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Mike Root

How this Presidential election could impact the furniture industry…

October 24, 2012

Yesterday the stock market tanked 243 points. The Wall Street Journal indicated that the stock market has lost $500 billion in value in three days. Yes, the stock market is up for the year. But the real concern is that third quarter numbers at publicly traded companies are starting to come in and are reflective of a weakening economy.

The Fed has done what they can to print money and prop up the market. But without growth and jobs and profits, there is only so much the government can do. At some point the private sector has to feel comfortable that things are turning around. And there are a lot of headwinds that are keeping employers from hiring.

• Earnings reports yesterday from a number of large companies indicated they see the economy slowing. For example 3M Company reduced its profit expectations for this year because of what it calls "current economic realities". Just think people are cutting back on post it notes and scotch tape!
• The so called fiscal cliff that is coming January 1 if Congress and the President can't resolve the issue of taxation will mean everyone will see new taxes. Therefore having less money to spend on furniture.
• Europe and China are struggling and not buying as much from us. 22 big companies came out yesterday and indicated that their earning guidance for the fourth quarter will fall short of what has been forecast.
• Big companies are beginning to announce layoffs. Dow Chemical cut 2400 jobs and DuPont expects to lower its work force by 1500 people.
• Because of the sequestration issue with major cuts to the military unless a budget deal occurs by year end, many 90 day notices may start going out to personnel of military contractors that their job is in jeopardy.
• The Obamacare mandate has very large employers like restaurant chains indicating that full time employees may end up going from 40 hour work weeks to 28 hour work weeks to keep under the full time definition. I wouldn't be surprised if retailers including large retailers don't look at the same strategy.
I have heard from a number of retailers that business has been softer than they expected. With all of the worries I have listed above, it's a wonder that anyone would want to buy new furniture. People like certainty. People want to be sure they have a job in the future. There has been no real effort in the past several years to put people back to work. Now both candidates have a plan. Before you vote you should study the different candidate's plans and see who you think best will give people confidence of having a job in the future. Because those people are going to be investing in new homes and buying new furniture.

Another problem in the economy is the political ads that end up making the electorate feel awful about the way the country is going. Fortunately I do not reside in a "swing state" so our presidential advertising in this election has been minimal. But I would assume with all the money being thrown on election ads over the air waves, there isn't a single other product or service advertisement that can break through the clutter. And yet after all those ads, after four national debates, countless direct mail pieces and constant news media attention, there are still people who are undecided.

Bringing this back to our furniture world, think about the fact that with all this time and money spent, and some people have not decided who they will vote for. These are the same people you are trying to get to walk into a retail store to buy your furniture. These people are obviously very tough to convince. And with unemployment still at almost 8%, big companies threatening job cuts, increased taxes proposed and other threats to the consumer's pocket books, it is a wonder we can sell anything. Add in the competition for discretionary income from things like the new IPHONE or IPAD mini, and a rugged housing market we as an industry are not as robust as we should be.

The answer is to find a message that is so compelling that people will forget their fears, ignore the negative political ads, forego the new IPAD mini, and use that money to come in and buy furniture. Major retailers spend big bucks consistently in their markets to remind customers that a furniture purchase is good. They create an awareness of the fashion products we offer.

Don't mean to be doom and gloom in this column. Once the election is over, there will be a real consumer bonus because of the certainty of direction. Once we get rid of the political ads and get people back to thinking about how nice their homes will look with new home furnishing delivered in time for the holidays.