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Home stores' sales not so sweet
Housing market swoon hits furniture, home improvement sectors
Wednesday, June 27, 2007

Michael A. Shull noticed the change in April. Customers at his Pleasant Hills furniture store who once might have redecorated an entire room began seeing that as too big a commitment. "Now they may just be buying a sofa," said the owner of Bradley Michaels Furniture.

The housing market -- a reliable leg of the American dream that more than a few retailers have braced their businesses against -- has gone all wobbly.

The slowdown didn't happen overnight but recent reports haven't looked promising for a quick rebound. In May, the government reported, building permits issued nationally were down almost 22 percent compared with a year ago. Existing home sales were down more than 10 percent from the same period last year, said the National Association of Realtors. Yesterday, Standard & Poor's said home prices have slipped nationally.

Americans don't just buy homes, they buy stuff for their homes, sometimes using the equity tied up in their homes to help pay for it.

Retailers selling roof trusses have been following the depressing numbers slide. But so have those offering appliances, floor tiles, sofas, even those who carry towels and curtains, all of whom are trying to outlast this down cycle.

Hardware chain Home Depot, which last month reported sales at established stores fell 7.6 percent, last week said it would sell its wholesale distribution division so it could concentrate on retail.

Specialty home retailer Pier 1 Imports last week decided to close 100 stores rather than the 60 announced earlier. The chain had seen sales at its established stores drop 5.4 percent in the three months ended June 2.

Bed, Bath & Beyond earlier this month offered what was reportedly its first-ever warning that quarterly results might be lower than projected. Department store Macy's scaled down plans for ambitious displays to show off a new Martha Stewart line, according to a report in the Wall Street Journal.

Even Smithton-based Levin Furniture has seen sales at stores at least a year old slip. "It's been a challenging market in home furnishings really for a couple of years," said President Robert Levin. The chain has 13 locations.

Coping has meant both cost-cutting and trying for new market share.

The Levin staff has asked manufacturers for better deals and trimmed overhead by not filling empty positions. Rising energy costs that have cut into sales to consumers have done a number on the chain's own budget, too. Diesel fuel alone rose $250,000 last year, Mr. Levin said.

With core customers buying less, the retailer has decided it needs to broaden its appeal. The stores now carry Amish furniture made in the region and soon will have entire departments designated to an exclusive NFL merchandise line with Steelers sofas and recliners in addition to licensed product featuring college teams.

How long the market slump will last isn't clear. Mr. Shull, at Bradley Michaels, said sales were pretty good until this spring. "April took a downturn," he said. Summer is typically slow but he has read in trade journals that business could pick up in late summer or early fall.

Fall is usually a strong time in home furnishings, agreed Mr. Levin. "We're hoping that's the case."

Meanwhile, furniture parts maker Leggett & Platt, which last week dropped its earnings projections after a tough spring, doesn't expect much improvement in demand until next year.

Home Depot's chairman recently suggested the home improvement market would remain soft throughout 2007.

84 Lumber Co., a Washington County company that makes its money supplying home builders, had hoped for a turnaround this summer. "There's been some blips up and down," said company spokesman Jeff Nobers. Now officials believe a sustained turnaround in new home construction could take another 18 months.

The Eighty Four-based company last week trimmed 26 jobs from its corporate headquarters, following an earlier round of cuts late last year. But it, too, continues to seek out new market share as it goes ahead with plans to build new stores around the country.

Whether the slowdown is being triggered by overall economic issues or just a generalized uncertainty about the future is up for debate.

Take home sales, for example. "It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market," said Lawrence Yun, senior economist for the National Association of Realtors.

Also, fewer new households are being formed, implying that people are going in with roommates or moving in with the folks. In Mr. Yun's view, the market is underperforming based on positive factors such as job creation numbers, mortgage interest rates and flat home prices.

But, as those customers who are buying a sofa instead of doing a whole room demonstrate, there's a lot of nervousness out there.

The Conference Board yesterday released its monthly index tracking consumer confidence. The results showed a drop in June after an uptick in May.

"Looking ahead, consumers remain rather subdued about short-term economic prospects," said Lynn Franco, director of the organization's consumer research center. "All in all, the glass remains half empty and half full."

First published on June 26, 2007 at 7:58 pm
Teresa F. Lindeman can be reached at tlindeman@post-gazette.com or at 412-263-2018.
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