The economy, along with material costs and labor concerns continues to temper the sales outlook of many residential and contract furniture manufacturers.

According to Allied Market Research, North American demand for furniture — residential and commercial — will hit $400.1 billion by 2030, at a CAGR of 4.9% (2021-2030). The residential segment is forecast to have a greater market share due to ongoing home renovations, plus the growing infrastructure and real estate market. Commercial furniture growth continues to be driven by companies investing in furnishing offices for social distancing and flexible or hybrid workplaces. Smart furniture is also gaining popularity.

Preliminary figures by S&P Global Market Intelligence, published on BIFMA’s website, show the North American office and institutional furniture market size reached an estimated $24.7 billion in 2022, up 18.4 percent from 2021. The United States accounted for $16.2 billion, with Canada at $4.2 billion and Mexico at $4.3 billion.

Based on comments by manufacturers, 2023 is also projected to be relatively positive by many in the contract furniture market.

Steelcase (#5), for example, has seen 17 percent revenue growth for fiscal 2023, despite a challenging environment.

“In the Americas, our fourth quarter orders were stronger than we anticipated and drove revenue and earnings above our expectations,” said Sara Armbruster, president and CEO. “Although our fourth quarter orders were below the prior year, project business from large corporate customers improved sequentially from the third quarter. We’ve seen opportunity creation in the Americas grow on a year-over-year basis for eight of the last nine months, and in recent months, a notable number of larger companies in the United States have announced workplace strategies that emphasize the importance of an in-office presence.”

With the supply chain stabilizing in most cases, allowing for shorter lead times and steady supply, 2023 sales for Groupe Lacasse (#96) are projected to rise compared to 2022, said Sylvain Garneau, president and CEO. “Overall, it might be above 2019 (pre-COVID).”

Projections for 2024, however, are too early to tell.

“When your lead times are two to eight weeks, it is too early to say,” Garneau said. “There is still quite a bit of unknown for 2024: Recession or not? Will there be more returning to work in downtown or not? Will employers invest more in their workplaces to make them more attractive or not? It’s too far out at this time.”

See sidebars below: Changes in the FDMC 300, Outlook for outdoor furniture

On the residential side, new furniture orders dropped 17 percent in February compared to 2022, although up slightly from January 2023 figures, according to the latest issue of Furniture Insights produced by analyst and consulting firm Smith Leonard.

Yet a number of manufacturers remain bullish on projections for 2023 and beyond.

“I am pleased with our third quarter results and the progress the organization has made, especially as we consider the many consumer and macroeconomic headwinds we continue to face,” said Jerry Dittmer, president, and CEO of Flexsteel Industries (#28). “Despite the market challenges…. Our growth initiatives are working and gaining momentum, and we anticipate continuing that drive to deliver even higher sales in the fourth quarter compared to the third quarter results.”

La-Z-Boy (#13) and Ethan Allen (#32) also recorded strong third quarters for fiscal 2023. “We are pleased with our third quarter operating performance,” stated Farooq Kathwari, Ethan Allen chairman, president and CEO. “We are confident in the investments that we are making for the future, but recognize the need to remain cognizant of the slower economic environment in which we are currently operating in. We remain cautiously optimistic,” he added.

Gat Caperton, CEO of Gat Creek (#211), is also cautiously optimistic on 2023 sales growth. “Sales will be up slightly,” he noted.  “We’ll do well in the first half of the year, but the second half is shaping up to be a bit soft.” 

Projections for 2024, he added, are “good.”

We asked Caperton and Garneau to share some of their tips for success. “Stay focused and resilient!” Garneau said. “Leverage our strengths.”

Caperton added, “Adapt quickly to changes in demand. It’s too hard to predict accurately so you have to adapt quickly.”

He continued, “The past two years were amazingly consistent, given a large bubble of pandemic orders that needed to be worked off.”

Meeting the challenges
Optimism is tempered by concerns. For 2023, it comes down to the “steady ability to produce what is sold, with no major changes in the marketplace,” Garneau noted. 2024’s top concern: “Economic conditions overall.”

Caperton also cited concerns over a possible economic slowdown. “Capital is tight, and spending is down.” That said, “I think both will open up more by the end of 2023,” he added.

“We can certainly confirm that declining orders, the economy and supply chain issues remain top concerns among our members. Beyond that, regulatory issues will be a key challenge for our member companies for the remainder of 2023 and throughout 2024,” said Andy Counts, CEO of the American Home Furnishings Alliance (AHFA).

