Monthly Furniture Survey From Smith Leonard Accountants & Consultants
According to our recent survey of residential furniture manufacturers and distributors, new orders in January 2007 declined 7 percent from last January 2006. This decline was in line with the 6 percent decline in December and the 8 percent decline in November. New orders were 8 percent higher in January than in December. The increase over December is somewhat normal due to the holidays.
The results were somewhat better for some participants. In January, some 45 percent of the participants reported increases in orders, compared to only 32 percent last year. Also for comparative purposes, January orders in 2006 were 6 percent higher than the January 2005 results.
Shipments and Backlogs
Shipments in January were also 7 percent lower than January 2006. This compared to a 5 percent decline in December over December shipments. Shipments were 9 percent lower than December shipments. These results were similar to last January 2006 compared to December.
Just over 42 percent of the participants reported increased shipments over January a year ago. For 2006, 40 percent of the participants reported increases for the full year.
Backlogs increased 7 percent over December as new order dollars were higher than shipments in dollars. Backlogs were 7 percent lower than January 2006.
Receivables and Inventories
Receivable levels were 6 percent lower than January 2006, in line with the 7 percent decline in shipments. Receivables were 4 percent lower than December levels in spite of the 9 percent decline in shipments.
Inventory levels were 6 percent lower than January 2006 levels and in line with incoming orders and shipments.
Inventory levels increased 1 percent over December, but still appear to be in reasonable good shape considering business in general.
Factory Employees and Payroll
The number of factory employees was 11 percent lower than January 2006 levels compared to 10 percent in December comparing to December 2005. The number of factory employees actually increased 1 percent over December levels.
Factory payrolls were 3 percent lower than January 2006. January 2006 payrolls were 8 percent lower than January 2005, so we may be seeing some leveling off with payrolls as many companies seem to be adjusting to current conditions.
The results for January were pretty much in line with expectations as business seemed rather slow in January. In our talks at the High Point Market, there appeared to be some bright spots occurring in March, but again no real traction yet. As has been the case over the last couple of years, some companies continue to have some reasonable growth, but many others are continuing to struggle. Obviously, customer base and type of business has a lot to do with the large swings in results.
Consumer confidence fell slightly in March to 107.2 after increasing to 111.2 in February. The Expectations Index fell to 86.9 from 93.8 while the Present Situation Index increased to 137.6 from 137.1.
“Apprehension about the short-term future has suddenly cast a cloud over consumers’ confidence” says Lynn Franco, Director of The Conference Board Consumer Research Center. “Despite diminishing expectations, consumers’ assessment of present-day conditions remains steady and does not suggest weakening in economic conditions. The recent turmoil in financial markets coupled with the run up in gasoline prices may have contributed to consumers’ heightened sense of uncertainty and concern. The direction of both components over the next few months bears watching to determine whether this decline is just a bump in the road or something more substantial.”
Existing home sales rose again in February, reaching the highest level since last April, according to The National Association of Realtors. Existing home sales rose 3.9 percent over January but were still 3.6 percent below February 2006.
David Lereah, NAR’s chief economist, said the strong gain is a bit of a surprise. “Some of the rise in home sales may be from mild weather that brought out shoppers in December, but fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers,” he said. “Even so, winter storms last month discouraged shopping, and buyers were chilled with the third coldest February on record. These unusual weather patterns mean home sales that close in March may decline before rebounding later this spring.”
Somewhat offsetting the increase in existing home sales was a 3.9 percent decline in new home sales. New home sales were 18.3 percent below February 2006 levels.
Housing starts were 9.0 percent above January starts but were a whopping 28.5 percent below February 2006 starts.
The High Point Market just finished (one reason this issue is late). Overall, while expectations were not great, we believe it was a pretty good market for many of the exhibitors. Those who seemed to have something really good and new seemed very pleased with both traffic and business. While most felt attendance was off a little compared to last April, many had more in attendance than last year and last October.
There was some negative talk about the changes in dates (more related to the actual opening days versus the month), but there were many good comments about the transportation and some of the deals offered by Chamber members.
Overall, we think most exhibitors and retailers/designers were pleased with the market. The weather, except for one day, could not have been better and much of the product was great. Those who did not come, missed a great opportunity for their business.
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: firstname.lastname@example.org.
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