Monthly Survey Of Furniture Business From Smith Leonard Accountants & Consultants

Furniture World News

Monthly Results New Orders: New orders in March 2007 were 4 percent below new orders in March 2006, according to our latest survey of residential furniture manufacturers and distributors. March 2007 new orders were 9 percent higher than February 2007 orders. The increase in March over February is somewhat normal with March having more days. Year-to-date, new orders remain below the first quarter of last year by 5 percent. The first quarter of 2006 was 5 percent ahead of the first quarter of 2005, so 2007 results were almost even with the first quarter of 2005. For the month, 72 percent of the participants reported decreased orders. This was one of the highest percentages of participants reporting declining orders in recent memory. Year-to-date, 60 percent of the participants have now reported a decline in new orders, comparable to the results in February. Shipments and Backlogs: Material discussed is meant to provide general information and should not be acted on without obtaining professional advice appropriately tailored to your individual needs. Furniture Insights® is a registered trademark of Smith Leonard PLLC. In March, shipments were 6 percent below shipments in March of 2006, in line with declining order rates. March shipments were 12 percent higher than February 2007, again a normal occurrence comparing March to February. Year-to-date, shipments are 6 percent below the first quarter of 2006. For the first quarter of 2007, 74 percent of the participants reported decreases in shipments. As with orders, this is the highest percentage of participants reporting decreases for extended periods of time in recent memory. Backlogs were 7 percent below March 2006 compared to 8 percent in February (versus February 2006). Backlogs were down only 1 percent compared to February. Receivables and Inventories: Receivable levels in March were 6 percent below March 2006 levels, in line with the decrease in shipments. With business as slow as it is, it seems that receivable levels are in pretty good shape. Receivables were up only 3 percent compared to February, even with the 12 percent increase in shipments. Inventories were 6 percent lower than March 2006, a significant decrease from February results which indicated that inventories were down only 2 percent. Inventories fell 3 percent from February. With year-to-date orders down 5 percent and shipments down 6 percent, it seems that inventories are being held in line with current business conditions. Factory Employees and Payroll: The number of factory employees fell another 2 percent in March. The March numbers were 15 percent below March of 2006. Factory payrolls were 11 percent below March of 2006, compared to only 7 percent last month. Factory payrolls were up 11 percent over February, but this reflects the higher number of days in March. Year-to-date, factory payrolls are 8 percent below last year’s first quarter, again reflecting current business conditions. National Consumer Confidence: The Conference Board Consumer Confidence Index, which decreased in April, rebounded in May. The Index now stands at 108, up from 106.3 in April. The Present Situation Index increased to 136.1 from 133.5 in April. The Expectations Index increased to 89.2 from 88.2. Says Lynn Franco, Director of The Conference Board Consumer Research Center: “The bounce back in Confidence was due primarily to a more upbeat assessment of present-day business conditions. Consumers’ view of the job market, both present and six months from now, was little changed and did provide a boost in confidence. The short-term outlook remains cautious, and rising gasoline prices are having a negative impact on consumers’ inflation expectations. All in all, confidence levels continue to suggest growth, albeit at a slow pace.” Housing: Total existing home sales fell 2.6 percent in April from March and were 10.7 percent lower than April 2006. Single family homes fell 2.4 percent from March and were 11.2 percent below April of 2006. Sales were down in all regions. Lawrence Yun, NAR senior economist, wasn’t surprised. “We’ve been anticipating slower home sales because many subprime loan products are no longer available,” he said. “In addition, increased scrutiny by lenders is stopping risky mortgage origination, which is good for both consumers and the lending community. Fortunately, a wide availability of conventional mortgage products and the 4.5 million jobs created over the past 24 months will help to stabilize the market going forward.” The median price for existing home sales was $220,500 in April. This was 0.9 percent below a year ago. Sales of new one-family houses in April were at a seasonally adjusted rate of 981,000, according to estimates by the U.S. Census Bureau. This was 16.2 percent above the revised March rate, but was 10.6 percent below the April 2006 estimate. The median price for new houses sold in April was $229,000. The report indicated a 6.5 months supply at the current sales rate. Privately owned single family housing starts in April were 1.6 percent above March 2007, but was 16.1 percent below the April 2006 rate. With the large supply of new homes, there is not much expectation for increases in housing starts any time soon. Consumer Prices and Retail Sales: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in April on an unadjusted basis and 0.4 percent on a seasonally adjusted basis. The April 2007 level was 2.6 percent above April 2006. The index for energy increased 2.4 percent in April after a 5.9 percent increase in March. The index for all items less food and energy rose 0.2 percent in April after a 0.1 percent increase in March. The advance report for April of retail and food services from the U.S. Census Bureau indicated a 0.2 percent decrease from March, adjusted for seasonal variation and holiday and trading day differences. April 2007 results were 3.2 percent higher than April a year ago. Sales for the three months ended April 2007 were 3.7 percent higher than the same period a year ago. Retail trade sales were also down 0.2 from March, but were 3.0 percent above last April. Sales at furniture and home furnishings stores were up 1.2 percent over March and up 5.8 percent over last April. For the four months, sales were reported up 5.0 percent (Editorial note—not sure where these sales are.) Employment: Nonfarm payroll employment edged up 88,000 in April. The unemployment rate remained substantially unchanged at 4.5 percent. Manufacturing employment continued to decline in April. Summary: The results from March were pretty consistent with our expectations. From what we hear, business at retail cannot seem to get any traction. Housing results have continued to be weak. When the housing market was booming, the furniture industry didn’t seem to benefit as much as expected. Some of the benefits were likely masked by cheaper import products (since we only track dollars versus units) as well as the impact of direct shipments to retailers (as we do not capture shipments from foreign suppliers direct to retailers). Now that housing has cooled, along with the rest of the economy, the furniture industry seems to be feeling the effects. With the High Point Market held the last week of March, we doubt the new orders numbers reflect much impact from it—we certainly hope not. Hopefully, the results of the Market will show in April with more positive results. But we continue to hear that retail is not good. We hope some Memorial Day sales created some business as well. This Furniture Insights® newsletter report has been re-published with the permission of Smith Leonard PLLC an independent member of the BDO Seidman Alliance. Firm Profile: Founded in 1930 by BDO Seidman, LLP, the High Point, North Carolina practice was recently acquired by four individuals who have spent the majority of their 100+ year careers building the existing practice. Beginning January 1, 2007, Smith Leonard PLLC became an independent member of the BDO Seidman Alliance. Partners are Ken Smith, Darlene Leonard, Jon Glazman and Mark Bulmer. Among the firm's 32 employees are 18 CPAs. Service Area – Smith Leonard concentrates primarily in the Triad, but also services companies with domestic locations throughout North Carolina, Virginia, South Carolina and Texas. Smith Leonard has an extensive network of international relationships that helps service their clients’ needs throughout the world with locations in Asia, Europe, South America, Mexico and Canada. These companies range in revenue size of $2 million to $300 million. Practice Concentration – The majority of the client base is composed of manufacturing and distribution companies. Many of its clients are either furniture manufacturers, distributors or suppliers to the furniture industry. Smith Leonard also services companies in retail, transportation, insurance, not-for-profit entities and employee benefit plans. Smith Leonard offers a full range of accounting and consulting services including audits, compilations, reviews, tax planning and compliance. The partners and staff of Smith Leonard also assists clients in mergers, acquisitions, business consulting, cash flow projections, and tax outsourcing. Individual clients benefit from extensive experience in family wealth services including estate tax planning. The firm continues to produce monthly and annual statistics for the furniture industry. For more information call (336) 883-018 or e-Mail: ksmith@smithleonardcpas.com.