New furniture orders rise again in November as ‘old normal’ seeks to return

HIGH POINT – Residential furniture orders for November rose 26% by the dollar over last year according to accounting firm Smith Leonard, which surveys furniture manufacturers and retailers every month in Furniture Insights. This marks the 7th consecutive month orders have risen by double-digit percentages over 2022. Two-thirds of those surveyed reported increased orders for the month.

Year to date, new orders are up a more modest 4% from 2022. November shipments were down 16% from 2022, which were up 1% from 2021. Year to date, shipments are down 17% from 2022.

As Smith Leonard has been saying for most of the past year, caution should be taken when considering these results.

“Despite recent improvement in monthly new orders, annual trends continue to be affected by many companies shipping from their historically high backlogs through much of 2022,” said Mark Lafierre, assurance partner at Smith Leonard.

“Accordingly, November 2023 backlogs were up a modest 3% from October, but down 35% compared with November 2022,” he continued. “Receivable levels were up 5% from October, which may be a result of timing given the slight decrease in shipments. Receivable levels were down 13% from November 2022, which is materially in line with the year-to-date decline in shipments.”

Inventories and employee levels were materially in line with October 2023, according to Lafierre, but down from November 2022, indicating that companies have substantially finished adjusting levels to match current operations.

Lafierre gave his overall thoughts for the year:

“The general economic indicators as well as our monthly stats continue to provide mixed results and accordingly, mixed expectations for 2024,” he said. “Overall consumer confidence is trending in a positive direction, although housing remains fairly stagnant. Other factors, such as inflation, supply chain, stock market performance (though perhaps overvalued) and employment data are also favorable or at least manageable. On the flip side, there are international and election concerns to consider.

“Perhaps the expected rate cuts in 2024 (Fed meeting as of publication), coupled with improving confidence, will stimulate growth in housing which drives furniture sales. However, it seems rate cuts may be slow to materialize as the Fed is able to work methodically, with the economy adequately shuffling along.

“The Conference Board still suggests there will be a short recession during the middle of 2024 (Q2-Q3) before recovering late in the year. If not already feeling it, we all know that furniture tends to be one of the first to feel the effects of a recession and one of the last to recover.

“So, while new orders are trending positively year-over-year, many of the companies we speak with have seemingly adjusted to operating at the ‘old normal’ (meaning back to 2019 volumes). However, through gradual implementation and holding of price increases, coupled with manageable cost inflation as of late, many have seen consistent or improved gross profits despite flat or declining revenue (as adjusted for inflation). Generally, upholstery (particularly custom) appears to be stronger than case goods and high-end stronger than low-end goods, although there are always exceptions.

“With more time to breathe and look internally after returning to historical norms following an extended period of unprecedented demand, we hope companies will ‘control what you can control,’ be open to change and opportunities, look at processes and ways to operate more efficiently throughout the organization, and to invest in relationships with their employees, customers, vendors, lenders and, most importantly, accountants.”

As noted last month, Lafierre has taken over leadership of the Furniture Insights survey after Ken Smith’s retirement at the end of 2023. Smith had authored the survey and report for 30 years.

“I’d like to thank Ken Smith for his dedication and service to the furniture industry over the years, including this very week helping to provide for a smooth transition with the newsletter,” Lafierre said. “Ken has been a long-time friend and mentor to many of us both within the industry and here at Smith Leonard, and his impact cannot be overstated. I am privileged and humbled to follow behind one of the greats with the support of our great Smith Leonard team and our countless combined years of experience serving the furniture and related industries.”

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