Furniture industry factoring ends on high note
Jay McIntosh -- Furniture Today, December 20, 2013
But opinions vary on why the business is improving.
It may be because the companies that factors are dealing with are simply doing better and have greater need of the inventory financing and other financial services the factors provide. Or it may be a result of the continuing trend of industry companies to downsize their accounts receivable departments, outsourcing functions like bill collecting and credit reporting.
"Our furniture business has grown at about twice the rate of the overall economy so we're pretty pleased with that," said Michael Hudgens, Southeast regional manager for CIT Trade Finance.
He said his company has seen business volume grow "across the board" for its clients, both for case goods and upholstery importers and manufacturers, and estimated that the growth is in the range of 7%.
That's faster than the U.S. Gross Domestic Product gain, which the government estimated at growing by 3.6% in the third quarter, up from gains of 2.5% in the second quarter and 1.1% in the first quarter. It also tops the U.S. furniture and bedding industry's growth at the consumer level, which Furniture/ Today estimates at about 1% for 2013.
Hudgens said CIT's clients appear to be benefiting from pent-up demand for their products, still making up ground from the double-digit declines of three or four years ago. In addition, housing is "really starting to bounce back," he said.
"Many of our clients are looking into capital expenditures," he added. "That could be because their growing and looking to expand their factories or it could be due to onshoring."
Product like cut-and-sewn fabric kits are becoming more expensive to buy from offshore because of rising labor rates and other costs, for example, and some U.S. upholstery manufacturers are looking into making them here, using technology that can reduce the labor component, Hudgens said.
Another factoring provider that has seen a number of its clients do well this year is Eagle Capital. Kirk Donnell, sales manager, said some longtime furniture manufacturers and importers have expanded their sales territories, or have found niches where they've been successful. A couple of newly created companies have also done well out of the gate, he said.
"They've got a pretty good backlog going
Rick Mantin, president of Lyon Capital, said his business has also been up this year, although he thinks it's because of increasing demand for the products rather than an upswing in the furniture business. Lyon Capital's sister company, Lyon Mercantile, offers credit reporting and along with other Lyon financial services can help companies replace the accounts receivable functions that were once done in-house, he said.
"What's happened over the past few years is that the headcounts at our customers' companies have gone down and they're doing more with less people," Mantin said.
He said the company has been "on a tremendous growth curve with our factoring in the past three years," but declined to give any percentage gains. He attributes the growth to gaining a bigger piece of an industry pie that isn't really expanding this year.
One of the biggest industry stories this year and heading into 2014 has been the bankruptcy and asset sale at Furniture Brands International, whose stable of household names like Broyhill, Lane and Thomasville now have a new owner and a new umbrella name, Heritage Home Group.
Furniture Brands' first-half sales were down 7.8% from the 2012 level, and may have declined further after the company's Sept. 11 Chapter 11 filing. New owner KPS Capita
CIT's Hudgens said the Furniture Brands decline allowed other companies to pick up some of its business as customers shifted to other sources.
Donnell, of Mississippi-based Eagle, said the acquisition by KPS has been a boost to his area, where employees at Lane had been worried about their future. It appears the new Heritage Home Group wants to continue with the brand, which had been in some doubt during the bankruptcy proceedings.
Lyon Capital's Mantin said he is happy that the brands are still around.
"I think the companies under their umbrella are really household names in the furniture industry. We're just thrilled that they have reorganized and have some management that looks like they are continuing on in our industry," he said.
Mantin added that after the bankruptcies and closures of the past several years, the industry has slimmed down to a hardy group of survivors.
"If the economy turns around," he said, "the people left standing are ready to do business."
Industry Related Content
Most Viewed Articles
FTTV: Frontline Friday From F/T