High Point Market Newsletter
April 2012 - Charlotte, NC
Our eight days in High Point for the spring furniture market were exciting and exhausting. Attendance was good, attitudes were positive and most of the exhibitors and buyers were optimistic for continuing recovery from a bumpy and inconsistent 2011. While the First Quarter of 2012 was strong for most companies, a slow April at retail is a big concern for all. Is this just a seasonal/timing pause or a revisit to the long and winding road to recovery?
Our furniture industry continues to assess its manufacturing and retail footprint due to shifting global pressures, rising fuel costs and labor availability. Ashley’s major manufacturing and distribution facility announcement in North Carolina highlights the need for a rebalancing of domestic production, better access to East Coast customers, and proximity to Atlantic Ocean ports as the Panama Canal widens in 2014. Albany Industries made a similar move to Virginia late last year, and we are working with several other companies now to execute a similar strategy.
Our RTA sofa-in-a-box project was a major highlight for the market, as Albany Industries announced a license agreement with the inventor, Billy Joe Griggs. Be on the lookout for several more license partnerships in the coming weeks. This proven technology is meeting the increased demand of consumers seeking quality upholstery that can be delivered to the home quickly and at sharp values. This product also addresses the growing alternative channels of distribution, including e-commerce, mass merchants, clubs, rental/rent-to-own and lifestyle categories. Our traditional furniture retail channel needs to observe this rising competition and adapt to shifting consumer patterns of purchasing.
Merger and Acquisition chatter is elevating to 2007-2008 levels, and we are busy working on several transactions. While valuation prices have not risen to historical multiples, the improving economy and a better bank lending environment are fueling confidence to proceed with transactions. Also, as most of us expect rising capital gains tax rates in 2012, selling now can yield a higher after-tax return to owners. ESOPs remain a viable alternative for some sellers, and we are currently very busy in this arena.
Quote of the Market: “If you want to live in fantasy land, go to Disney World. This is the furniture industry, and we better get used to it.”
Please let us know your thoughts – we always enjoy the discussion.