile, the rise of imports — which now account for about 40% of all household furniture sold in this country — will prompt retailers to change their approach to buying domestically made product. With few exceptions, Canadian manufacturers shouldn't expect truckload orders.
Instead retailers will emphasize custom order programs, regardless of category or even price point, with truly quick delivery. This will improve service to the consumer and also should improve retail cash flow without tying up excessive amounts of operating capital — which is needed to finance imports.
Conventional industry wisdom says furniture sales tend to lag behind housing sales by 18 to 36 months. If that pattern continues, the recent housing slowdown should be reflected in retail orders starting early in 2008.
