HIGH POINT – The latest Furniture Insights survey of residential furniture manufacturers and distributors bears out what vendors have been describing as booming business relative to prior months.
After big declines of 29% and 61% in March and April, new orders for furniture in May were off just 8% from the same month last year and up a whopping 166% from April, according to vendors participating in the survey by accounting and consulting firm Smith Leonard.
Still, only 19% of the survey participants reported an increase in orders over May 2019.
Year-to-date new orders through May were down 18% compared with the prior year, an improvement over the 21% decrease through April. Less than 10% of surveyed vendors reported increased orders year-to-date.
“Our feel is that June results will continue to show improvement,” Smith Leonard Partner Ken Smith noted in the report.
May shipments fell 31% from May 2019 levels “as would be expected as orders in March and April fell off so much,” Smith said. While few participants reported increased May shipments, shipments increased 47% from April. Year-to-date shipments are off 18% through May compared 2019’s first five months.
Backlogs rose 20% in May from April as new orders exceeded shipments. Backlogs rose 13% from May levels a year ago.
May receivable levels fell 25% from May 2019, “somewhat in line with the 31% decline in May vs. May 2019 shipments,” Smith said, adding, “Receivable levels were actually down 2% from April in spite of the 47% increase in shipments.
“We will need to watch receivable levels over the next couple of months as stores are able to get totally re-opened, at least we hope they are.”
Inventory levels were down 10% in May compared with April, attributable the ability of case goods companies with inventory in warehouses to begin shipping rather quickly. Inventories at the end of May were 6% below May 2019.
“While we would normally say these levels are well out of where they should be, no one could have expected what we have been through,” Smith noted.
Factory and warehouse employment actually increased 6% in May from April levels but remained 10% below May a year ago.
Factory and warehouse payrolls increased 83% in May from April after many workers were rehired especially due to the Payroll Protection Program put in by the federal government. Payrolls were still 34% below May levels a year ago. “It will take a while for these payroll and employee results to become more meaningful,” Smith said.
In summary, Smith sees positive trends for continued improvement in the industry.
“From what we have heard, June and July business has continued to improve with some saying that business has been better, volume-wise, than last year,” he said. “Of course, many folks in our industry tend to be afraid to get too excited, thinking that this ‘bubble’ will end soon, just a matter of time.
“The reality is that some of that thought is probably true,” he continued. “We realize that with business basically shutting down for at least a couple of months, there would be a surge from normal business stopping then starting up again with a spurt.”
The survey report pointed out that the Leading Economic Index and Consumer Confidence reports indicated that possible slow economic recovery in the short term.
“In fact, the term ‘recession territory’ in the near term was used,” Smith said. “So we know that plans need to be considered for moving through the possible slower times ahead.”
He added that while the Payroll Protection Program was “fraught with all sorts of issues,” it did allow companies to keep employees together and helped cover other costs.
“We should hear the next government plans in the next few days,” Smith said. “As we always have heard the words, ‘I am from the government and I am here to help you’ are not words we want to hear or believe, we do think that some of the efforts have been helpful.”
Click here for the full report.