Housing slump hits furniture stores hard

Last week, most senior executives of Florida furniture companies were in North Carolina for High Point Market, America’s biggest furniture extravaganza.

They might have been tempted to stay there.

Back here in Florida, the furniture industry is in one of its ugliest downturns in years.

The housing boom that fueled huge sales at some furniture stores has turned into a housing bust, and some longtime furniture chains are shutting down or packing up and fleeing the state. Meanwhile, a huge shift from American furniture to imported Chinese furniture has caused prices to drop and thrown the whole industry into a “state of flux,” according to the chief executive officer of high-end retailer Robb & Stucky.

Among the hardest hit:

Spectrum Home Furnishings. This small chain shut its eight stores from Sarasota to Naples in the fall after more than 20 years in business.

Modernage. This chain on Florida’s east coast is holding a “Save Our Stores” survival sale but warns it may close.

The companies that remain say they’re bracing for a long drought, as several major economic forces combine to create what one industry expert called a “perfect storm.” But where retailers struggle, consumers may profit. To lure customers, retailers are aggressively promoting sales and attractive credit offers.

“Florida’s been very active in liquidations,” said Roy Hester, whose company, Planned Furniture Promotions, helps distressed companies sell off their assets, among other functions.

What’s driving it?

There are several trends and issues plaguing the furniture industry. One involves people pumping so much money into big-screen TVs and other electronics that they aren’t splurging on furniture, industry executives say.

However, everyone agrees that the housing slowdown is causing ripples across the Florida economy, and furniture stores are feeling it worse than most.

In Florida, sales of existing single-family homes fell 23 percent in February compared with February 2006. Sales of existing condos fell 28 percent, according to the Florida Association of Realtors.

That hurts because people will spend six to eight times as much money on furniture in a year when they’re moving, said Don Marks, president of Mulberry-based W.S. Badcock Corp.

Badcock and its competitors are taking a double hit from the housing market, Marks said. Not only are fewer people moving into Florida, but people already here are staying in their existing homes. They fear that if they move to another home in Florida, their taxes would skyrocket, Marks said.

Under Florida’s Save Our Homes amendment, property tax assessments can rise by only 3 percent per year. But if people move, their new homes are reassessed for tax purposes at market rates.

That’s the situation for Elke Brink, a homeowner who was shopping for furniture at Leather Express in Tampa last week. She and her husband live in Tampa’s Citrus Park and would love to move to Carrollwood to be closer to their children’s school. But that would mean a doubling of their taxes — at the least.

“We’re putting more money into the home because we’re not going anywhere,” she said.

Marks said he’s feeling the effects of the Save Our Homes amendment in his business. Badcock’s sales are flat when compared with last year, but he considers that a drop-off because until recently Badcock’s sales were up 6 percent or 7 percent a year. For now, the company has a hiring freeze.

Other chains have fared worse. At Atlanta-based Haverty Furniture Cos., sales at stores open at least a year fell 12 percent in February when compared with February 2006. That turned heads in the industry because such double-digit drops in comparable store sales are fairly unusual.

Even at Robb & Stucky, where you can find $5,000 sofas, sales fell by the “low single digits,” said Clive Lubner, who declined to elaborate. Fort Myers-based Robb & Stucky is faring better than most because it operates in hot housing markets such as Texas. So it isn’t as dependent on Florida as, say, Spectrum Home Furnishings, which operated all of its stores in Southwest Florida before shutting down a few months ago.

Deals abound

Despite all the doom and gloom, retailers’ pain could be customers’ gain. Imports have caused prices to fall and have revolutionized the industry in a very short time.

For example, at the end of 2002, only 37 percent of Haverty merchandise was imported. By the end of last year, that had grown to 70 percent, according to Haverty financial filings.

Hester, whose family ran several furniture stores in Florida years ago, recalls selling recliners for $299 in the 1960s, he said. Forty years later, he has seen recliners retailing for $199.

That’s a mixed bag for retailers. Haverty’s gross profit has improved over the past few years because of its lower wholesale costs. On the downside, though, it can take 90 days to get in a shipment of furniture from Asia.

Weaker retailers can run into cash flow problems because they’re waiting so long for their merchandise that they’re not able to pay their bills on time, said Hester, the furniture promotions and liquidation company executive.

Meanwhile, retailers are pushing finance offers to entice customers. Badcock is touting a two-room furniture special for $99 a month. And those ever-present no-interest, no-down-payment, no-payment-of-any-kind deals pioneered by Rooms To Go have spread even to small, independent retailers.

Byron Claussen, vice president of the two-store Claussen’s furniture company in Polk County, said 12-month, no-interest financing deals used to be occasional promotions. Typically, the retailer essentially pays the interest for a customer.

But in the past couple of years, Claussen’s is running them every day just to compete, he said.

Information from: www.heraldtribune.com