For the past 13 years, the home furnishings industry has approached the semiannual High Point Market with about the same level of cautious optimism.
So much so that you’d almost expect Bill Murray’s character from the Groundhog Day movie or Yogi Berra (“it’s déjà vu all over again”) to make a guest appearance during the market that officially began Saturday and runs through Thursday.
Once again, industry officials are hopeful that a housing market recovery finally unleashes pent-up demand for furnishings and provides a sustainable economic shot in the arm.
Once again, those officials are aware that orders can either shrink or go unfilled post-market because of buzz-kill factors such as higher energy prices, tight consumer spending and price deflation.
Add in the economic uncertainty from the federal government sequester and shutdown, particularly as they affect consumers’ ability to buy a home and refinance a mortgage, and it’s possible that caution will reign once again.
“It seems the October market has had its share of outside events over the years that have had some impact on the mood,” said Ken Smith, director of furniture services for Smith Leonard PLLC. The High Point company issues a monthly survey on furniture orders and shipments.
“Before all of this, I think most were coming to market with good expectations.”
Orders for home furnishings increased 13.4 percent in July to $1.85 billion compared with a year ago, according to the latest Smith Leonard report. Orders were down 2.9 percent from $1.9 billion in June. About 76 percent of survey participants reported an increase in orders compared with 64 percent in June.
Retail furniture sales in August rose 4.9 percent from a year ago at $8.53 billion, according to the U.S. Commerce Department.
“We continue to hear that business continues to improve, maybe not at levels we would like, but still improving,” Smith said.
“Let’s hope we can avoid losing the ground we have gained in the last couple of years. Most businesses have now settled into models that are sustainable, if we can keep the bottom from dropping out of sales.”
Tom Conley, president of High Point Market Authority, said his main concern has been international buyers not being able to gain visas.
“Any uncertainty makes the stock market skittish,” Conley said. “It also tends to have an effect on interest rates – which is not good for the housing market. Our economic and health-care insurance woes are not helping from a U.S. economic development perspective.”
Conley said buyer pre-registration year over year was flat.
“However, we have had a flourish of phone calls and e-mails since we closed registration, so our feeling is that we could see some improvement in attendance.”
The Washington political gridlock may not be felt too deeply by exhibitors and retailers during the market, said Jerry Epperson, managing partner of Mann, Armistead and Epperson, a financial-services company based in Richmond, Va.
“I think most Americans are numb to the brinkmanship that continues in Washington, and will not pay any more attention until it affects their pocketbooks directly,” Epperson said.
Epperson said that in 2010, the industry had no economic positives to lean upon.
For the fall of 2013, he listed 22 in his latest industry newsletter that included higher employment, rising new and existing home sales (particularly as fewer homes were built between 2008 and 2011), lower consumer debt, still historically low mortgage rates, low inflation, stock markets at record levels, more home remodeling and more “boomerang” kids leaving their parents’ home.
The main negatives are the gridlock in Washington, “in other words, nothing is new!” he said.
“In today’s media, the largest retailers (Ashley HomeStores, Value City, Rooms-to-Go) are aggressively spending and, thankfully, raising consumer awareness for furniture and mattresses.
“Consumers are bored with the old looks that have dominated during the downturn. Does your store look like the recession is over?”
Glenn Prillaman, chief executive and president of Stanley Furniture Industries Inc., told analysts during a recent conference call that the company “took an aggressive position on discounting existing designs to gain floor space at retail. I can tell you that worked.
“While these discounts resulted in a decrease in gross margin, this is a onetime event. And it will allow more customers to see our product, which should drive profitable growth in the back half of the year and into the next.”
Prillaman warned during the call that Stanley is paying close attention to its Young American line of bedroom furniture that is mostly built in Robbinsville. It has been cited as a leading example of “re-shoring” wooden furniture production.
“If you take the initiatives we’ve put in place to make Robbinsville an efficient domestic manufacturing facility and make our product line meaningful in the marketplace, if those things don’t make Young America grow and break even, and we don’t see that in a relatively short amount of time considering how much time we’ve spent to get it to this point, then that’s another decision to make,” Prillaman said.
“And you’re right, you’re right, that is a cash drain on operations.”
The market received one economic shot-in-the-arm recently when a Duke University study estimated the annual economic impact of the High Point Market at $5.39 billion, more than 3½ times the amount calculated in earlier studies.
The Duke study was commissioned in April by the High Point Market Authority’s board of directors to measure the trade show’s economic muscle in comparison to other domestic and international furniture shows.
Studies by UNC Greensboro and High Point University several years ago measured the economic impact at about $1.5 billion annually, mostly concentrated in the Triad.
What accounts for the much bigger impact is the decision to broaden the market’s circle of influence to 22 North Carolina – stretching to Hickory and Lenoir – and eight Virginia counties, all within a 75-mile radius of High Point.
Expanding the radius pulled in the furniture orders and sales by major Virginia manufacturers and High Point Market exhibitors Hooker Furniture and Vaughan-Bassett Furniture, and smaller manufacturers in the Galax, Martinsville and Ridgeway areas.
Forsyth County benefits primarily from spillover at hotels and restaurants. Davie County is basking in landing an $80 million manufacturing and distribution campus by Ashley Furniture Industries Inc., the nation’s top furniture manufacturer and retailer. Ashley has pledged to create up to 550 jobs at the facility.
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