Businesses in the home-goods industry are facing a tough time, with falling sales numbers and order cancellations amid a slowdown in the housing market.
Sales at furniture and home furnishing stores fell 1.6 percent in August 2022 compared to the same time last year, according to a U.S. Census Bureau news release, on Sept. 15, detailing advanced estimates for the month. When compared to July 2022, sales were down by 1.3 percent. At electronics and appliance stores, August 2022 sales fell by 5.7 percent annually and 0.1 percent monthly.
The downturn in the home-goods sector comes as the housing market is slowing down. In July, existing home sales in the country fell for the sixth straight month. This is the longest monthly streak of existing home sales declines in over eight years.
Last month, Robert Dietz, chief economist at the National Association of Home Builders (NAHB), blamed high construction costs and the tight monetary policy adopted by the Federal Reserve for triggering a “housing recession.”
After the pandemic broke out in 2020, there was a housing boom, which boosted the home-goods retail market. Moreover, as many people stayed indoors and avoided spending money on restaurants and vacations, some of the saved money went toward home furnishings.
The current high inflation rates are forcing people to cut back on unnecessary spending. “From when we reopened in 2020 to the end of 2021, business was going crazy good, you were selling everything you had,” Jared Simon, owner of Simon’s Furniture, Mattresses & Appliances in Franklin, Mass., told The Wall Street Journal. But now, “most dealers are over-inventoried; our inventory is up 55 percent from pre-COVID levels.”
Cancellations and Layoffs
Certain home-goods sellers are also seeing a rising trend of order cancellations. In an August 2022 industry newsletter, Smith Leonard PLLC, a full-service accounting firm, stated that the residential-furniture manufacturers and distributors saw new orders decline by 39 percent in June 2022 when compared to last year.
This is a big change, considering that June 2021 new orders were 8 percent above June 2020 orders and that June 2020 orders were 30 percent above June 2019 orders. Between June 2019 and June 2022, orders declined by 13.3 percent.
“The cancellation of orders has shown up in a pretty big way in our survey, especially for those selling at the lower and middle price points. When cancellations exceed new orders, that is not a good sign,” the newsletter said.
The struggle facing the home-goods retail sellers is evident by the slew of layoffs announced by such firms. New Jersey-based Bed Bath & Beyond, for example, is laying off 20 percent of its workforce and closing down 150 stores.
Corsicana Mattress, in Dallas, Texas, plans to shut down its mattress factory in Olive Branch, Mississippi, next month. Serta Simmons Bedding, in Atlanta, Georgia, laid off 284 workers at three of its factories earlier this year.