Labor Day promising

Will sales hold up for rest of year?

By Clint Engel -- Furniture Today, September 9, 2007

High Point — It's not unanimous, but many retailers said the Labor Day holiday weekend brought a much-needed boost to furniture store sales.

They remained mixed, however, on what this means for the rest of the year.

Special deferred-payment offers were out in force, and several retailers noted particular strength in bedding business over Labor Day. Some said they posted some of the best results of the year — continuing a pickup they began seeing this summer, or starting what they hope will be a trend.

"It was probably the best weekend ever this year," said Pedro Capo, chief operating officer of 10-store Miami Gardens, Fla.-based El Dorado Furniture. "We had better traffic than we had the two previous years."

Florida has been one of the hardest-hit furniture markets, owing to factors ranging from rough hurricane seasons to higher insurance and property tax rates and a deflated housing market. Through August, El Dorado's same-store sales are down about 10%, but with its new 110,000-square-foot—store opened in West Palm Beach early this year, total sales are about flat.

Cause for optimism

He sees hope in the Labor Day weekend pickup.

"Hopefully, it will give us something positive — not just for sales but for our salespeople, letting them know people are out there and buying furniture — and will kick us in the right direction for the last quarter," he said.

Kittle's CEO John Durkott was pleased with business during the Labor Day weekend given what's been a "challenging year" to date.

"Last year, Labor Day was the single largest day in the history of the company, and this year it was probably our second or third largest," Durkott said. Close rates were strong and consumers "were in a buying mood."

The 15-store Indianapolis-based retailer's holiday weekend promotion was similar to last year's, offering two years no interest, no payment or a discount for cash. It also offered rebates that increased with the size of the purchase.

Durkott said business has been off for the company this year, largely held back by its three Thomasville Home Furnishings stores. But this summer, Thomasville changed its pricing policy, allowing dealers to be more promotional, and things started turning around, he said.

Business challenges

Durkott said the retailer's markets still face challenges, chiefly a huge property tax increase facing Indiana homeowners. In parts of the Indianapolis area some tax bills were set to rise 50% this year, and "that takes a good furniture payment away," he said.

The governor stepped to delay the increases "but it still doesn't take away the fear," Durkott added. That's one reason he finds it difficult to use Labor Day as a barometer for the rest of the year.

On the bright side, Durkott said, Kittle's business picked up to roughly flat in July and August, "which we consider a moral victory" given the business climate. Gross margins are up as the company has looked for ways to be more cost-effective, and Kittle's bedding business has been "through the roof" thanks to initiatives to carve out a bigger market share in the category. Bedding now accounts for just under 16% of total sales, up from 9% to 10% a year ago.

Labor Day weekend sales for Jackson, Miss.-based Miskelly Furniture were up about 5% from a year earlier. "Our store traffic was incredible," said Tommy Miskelly, partner in the business with his two brothers. It was a continuation of a fairly good summer, he said.

So far in 2007, Miskelly's sales are off by single digits, the first time the retailer has tracked negative numbers this far into the year. But it's up against unprecedented business in 2005 and 2006 as people replaced furniture damaged in Hurricane Katrina.

For Labor Day, the retailer stepped up its advertising and offering "incredible deals," Miskelly said.

While he said he hopes the holiday bodes well for the rest of the year, "I think it's going to be real bumpy."

"I think you're going to get it in bunches on holidays and weekends," he said. "It's amazing. It's like the shoppers get on the phone together and say, 'Let's all come out this weekend,' or 'Nobody show up this week.'"

Miskelly said consumers seem to be affected by negative economic news, even if they're not personally affected.

"That means our offers have to be strong. We have to do a great job of selling the benefits of buying our product. It makes it more difficult because we have to do everything perfectly."

Havertys, Shanks score

At least two retailers had record-setting Labor Day sales. Atlanta-based Havertys said written business for the holiday set a single-day record and noted that business was "trending better" after an 11% same-store sales decline for the first eight months of the year.

Austin, Texas-based Louis Shanks of Texas had the best Labor Day in its history, said Amor Forwood, CEO of the high-end Texas retailer. He said he measures success in profit, not just volume.

"We're riding high. We're having a good time," he said.

He did not yet have sales numbers from all the stores, so he couldn't give a sales percentage comparison for this Labor Day versus last.

Forwood said April was "just terrible, volume-wise," but that business has picked up since then. The company's last fiscal year, which ended March 31, was the most profitable one ever for Louis Shanks and this year has started off well, he said.

Forwood thinks the store's good fortune results from several factors.

"No. 1, Texas is doing better than most of the country," he said. And he added, "I think all my competitors have run off. I'm the most expensive store in town."

He said Shanks had experimented with selling less expensive product when the "tidal wave" of Chinese imports confused price points in the industry, but in the past couple years has gone "back to what we were known for" with big displays of high-end goods. Now, it's doing well with suppliers such as Henredon, Feizy and Bernhardt.

Martin Komisar, president of BiltRite Furniture in Greenfield, Wis., said his strong Labor Day was a continuation of solid business the retailer has seen since moving to a new location a year and a half ago. August was the best month since the move.

Still, he said, "People are apprehensive. They're shopping, they're looking, but they're not always jumping the gun ready to buy."

For the holiday weekend, BiltRite ran a truckload Sealy sale and a one-year, no interest, no payment promotion.

"What it really amounts to is finding the right product for the customer," Komisar said. "It's first getting them through the doors, but then they have to perceive you have what they want at their quality level. There's no shortage of cheap stuff from China, but we're selling better products."

Labor Day weekend sales were less than stellar for Pittsburgh-based Roomful Express Furniture, down double-digits from the year before, said Michael Kuhn, president. The company promoted free financing until 2012.

Labor Day weekend a year ago was rainy and the company rang up a 25% sales increase over the year before. This year, Kuhn said, the retailer was faced with four warm, sunny days that kept consumers outdoors and out of stores.

The one positive was that the company's recently opened Ashley Furniture HomeStores in Altoona and Johnstown, Pa., were nearly 10% above projections during the long weekend.

Kuhn said business overall is decent, adding that the company feels fortunate to be running about flat with last year given the business climate.

"We're optimistic" about the rest of the year, he said. He can't explain why, except a hope that the housing crunch, gas prices and other concerns will ease for a consumer he believes is overextended.

"Let's hope (Federal Reserve Chairman Ben) Bernanke makes some rate cuts," he said.

Acknowledgements

News Editor Jay McIntosh contributed to this story.