The numbers remain a puzzle to Ken Smith, assurance partner for Smith Leonard Accountants & Consultants in High Point, N.C. Smith is co-author with Mark Laferriere of the monthly Furniture Insights survey.
Their July 30 report found that new orders for residential furniture declined 3 percent in May compared to a year earlier, the fourth consecutive monthly decline. In June, “sales at furniture and home furnishing stores were up 0.8 percent from June 2018 but down 0.8 percent year-to-date from the first half of 2018,” Smith and Laferriere noted.
Yet overall economic indicators are still good, including employment, personal income growth and especially consumer confidence. In the past, “it was all about consumer confidence,” Smith said in a phone interview last week.
‘It looks like it should be better’
“It looks like it should be better, and hopefully it’s going to come,” he said, referring to jumps in furniture spending. He also observed that 2018 was strong, so it’s more difficult to achieve significant improvement in year-to-year comparisons.
Tariffs on products imported from China are affecting prices in some categories, but Smith continues to stress that furniture is underpriced.
“That old $300 sofa we used to buy 30 years ago is now $200. There’s something wrong with that picture,” he said.
Housing also relates to furniture sales, Smith said, but the data there are inconsistent.
New home sales numbers are inconsistent
“New single-family home sales in June were 4.5 percent ahead of June a year ago, with sales up in the South and West, but down 50 percent in the Northeast and 17.6 percent in the Midwest,” the report says.
“Housing starts were off slightly from May 2019 but were 6.2 percent ahead of June 2018. Starts were up in the Midwest and South but were down in the Northeast and West.”
Low interest rates help with financing, but labor and material costs may be pushing up home prices, giving purchasers higher mortgage payments and leaving them with less money to buy furniture, Smith observed.
The picture is inconsistent across regions, Smith said, but success for individual retailers isn’t necessarily tied to larger trends.
“An awful lot of it does depend on how you run your store,” he said. “When the customer walks in the door, you need to know what you’re talking about.”
That means retailers need to know their customers and what they need. Well-trained sales staff must know the products, why one piece is priced more than another, what upholstery fabric is better than another, what accessories work and what don’t, Smith said. The customer might not know these things, so the retailer must help. And doing so can clinch the sale.
New orders declined again
The survey of manufacturers and distributors found that new orders in May fell 3 percent compared to May 2018, the fourth consecutive month of declining orders. Nearly 60 percent of respondents reported reduced orders.
Year-to-date, new orders were 3 percent below the first five months of 2018, with 64 percent of participants reporting reduced orders.
“Last year, new orders year-to-date through May were up 6 percent, so maybe the decline this year is not quite as bad as it might seem,” the authors said.
They added: “We have always said that the industry does not do well when confidence is down. And we always believed it performed better when there was strong confidence. We wonder why that is not working as well this time. We hope to see some pickup after summer vacations, etc. We will need some before the political ads start and all the news goes to elections.”