High Point Market Fall 2008: Leather upholstery players' moods mixed

Plagued by escalating prices for materials

Joan Gunin -- Furniture Today, October 20, 2008

HIGH POINT - As if heeding a yellow traffic light that signifies caution, leather upholstery manufacturers are braking to see what may be ahead as the High Point Market begins this week.

In addition to being squeezed by the economy, currency fluctuations and fuel and freight hikes, leather upholstery players continue to be plagued by escalating prices for materials such as fabric, foam, polyurethane and steel.

While some of those pricing pressures may have slowed, they remain much higher than years past.

Consequently, the mood leading up to this market - historically the stronger of the two High Point events - has been described as everything from "optimistic" and "positive" to "guarded," "somber" and "challenging."

Heath Corso, executive vice president of sales and marketing for DeCoro, describes the retail sales environment as "brutal."

While media coverage of the election, the financial crisis and the plunging stock market is dominating consumer attention, retailers are looking for new ways to generate interest in a gloomy sales environment, he said.

"Some are looking to aggressively promote, some are looking to contain costs, but no one looks at it as business as usual," Corso said. "Manufacturers need to be responsive on all fronts, and to raise the supply chain standards to squeeze out time and costs. At the same time, design and product quality are more important than ever as inflation mandates rising prices."

Most company executives said they either raised prices earlier this year or will implement increases now without fanfare.

"We will raise prices on some items but it will be very reasonable for the retailer to absorb," said Craftmaster President Ray Calcagne.

Current conditions will have a bearing on the market attendance and activity, exhibitors agree. "Smaller dealers may not spend money to attend a market when they are just trying to survive," Calcagne said. "But aggressive buyers will be looking for ways to stimulate their business." 

Still, Calcagne expects Craftmaster to have a good market due to new dealers that the company has gained in recent months and its strength "from a product and financial standpoint."

Flexsteel is "preparing for business as usual," with an introduction that Lee Fautsch, vice president of sales for residential, termed "as large as or larger than what we've brought to market historically."

"We are concerned about present economic conditions coupled with the impact of the Las Vegas Market," Fautsch said. "We, like all manufacturers, have the same amount of customers but twice the number of markets. Customers are choosing between the two markets, which is challenging."

Also taking an optimistic stance this market is John Phillips, executive vice president of sales, upholstery, for Palliser. He dismissed the idea of dealers looking to attract customers with "bargains." Such a strategy, he said, would be at the cost of container loads from half a world away with 8- to 12- week lead times. "This decision will further strain the cash flows and profitability of already profit-deprived dealers."

Ashley President Kerry Lebensburger said the major issue facing retailers is their ability to get merchandise.
"With disruptions in the supply chain, dealers actually have holes on their floors, or groups tagged as not available, or are getting calls telling them to pull ads."

"Changing samples is expensive and dealers are looking for well-priced products they can count on for delivery, whether by container or from (U.S.) distribution centers." Since Ashley can fulfill such needs, Lebensburger said he expects a crowd at market.

On the other hand, John Hoff, president of upscale Palatial Furniture, said, in light of what is going on with the economy, he does not anticipate a strong market.

"There are too many questions regarding the credit crunch and the housing industry. It appears many retailers have elected either not come to High Point or to be very cautious with their purchases if they are here."

Palatial is among several resources offering customers market specials and other incentives.

Similarly, Jack Donahoe, president of Leathercraft, another high-end Hamilton-Wrenn tenant, said, "We see the market shaping up as difficult, with the retailers that (do) come placing reduced orders."

But Donahoe said he hopes to make up those numbers with the design trade. "We would not be surprised to see retail attendance down 20%. We hope to fill the void with design customers and the projects they bring."

Lane Home Furnishings looks to drive business in the fourth quarter and into 2009 with product promotions.

With dealers "looking for solutions and ways to drive business, we will be ready," said Michael Herman, merchandise manager for stationary upholstery.

Leather Italia has already lined up more than 200 appointments for market. "That is high and a bit more than last market for early bookings," said CEO Michael Campbell.

Leather Italia will meet retailers' requests for sofas below $899 retail, he said.

Sizing up the market-to-be, Peter Robinson, group president of LeatherTrend parent, Robinson & Robinson, said he is hoping for a "reasonable attendance."

"As in April, our major accounts will attend, but we expect a drop in overall attendance," he said.

Chateau d'Ax is unveiling a newly expanded showroom. The Italian-owned company gains 30% more floor space with its takeover of the former Jaymar/Metropolitan Home showroom.
"Customers are coming in looking for something new and fresh and we need to give them a reason to buy," said Harry Cierler, director of North American operations.

Both Broyhill and Luke Leather are featuring custom programs this market. Broyhill adds five frames to its Custom Colors Leather program, which includes more than 50 leathers, while Luke is launching a new custom program with 10 leathers. With either program, each individual frame is priced alike no matter which leather is selected.