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Buyers face tough climate

Market shopping may be conservative

Clint Engel -- Furniture Today, October 1, 2007

HIGH POINT — Retailers here for the furniture market this week are facing the toughest business climate they’ve seen in years. For some, shopping lists for market are shorter than usual, as retailers have either set their lineups earlier this year or chosen to be more cautious in their buying. None interviewed for this story named a new collection they were particularly interested in seeing, perhaps reflecting the conservative nature of this market on the part of both retailers and resources. On the other hand, one retailer said that a number of his suppliers have gone out of business, which will require aggressive shopping as he searches for replacements. In addition, a critical need to achieve better product flow will have some stores looking for more domestic sources rather than imports, reversing a years-long industry trend. Almost without exception, retailers said the ongoing housing crisis and overextended consumers will make it tough going for the rest of this year and into 2008. “People are talking about 2009 for the housing market (comeback), and we don’t see any reason to disagree with that,” said Fred Berk, president of Fort Myers, Fla.-based Robb & Stucky. Berk described tough business conditions, particularly in the upscale chain’s Florida market, where traffic has been slow for the company and other furniture stores. In greater Dallas and Phoenix, business is better, he said, largely because Robb & Stucky is the giant in the market, “so if there’s business to be done, we’re going to get it.” But overall, traffic is soft, “and we’re relying on our design business to help smooth that out,” Berk said. In High Point, the retailer will be “opportunistic” in its shopping, he said, noting the April market typically is more important for Robb & Stucky, and that its merchandise assortment is pretty much set. “We go in with an open mind, but we’re not going with a heavy appetite,” Berk said. Elwood, La., which is the home base of Compass Furniture, still is recovering from Hurricane Katrina, so sales continue to clock in above pre-2005 levels, said Billy Rippner, president of the three-store retailer. “Business is a little better than 2005, but costs (for insurance and other items and services) have probably doubled,” he added. Compass is coming to market in need of new product to replace several suppliers that have gone out of business or become strictly importers. Brookwood, for instance, has been a key upholstery source for Compass, capable of special-order deliveries in six-to-eight weeks, Rippner said. Now that it’s moved production overseas, those special-order capabilities are no longer there, so “we have to change our merchandise mix,” he said. Compass will be seeking new vendors in case goods and upholstery, “and good values coming out of warehouse programs,” Rippner said. “We’ll be looking for resources that have gone offshore but with proven continuity, that can flow the goods to us.” Martin Komisar, president of Greenfield, Wis.-based BiltRite Furniture, also plans to give domestic lines more attention here. “That’s our first choice,” he said, if quality and price are comparable, because of supply-chain problems with imports. He recalled that some cut-and-sew upholstery from Lane had taken seven months to arrive, compared to one to three months, tops, for domestic furniture. “I think manufacturing is going to come back (to the United States),” Komisar said. “There’s a saying, What’s old is new and what’s new is old,” he said, adding he finally understands what that means. Like many retailers across the country, Salt Lake City-based R.C. Willey had a great Labor Day weekend. But also like most, “Since then it’s been a little soft,” said Jeff Child, president of the chain, which is part of Berkshire Hathaway’s furniture division. Some markets are doing better than others, he said. Sacramento, Calif., for instance — R.C. Willey’s newest market — continues to do well, and Reno, Nev., and Boise, Idaho, are hanging in there. Salt Lake City is “OK, but getting softer, and Las Vegas is still a bit of a challenge,” Child said. Given this, “We’re just going to be looking for great values — things we can advertise to get customers excited,” he said of his shopping trip here. Whether that excitement comes in the form of great price, new product or new looks, it will get equal attention from buyers of the midpriced chain. “Whatever seems to be working ... to drive people into our store, we will jump on it in a minute,” Child said. R.C. Willey’s inventories are in pretty good shape, he said, so whatever it does buy will most likely be a traffic-driver. And while the retailer probably has increased its advertising on lower-priced goods to draw consumers out, Child said, “I’m not sure price is the only reason people are buying.” On the style side, he’s seeing more interest these days is casual looks that lean toward formal and transitional upholstery frames — a move away from contemporary, which has been hot for several markets now. Lee Blaugrund, vice chairman of the 11-store, Albuquerque, N.M.-based American Home, said there’s no doubt consumers have drawn back, concerned about their ability to spend and carry debt. The question on everyone’s mind in the furniture industry, he added, is when the housing market and consumer confidence are going to come back. Blaugrund doesn’t believe it will be until after the fall 2008 elections. In the meantime, “We need to bring a balanced agenda to our marketing,” he said. “Just low price isn’t going to drive business.” With stores in New Mexico and Arizona, American Home is “buttoning down,” he said, controlling inventory in this very conservative environment. In High Point, its buyers will look to fill a few voids and for special values, but Blaugrund said much of his time will be spent simply building relationships with existing vendors, discussing supply chain issues and working to improve inventory flow. He intends to stop by the showrooms of such key suppliers as BK Home, Lane, Natuzzi, DeCoro and Aspenhome, the latter a standout lately. “We like the values Aspenhome (is offering),” Blaugrund said. “They’re not the least expensive, but they’re (making product with) great value and great style.” Gorman’s Home Furnishings and Interior Design, with four Detroit-area stores, will finish the first nine months of the year with sales down about 2%, said Tom Lias, president and chief operating officer. That decline is attributable to the going-out-of-business sale of Klingman’s Detroit store, which sucked business out of the market, he said. “I’m tickled to death to be able to say that, because they only get to do that to you once,” Lias added. Michigan’s unemployment rate is running 7.8% vs. the 4.2% national rate, and housing values are down about 10% over the past two years, he said, adding, “What we’re going though is what some other markets will be going through if the downturn continues.” The reason Gorman’s business actually has improved in recent months is simple: With the exception of Art Van, which opened a Drexel Heritage store late last year, “we’re pretty much the last man standing in better-quality home furnishings,” Lias said. Gorman’s is coming to market in the best shape it’s been in in three years, he said, having completed its transformation to a “100 brands” marketing and merchandising format and away from in-store galleries, including Drexel Heritage, once its largest supplier. The focus in High Point, Lias said, will be on Gorman’s top 40 or so vendors, and “enhancing whatever our position is with them to increase volume and sales per square foot.” That will includes stops at Stickley, which the company took on this summer, Stanley, Hooker, Universal, Sherrill, Henredon, Baker and Lexington. Lias said Gorman’s now is in a better position to be more critical about what’s right for its floor, “and for the first time in years, I will be able to move on new things and position ourselves fashion-forward for six months from now,” as opposed to racing to replace dropped lines. And Gorman’s won’t feel trapped when a supplier chooses to walk away from “a unique selling proposition or price point.” In the past, under the store’s gallery format, the retailer had to grin and bear it, Lias said. But at this market, it will move quickly to replace these dropped looks or prices with similar goods from other suppliers. John Disa, president and CEO of Wheeling, Ill.-based Wickes Furniture, said his buyers will be “shopping upstream, looking for more directional resources and trend-right” merchandise to refresh the Top 100 chain’s assortment. Wickes, with 41 stores in greater Chicago, Los Angeles, Portland, Ore., and now Las Vegas, is among those retailers challenged by the business climate, and Disa said he sees no near-term fix. Still, he believes this is the time to stay aggressive and not back down. “The way to win is to take market share and really be focused around trend-right product more than ever,” he said. “Every inch of our store has to produce.”

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Buyers face tough climate

Sep 30, 2007

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