HIGH POINT – New orders for furniture fell 14% in August compared with the same month in 2020, but as the impact of the coronavirus pandemic continues to skew year-over-year comparisons, consumer demand for home furnishings remained high.
That’s one takeaway from the most recent Furniture Insights survey of residential furniture manufacturers and distributors from accounting and consulting firm Smith Leonard.
Measuring August 2020 orders with the same month last year doesn’t tell the whole story, Smith Leonard Partner Ken Smith noted in the survey report.
“That comparison is misleading, as August 2020 new orders were up 51% over August 2019 as business continued to open back up from the shutdowns in March, April and early May. Comparing August 2021 with August 2019 resulted in orders being up 30%. Orders in August 2021 were down for some 55% of the participants when comparing to August 2020.”
Year-to-date, new orders rose 29% compared with results through 2020’s first eight months, when orders were 35% ahead of the same point in 2019. Some 82% of surveyed vendors reported increased year-to-date orders for 2021.
August shipments were up 10% compared with August 2020 and were up for 71% of the participants as companies continued to bring workers back and were able to get materials and imports moving. Shipments in August rose 14% compared with August 2019. Year-to-date shipments were up 34% through August and rose for 91% of survey participants.
Backlogs continued to grow, however, up 3% in August from July levels, and up 81% compared with August 2020. August 2020 backlogs were up 102% from August 2019.
“Clearly, this continues to be a significant problem for the industry,” Smith said, adding “It seems that everything that can go wrong is not helping the situation. The wait times are definitely a problem and a point of frustration, up and down the lines.”
Receivable levels rose 21% from August 2020. Smith called that “a little high” considering August’s 10% increase for the month in shipments but “very much in line” compared with the 34% increase in year-to-date shipments.
“Customers are keeping their invoices up to date, as those that are falling behind, fall further behind in getting their orders,” he noted.
Inventories rose 43% in August compared with August 2020, down from a 51% increase reported for July.
“As we have noted before, the key to the game today is having inventory,” Smith said. “Unfortunately, the key is having the right inventory, and that is not always the case these days.”
Factory and warehouse employment, up 6% compared with August 2019, remained even with July.
“The problem is that the number needs to be significantly higher both in manufacturing and to a degree in warehouses,” Smith said. “This issue is really causing problems as even if materials are available, many times it’s the lack of employees that is keeping product from being shipped.”
Factory and warehouse payrolls rose 16% in August compared with August 2019 and were up 24% year to date.
“The increases are a combination of a few more people and rising wage rates as the competition in and out of the industry is causing employment costs to rise,” Smith noted.
In summary, Smith pointed out that survey participants reported positive results for High Point Market despite “some trepidation coming in.”
“Most seemed to have an attitude of focusing on making the best of a market season that is admittedly challenging,” he said. “Orders were written, lots of designers were here, the big folks came early, and it was business as usual, although maybe not by the numbers all would have wanted. Noticeably absent but expected was the lack of the typical international visitor representation.”
At one company’s request, Smith also did an unscientific survey of key issues affecting the industry.
“What we came up with was, at first, we had the issues with COVID-19, then lack of employees both domestic and foreign, and then the foam shortages,” he said. “Then when foam was available, there were not enough employees to fill the need for cutting foam for cushions. Then prices started rising for other materials. Freight? Oh, that caused issues from lack of truckers, boats, containers, dock workers, container prices, and the list just went on and on. There were even issues with ability to get twine and cotton. Then to top off the list, several Asian countries had a run of COVID-19 and basically shut the whole country down. Imports from those countries just shut down.
“So much of the conversation was pretty easy,” he continued. “‘When can you ship?’ The answer was 12, 20, 30, 40 weeks or more. Pretty much all those numbers were used as well as in between. The other question that we asked of most everyone was, if we had told you two years ago that business in the industry would be this good, how many would have realized that there would be this many problems. But we always came back to it is a lot better than 2008 when we didn’t know who would survive.”
When asked how much longer current high demand for home furnishings will last, companies’ responses varied.
“The answers we got were probably through 2021, some said through 2022, some through 2023, while others said it will fall off quickly,” Smith said. “If anyone figures it out, please let us know. We will be happy to share.”
Click here for the full Furniture Insights report.
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October 28, 2021 at 02:28AM
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