With the U.S. Consumer Product Safety Commission (CPSC) voting to adopt the revised ASTM International voluntary stability standard, F2057-23, as the mandatory federal safety standard for clothing storage units required by the STURDY Act, “All case goods companies producing or importing bedroom furniture will be focused on the Sept. 1 compliance date for the new federal safety standard for clothing storage furniture. New performance testing requirements are similar to those within the F2057-19 voluntary standard in terms of how they are executed. But the tests are far more stringent, and most companies will spend the next several months ensuring that the product modifications they have planned will bring them into confident compliance with the new regulation.”

He added, “Upholstery companies also have regulatory issues top of mind as a growing number of states consider legislation to restrict or ban the use of PFAS in upholstered furniture. Many fabric sources already have committed to being ‘PFAS-free,’ and this means companies may have to modify the way they market so-called ‘performance fabrics.’ At the very least, cleaning instructions may need to be modified to account for different performance capabilities.

“These two issues together point to the need for our industry to examine the way it communicates health and safety information to our end consumers,” Counts said. “At AHFA, we will be looking for ways to help our member companies continue as industry leaders on health and safety issues.”

The business and institutional furniture segment has also seen increased interest in safety, environmental and social impacts. As part of its duties, BIFMA develops safety and performance standards that promote the well-being of customers and the environment.

About the FDMC 300
More than 125 residential and contract furniture manufacturers are included in the 2023 FDMC 300, an annual report that tracks the largest wood products manufacturers in North America and ranks them by sales. Updates of the FDMC 300 firms can be found at WoodworkingNetwork.com/FDMC-300, along with industry snapshots and interviews. For information on how to be included, contact [email protected].

Changes in the FDMC 300
Already this year, some notable changes in the furniture landscape include:

• The acquisition of Kimball International (#23) by HNI Corp. (#14). Completed in early June, the estimated $455 million transaction will result in a pro forma annual revenue of approximately $3 billion.
• Hooker Furnishings (#27) has been busy. The firm launched its M modern lifestyle brand and rebranded its Sam Moore product line to HF Custom.
• MillerKnoll (#2) company Geiger launched its first outdoor collection, Crosshatch, which includes a lounge, ottoman, settee, coffee, and side tables. In April the company also announced plans to close a Wisconsin plant.
• American Leather (#106) has rebranded as “furniture collective” Artisant Lane.
• Haworth (#7) subsidiary Cassina has acquired Zanotta, a furniture maker based in Italy. Zanotta will join Haworth’s Lifestyle Design Group.

Outdoor market outlook
What are some of the top concerns facing the outdoor furniture industry? Here’s what a few members of the International Casual Furnishings Association had to say:

With the economy and supply chain issues still a big concern, do members project 2023 sales to exceed 2022 sales? Why or why not?

• “The economy is now more of a concern than supply chain issues.  2023 sales we project to be down from the extraordinary year of 2022.  A very large bet-on-the-come by dealers in 2021 resulted in most manufacturers being overwhelmed with volume while supply chain issues and labor issues greatly hampered any possibility of keeping pace with the high order demand. This resulted in very late shipments in 2022. Inventories carried over into 2023, which impacted early buys for 2023 and a late start to the normal springtime order patterns as inventories sold down.”
• “We expect flat sales due to dealer inventory, late deliveries and fears of a recession.”
• “At this point in the season, we are seeing a lot of retailers reordering, which is uncommon this time of year. However, e-commerce sales are down considerably. We project sales to be a bit higher in 2023 than 2022.”
• “Not exceed. Over-inventoried retailers have unrefreshed floors.  Bad weather-slow start. Economy, inflation, Consumer confidence, stagnant floors.”
• “No, sales will probably be flat against last year or slightly down – retailers are being cautious with their orders and seem to have cut back on quantities.”

What are your top concerns for 2023 and 2024?

• “Increasingly negative news, economy woes, conflicts between US & China worsening.   Not looking good.”
• “Very hard to predict at this point. However, if the economy remains stable then ‘normal’ early buy demand should return in the fall and ‘normal’ seasonal order patterns will return. If the economy weakens 2024 could be a very difficult year.”
• “Less discretionary spending, a shift from the time at home to travel, recession fears.”
• “Of course, the economy – so far we have not seen an issue with our retailers but with e-commerce being down we think less people are purchasing online.”
• “For 2024 I project good sales for those who clean up old inventory and make way for new.”
• “Retailers are cautious about ordering for 2023 and that may translate into the same concerns for 2024, which means pre-sales in the fall for 2024 may be put off until the beginning of the year.”