High Point Market Review

May 2009 - Charlotte, NC

The following client comment sums up the recent High Point Market: “If your expectations were properly set, then it was a good market.”

Our global economy has suffered a terrible 6 month decline, and the furniture industry has been severely impacted. The average first quarter sales decline registered by public companies was 28% (versus 2008), and almost every company suffered losses. Banks aren’t lending, and the credit crunch is preventing healthy capital flows to operate businesses and support receivables and inventory. Valuations have plummeted and liquidation is now a viable alternative for many creditors and shareholders.

But the sales declines appear to have slowed or stopped, and we are beginning to hear some good news of a possible end to the recession by later this year. Strong companies are planning for an uptick in late 2009, and our phones are starting to ring with inquiries about acquisitions. Those with cash have a clear advantage over those with debt.

We believe these next 6 months will bring a very public and visible display of plant, showroom, and company closings, mergers of equals, absorptions of weak competitors, and strategic acquisitions by US and Asian buyers. The larger liquidation companies and vulture hedge funds will be circling as well, but the private equity groups will sit this cycle out and will most likely take their losses and move on to other industries.

The HD Show (hospitality and design) in May and Neocon Show (office/contract furniture) in June will most likely face similar issues, as these furniture channels are also feeling the downward pressures of a weak economy and the credit crunch. Commercial projects are being cancelled or delayed, creating a negative trend in sales and margins.

So buckle up and get ready for a bounce off the bottom of this terrible and turbulent economy and the beginning of an upturn later this year.

We look forward to having confidential conversations with you soon. Please call as you have comments or questions.