New residential furniture orders continue to be mixed bag: Smith Leonard
Smith Leonard Furniture Insights

Photo By Smith Leonard

HIGH POINT, N.C. - Consistent with the past few months, new residential furniture orders continue to be a mixed bag. Although down slightly from September's figures, new orders in October 2023 were up 12% compared to the year prior. That said, "The October 2022 orders were down 30% from October 2021 and were even down in the 2021 to 2020 comparison, as 2020 orders were up 40% over October 2019," noted Ken Smith in the December issue of Furniture Insights, his last report prior to retirement on Dec. 31.

Smith was the managing partner at Smith Leonard, which produces the monthly report. The company said the furniture practice, including statistics, analysis and the monthly Furniture Insights, will now be led by Mark Laferriere.

In December's report, Smith addressed the fluctuations of the past four years. "As has been the case for the last couple of years, the results continue to require some background. October 2022 orders were down 30% from October 2021 and October 2021 orders were down 18% from October 2020. But October 2020 orders were up 40% over October 2019. Now factor in the effects of the COVID pandemic, up to 30% and more price increases due to material price and freight cost increases, increases in labor costs and other issues, and you could come up with probably something similar to some of the hash casseroles served at Holiday meals. Oh, and do not forget the fact that ocean freight increased over five or more times in some cases and then dropped back to more normal rates in the past year or so. But hopefully these comparisons will allow you to make some sense of your own results," he said. Approximately 62% of the survey participants reported increased orders in October compared to last year's figure.

Year to date, new orders were up 2% compared to the same period in 2022, according to the latest issue of Furniture Insights. Further comparison shows year-to-date new orders were down 29% in 2022 compared to 2021, when they were up 17% from 2020 - "again affected by the couple of months shutdown in early 2020," the report shows.

Shipments in October were down 13% from October 2022 figures, but down 18% in the year to date comparison; in contrast, 2022 year to date shipments were up 7% over 2021 figures. "So while new order comparisons were difficult, shipments were as well, as backlogs were built so much during 2020 and 2021. Shipments were also affected by major ocean freight issues," Smith noted.

The survey showed backlogs continued to fall in October, down 5% from September and 43% from 2022 levels. "Our survey results have been affected by several participants adjusting their backlog levels, since backlogs are not tracked in general ledgers, so over time, as orders were cancelled and other issues came up, several have had to restate their backlog numbers."

October receivable levels were up 4% over September, "somewhat in line with the 2% increase in shipments," but down  22% from October 2022, "again somewhat in line with the year to date 18% decline in shipments." 

Smith also noted, "[W]ith a few exceptions, there have not been major losses through retail failures. While there are some concerns out there, most of the major retailers seem to be in pretty good shape. Inventory levels have come down to be more in line with current business conditions. While there are spots of shortages of employees, most of the employment needs have leveled off, except for certain needs in some skilled positions. The declines in overall positions have seemingly been handled through attrition for the most part.

Inventories fell 1% from September and were down 31% from October 2022, the same decline reported in the previous month's Furniture Insights. "We hope that most have, by now, rebalanced their inventories to levels that really seem to make sense for current business conditions."

Sales at furniture and home furnishings stores were down 4.3% from November 2022 and down 5.5% year to date.

"Several of the economic reports appear to be a bit mixed in terms of expectations for 2024. As we have said many times before, the individual factors that make up the economy as a whole do not always move at the same pace. The same goes for the furniture industry, even when just looking at residential furniture. So, while some expectations for certain parts of the industry have struggled, others have held up fairly well in spite of the slower economy in general."

Smith continued, "We continue to believe that planning for 2024 should remain a bit on the conservative side. The Conference Board still suggests a short and shallow recession in the first half of 2024. We believe that maybe residential furniture may already be there. With 2024 being an election year, much of the normal advertising will be taken over by the political ads. We know that advertising does create consumers desires for new furniture so even if the economy does not go to a 'light recession,' we would not expect a robust recovery for the residential furniture industry. But we do believe that 2024 does give us a chance to create a new base level of business for future comparisons as price increases, due to abnormal fluctuations in freight, as well as other material and labor fluctuations, should become more like the normal changes to prices.

"So, while planning conservatively, we would think that maybe the industry can start to plan for more normal fluctuations in their expectations for business," he concluded.




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About the author
Karen Koenig | Editor

Karen M. Koenig has more than 30 years of experience in the woodworking industry, including visits to wood products manufacturing facilities throughout North America, Europe and Asia. As editor of special publications under the Woodworking Network brand, including the Red Book Best Practices resource guide and website, Karen’s responsibilities include writing, editing and coordinating of editorial content. She is also a contributor to FDMC and other Woodworking Network online and print media owned by CCI Media. She can be reached at [email protected]