Furniture Insights: Orders moderate in January


Furniture Insights: Orders moderate in January

New orders ease, but still up 17% for January; backlogs stay extremely high

HIGH POINT – While new orders for furniture slowed in November compared with the torrid pace of recent months, they were still a healthy 17% ahead of November 2019 levels, according to the latest Furniture Insights survey of residential furniture manufacturers and distributors.

November’s milder increase followed five months of blistering year-over-year increases beginning with June’s 30% increase, 39% in July, 51% in August, 43% in September and 40% in October.

“From conversations we had, we expected the increases to begin to slow, and the November results proved that to be in line,” said Ken Smith, a partner at Smith Leonard, the accounting and consulting firm that conducts the monthly survey. “About three-fourths of the participants reported increases in orders over last November, in line with October results.”

Year-to-date through November, new orders were 14% ahead of the same point in 2019, with some 66% of survey participants reporting increased year-to-date orders, up from 59% last month.

Shipments continued to lag behind orders in November, up 3% compared with November 2019 and only up 2% from October, when shipments were up 8%.

“Supply chain issues continue to be blamed for most of the issues, especially in the case goods business,” Smith said.

Year-to-date, shipments were down 7% from the same period a year ago (down from 8% last month, with 78% of survey participants reporting lower shipments than last year.

“Much of the lower shipment issues continue to be blamed on lack of ability to flow imported goods caused by factory issues in Asia, container and other logistics issues, etc.,” Smith noted.

Backlogs rose slightly again in November, bringing backlog levels to being 148% higher than last year, up from 141% reported in October.

“We understand that there has been substantial effort made since November in bringing these levels down some, but between lack of labor for domestic goods and the issues noted for imported goods, the levels remain extremely high,” Smith said.

Receivable levels rose 1% in November compared with the same month in 2019, in line with shipment levels.

“Most we talk to have been able to keep the levels down since product is so hard to get,” Smith said. “If dealers are not paying, they are not getting shipped. And in the custom area, many dealers and designers are making deposit on orders to help faster shipments.”

Inventories rose 2% from October but were still down 7% from November 2019. “With orders coming in so fast, it is really hard to build inventories,” Smith pointed out.

Factory and warehouse employment continued to be a problem, down 3% from November 2019, at a time when Smith said those numbers “should probably be up at least that much.”

As a result, payrolls also fell 3% from November 2019. Year to date, payrolls were down 12% vs. the 15% reported in October.

In summary, Smith said the survey should yield results similar to November’s in December, with moderating order activity.

“That being said, the consensus with most folks we talk to is that we should continue this good ride on into 2021,” Smith said. “One of the major concerns that we are hearing is that some dealers are starting to hear about cancellations due to the long lead times.”

On a positive note, Smith said most of the economic factors influencing furniture sales look good.

“Consumer confidence picked back up a bit,” he said. “Housing continues to be very strong in spite of the higher prices. Interest rates continue to be in a good place.”

Smith did note the consumer price index has ticked up, and new rules coming out on drilling already show a spike in gasoline prices.

“Still, leisure travel remains down, and spending on the fun things remains low,” he said. “This continues to leave more money in consumers’ pockets, and purchases for the home seem to be the place that many are spending their extra money on.”

Finally, Smith asserted that the cost of furniture is rising for imports and domestic goods alike.

“With demand this strong, we hope that at retail and wholesale, the industry does not give up margins just to chase sales,” Smith said. “We realize the industry thrives on low prices in too many cases, but it makes no sense to try to enjoy all these increased sales at low margins. This is the time to make some margins back; not crazy but good solid margins, which have eroded in the last number of years.”

Click here for the full Furniture Insights report.

About Powell Slaughter

I'm Powell Slaughter, senior editor at Furniture/Today. I returned to the publication in January 2015 after nine years of writing about furniture retail strategies and best practices at a monthly magazine focusing on home furnishings retail operations. Prior to that, I spent 10 years with F/T covering wood furniture, the last five of those as case goods editor. Upon my return to F/T, I developed coverage of the logistical and service aspects of the furniture industry as well as following the occasional, home office and home entertainment categories. In April 2018 I took over the upholstery category, with responsibility for coverage of the fabric and leather stationary and motion upholstery, recliners and massage chair categories.


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