IWF 2008 Market Update

August 2008 - Charlotte, NC

We spent 2 days in Atlanta for the IWF (International Woodworking Fair) and were pleased with the attendance (even though it was down) and the general attitudes of exhibitors and the visitors. Clearly the general economy and furniture industries are struggling, but we remain upbeat about our business and several pockets of strong business activity, such as:

• North American Production: many of our conversations centered on the return of production to US, Canadian, and Mexican factories to offset the rise in China prices and the freight expense. Many of the machine manufacturers were amazed at the level of orders they wrote at IWF for new machines to retrofit and modernize existing casegoods factories. Managers of domestic furniture companies that still have factories are excited to have domestic options and we expect to see them grow their Made in the USA business.
• Many retailers are beginning to look at opening their own factory, patterned after the successful new casegood factory of IKEA in Virginia and upholstery plant for Williams-Sonoma in North Carolina. Upholstery will be a much easier business to integrate than casegoods.
• Lumber producers and exporters of lumber have seen a shift in business away from Asian furniture manufacturers that reship that wood back to the US in the form of finished furniture to manufacturers of Chinese furniture for their domestic marketplace.

We believe mergers & acquisitions will be a big story for this next 12-24 months. Strong companies will seek out opportunities to grow, while weaker companies will feel the burden of the economy and “Just Want Out.”

Our real estate business is also very active with the return of some business from Asia, and the continuing growth of the Southeast versus other regions of the country. Manufacturers and distributors want their plants and warehouses near the customer, particularly with the high cost of fuel and freight.

We look forward to having confidential conversations with you soon. Please call as you have comments or questions. Also, we will be expanding our offices here in Charlotte towards the end of the year. We welcome you to drop by for a cup of coffee anytime.