Market Update

September 2009 - Charlotte, NC

We have just concluded our tour of US furniture markets, visiting High Point for Pre-Market, Miami for HD Boutique and Las Vegas for the home furnishings Fall Show:

Some thoughts:

• Business is bottoming out and there is some evidence of a slight uptick in furniture sales going into the fall. Many clients suggested that the Labor Day sales lifted revenues. And we all know that exceeding last year’s numbers will be easy to do, following dismal performances in Q3 and Q4 of 2008. This is not the case in hospitality, where major projects are still being delayed or cancelled. However, our clients are telling us of increased bidding and new proposals, which may signal some growth in 2010. Most hospitality providers lived off their 2008 backlog through mid 2009 and are now struggling to right-size their companies to the new economy business levels.
• We continue to see a “flight to quality,” with vendors, manufacturers, distributors, and retailers seeking to align with the strongest partners they can find. There have been too many broken promises and unpaid invoices, so everyone is trying to move up the food chain of survival. Credit remains a problem, with lenders, factors and finance companies still being cautious in these turbulent times. We see this issue continuing through 2010 as many banks (particularly regional banks) will suffer another round of trauma with the commercial real estate defaults that are mounting in the US. The financial crisis at CIT remains a big point of frustration to our industry, and we hope to see a solution there soon.
• Mergers & Acquisitions are starting to emerge again and our meetings these past five days have opened a healthy balance of buyers as well as sellers. Many US and international companies believe now is the time to acquire, to capitalize on weak companies and gain market share in a no/low growth environment. Many smaller companies are seeking alliances with larger, stronger companies to allow them to survive and participate in the next wave of growth.

We are pleased to announce the sale of Zocalo, a superb casegoods company based in San Francisco. The buyer is a strong international player, Furniture Origins, which is based in Singapore. Expect to hear more from this new combination in the coming months.

We are looking forward to the High Point Market in three weeks, and look forward to hearing your thoughts on the points above. We welcome your calls or emails, and would be happy to meet confidentially to review how we can be of assistance to you and your company.