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.”
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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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