HIGH POINT – New orders for furniture registered their ninth straight month of high double-digit increases in February at 34% above February 2020 levels. They also rose relative to January, when orders grew 27% compared with the same prior year month.
But, while shipments showed gains on orders in February, backlogs continue to be a drag on the industry, according to the latest Furniture Insights survey of residential furniture manufacturers and distributors from accounting and consulting firm Smith Leonard.
February orders rose for 94% of survey participants and rose overall by 31% for 2021’s first two months, compared with last year, and up for 88% of surveyed companies.
“We are not sure what we will see for the next two months, as March 2020 was when we first saw the drop off of business due to the onset of the pandemic,” said Smith Leonard Partner Ken Smith in the survey report. “So, the next few months will likely show some drastic variations, which will take a while for the numbers to get sorted out.”
February shipments increased 18% compared with the same month last year, showing some gains from the major increases in orders. For the two months ended February, shipments are 13% ahead of the same point last year.
“So finally, there will be cash coming in for March and April instead of just paper orders,” Smith noted.
Backlogs increased again in February, up 5% from January and 184% ahead of February 2021’s levels.
“The backlog levels continue to create problems at retail as customers are not happy having to wait on product,” Smith said.
“Part of the backlog issue has been created in both upholstery and case goods. The lack of availability of foam for upholstery has been the primary cause as well as the lack of labor supply. Case goods have been affected by factory issues in Asia as well as all sorts of issues with the flow of goods on the water.”
With the increase in shipments, February receivables rose 9% compared with the same prior-year month and were up 1% from January.
February shipments were up 2% from January and up 18% over February 2020 so it appears that receivables are in good shape,” Smith said.
Inventories increased 4% from January and were up 15% from February 2021 levels.
“This increase is certainly in line with the increase in orders and would probably be even higher if the flow of goods were better and more employees could be found for the manufacturers,” Smith added.
Factory and warehouse employment fell 2% from February 2020 but was up 1% from January. The number of employees was down 3% in January from January 2020.
Factory and warehouse payrolls rose 3% from last February and are up 2% year to date, which Smith said was largely attributable to pay increases and extra hours.
In summary, Smith said frustrations remain with bottlenecks and price increases in the face of good business at retail.
“We have had several conversations with industry executives that almost always end up with frustrations of how good business is in terms of orders coming and yet how difficult it is to either not be able to get foam or workers, or deal with significant price increases when prices were quoted before the material cost increases came into effect,” he said. “Or orders are great but cannot get product out of Asia. Or the cost of containers, if you can get them, have quadrupled or more.”
Smith is interested to see how business develops as restrictions are released and consumers are free to travel and move about more. “Will the focus on the home change, or will we see this focus remain for the next year or two or more?” he said.
Click here for the full report.
