HD Las Vegas Market Update

May 2010 - Charlotte, NC

HD Las Vegas was better attended than last year and attitudes were much more upbeat. The business in the hospitality world has not returned to normal yet, but most of our clients told us of increased bids, project reviews and requests-for-proposals.

The problem remains cash. There is just no money yet to generate the velocity of business. New construction financing is not occurring, and most banks and factors are not eager to lend into the furnishings industry. Money is the lubricant for generating business, and we won't return to any healthy business levels until lending increases.

Many of our industry participants are struggling to survive due to this shortage of financing. Receivables and inventory have been systematically reduced during the recession, and now as sales growth is beginning, there is very little capital to finance the uptick. As one furniture veteran opined, "owning a company in the furniture industry is like owning a Chinese restaurant - you survive by living off your inventory." With inventories low and no capital to grow, we believe the next 12-18 months will bring plenty of business failures, and the strong companies with access to capital will dramatically capture market share. Certainly, with the recent publicly reported issues at AOM, there is a changing of the guard of industry leadership.

Mergers & Acquisitions will be a hot topic as the business returns and market share shifts. We will see more companies combining to offer both casegoods and upholstery. Asian manufacturers will continue to seek North American marketing access with special order domestic upholstery capabilities.

Financial stability and solvency will be the #1 issue heading into this recovery. Hotel owners and specifiers will only place orders and deposits with financially viable entities, and we will see a "flight to quality" as business improves.

Las Vegas as a city continues to struggle, with low occupancy, high unemployment and huge foreclosures of homes. The cab drivers remain a great source for the real story going on in Vegas.

We were please to hear from several clients that the World Market Center, home of the residential furniture markets in August and March, have solved their financial puzzle and building configurations, and we expect to see a viable, competitive and long-term strategy unfold.

We have all been humbled by the world recession these past 18 months. Our key to recovery is addressing the problems head-on, dealing with them the best we can, and proceeding forward.

We look forward to working with you and hearing your thoughts.