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The Recession and the Furniture Industry

Like most folks anxiously awaiting clear signals that the Great Recession of 2008-2009 (or maybe 2010) is over, those involved in the furniture industry, whether on the retailing, importing, transporting, or manufacturing ends of the business, are chewing their collective fingernails, checking their latest belt-tightening measures, consulting their preferred horoscopes, and, generally, trying to guess what one thing, be it idea or image, will spark the interest and, best of all, open the wallets of consumers. Sales are down pretty much across the board, from the larger stores carrying top name brands to small town franchises and artisan operations. News reports of corporate restructuring, consolidation of facilities, bankruptcies, and layoffs have become commonplace across the country, with only a few bright spots in relative boom-towns like Houston or Las Vegas, navigate to this website.

Four companies that seem to be dealing at least adequately with the current dismal business climate are Ethan Allen, La-Z-Boy, Pier 1 Imports, and Ikea. Let’s take a brief look at how they are coping.

Furniture Industry

Danbury, CT-based Ethan Allen Global, a concern started in 1932, makes and sells upholstered chairs and sofas, case goods such as bureaus, desks, and dining room and bedroom outfits, and calls its retail outlets “design centers” instead of “stores”. In a recent consolidation move, the furniture company closed a plant in Andover ME and streamlined operations at two Vermont facilities, reportedly axing several hundred jobs in the process. On the retail side, in June Ethan Allen unveiled a renovated Midwestern flagship facility in Chicago; and in September, the company is scheduled to open a deluxe showroom in Las Vegas’ World Market Center. Opting for a possibly radical strategy, Ethan Allen’s management recently announced a plan to turn its entire case-goods operations into a customized business, targeting affluent customers and maintaining its U.S.-based quality manufacturing operations. Additionally, the company has upgraded its website, to allow online purchasing of popular products like chests, accent tables, ottomans, and bookcases.

Name recognition counts for much of La-Z-Boy’s success. Founded in 1927 in Monroe MI, the noted recliner manufacturer recently has trimmed stores, outsourced some manufacturing to Mexico, and begun targeting baby boomers in advertising campaigns. On its website, it is possible to purchase a variety of recliners, sofas, chairs, and tables, as long as the buyer’s address is in the continental U.S.

Retailer Pier 1 Imports, now based in Texas but started in 1962 in California, has pretty much given up on the slack summer season and turned its focus to the fall and winter holidays to come. It recently completed a debt refinancing package to bolster its cash flow and to allow reasonable flexibility in meeting the challenges of the recession. Store closings are another option for stabilizing financial losses; and more are expected to occur before year end. At the website, a showcase for exotic household accessories as well as wicker furnishings and chairs with fanciful cushions, only gift cards and shopping list reminders are available, as there are no online purchasing options.

Founded originally in Sweden in 1943 but now headquartered in the Netherlands, Ikea, a manufacturer of flat-pack case goods and worldwide distributor and retailer of household furniture, movables and accessories, is expanding operations in China, having recently broken ground for a second outlet in Shanghai and also having green-lighted a project for a flagship establishment in a huge shopping mall set to open in mid-2010 in Beijing. Meanwhile, the company has elected to slow or curtail operations in Russia due to excessive red tape and suspicions of corruption. Its U.S. and Canadian customers can access not only its user-friendly, but also its tome-sized, mail-order catalog, available for free on request.

Among issues and trends of topical interest to the furniture industry as a whole are a new anti-tipping safety standard intended to cut down on the number of children injured by falling TV sets and other mishaps, renewed concerns over shoppers investigating big-ticket furniture items in stores but then deciding to purchase the same items from online discounters, and threats to U.S. and Canadian manufacturers from emerging lower-priced sources in Mexico and Asia. But, right now, the over-riding concern is the recession–when will it end and when will consumers return to decorating their homes with shiny new pieces of furniture and accessories.

Recession Furniture

Ben Steverman, “Housing Bust Wears Out Furniture Makers”, Business Week Online

Clint Engel, “Ethan Allen sets up retail at WMC”, Furniture Today

“Pier 1 Imports, Inc. Announces Retirement of 6.375% Convertible Notes”, Business Wire

“IKEA to build biggest store outside Sweden in Beijing”. Xinhua News

Thomas Russell, “Tipping standard takes hold”, Furniture Today “Ethan Allen to Reinvent American-Made Case Goods Division as Custom Operation”, Yahoo Finance/Business Wire.