Photo By Smith Leonard
HIGH POINT, N.C. - New orders for residential furniture continue their rise, up 7% in June compared to 2020. This is especially notable considering June 2020 was up 30% over 2019, and marks 13 straight months of year-over-year growth, as reported by Smith Leonard in the latest issue of Furniture Insights. The increase in new orders was reported by about 66% of the residential furniture manufacturers and distributors participating in the monthly survey.
"Year to date, new orders were up 51% over the first half of 2020 and up for 94% of the participants. For comparison, new orders in the first 6 months of 2021 were up 37% over the first 6 months of 2019. We continue to think that the comparisons to 2020 for the rest of this year will be tough to beat," said Ken Smith, managing partner at Smith Leonard.
Shipments were up 38% compared to June 2020 figures for approximately 81% of survey respondents, according to the August Furniture Insights. Year to date through June, shipments were up 42% over the 2020 time span, with some 91% of the participants reporting an increase.
However, shipments are continuing to be hampered by supply shortages. "Freight issues are a major problem, with container shortages continuing, causing significant price increases, if you can even get them," Smith said. "Some are blaming some of the large retailers for tying up containers. Labor issues continue. We have read articles about how many are just not looking for jobs. Reasons include not only government stimulus and increases in unemployment checks, but also some have taken the opportunity to start their own small businesses. Some have decided to just retire, and some point to cost of daycare, making it better to just stay home. Others have pointed to the fear of contracting COVID-19."
Backlogs continued to increase as orders in dollars exceed the dollar value of shipments. Backlogs were 153% higher in June than in June 2020, according to the analyst firm.
Receivable levels were up 40% over June 2020 figures, which is in line with the 38% increase in shipments for the month and 42% increase year to date. "Receivable levels continue to be in good shape and from conversations, ageings continue to look good as dealers are paying to make sure their orders do not get held up," Smith said.
Inventories were up 48% in June, an increase of 3% over July levels. "While inventory levels have increased, some of the manufacturers are saying that they have built up product to keep plants busy but are not able to always ship due to foam and other shortages. The foam issue seems to be getting better but other materials such as those with steel involved, are still causing issues," Smith noted.
Sales at furniture and home furnishings stores in July, on an adjusted basis, were up 15.6% over July 2020 and up 38.5% over the same period a year ago.
"Expectations are for the overall economy to continue to expand, although at a slower rate, but still expectations are for over 4% into 2022," Smith said. "We would think that the furniture business should continue its expansion as well, with shipments continuing to grow as backlogs are brought down. This would indicate that volume does not appear to be the issue. Profitability may be the problem as costs are going up faster than price increases can be put in place. It is hard to anticipate three months out, when products will be made, based on price lists being put out today."
He added, "These issues are significant and tough to deal with when business 'feels' really good. But we would say, that as difficult as these times are, they are a lot better than 2008 when new orders were hard to find. Let’s hope by October market and the upcoming fall season that COVID cases are trending downwards."
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