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Thursday, Mar 28, 2024

Furniture Retailers Hold Up Despite Housing Slowdown

With home sales down about 25 percent year to date in the San Fernando Valley area you might expect furniture retailers to be in a downward spiral as well. But while the local independents are noting that the climate has become tougher, they are not seeing significant sales declines, particularly as compared with their larger, chain counterparts. The reason, first and foremost, stems from the size of these local stores in relation to the large furniture chains. Because they are smaller, they typically don’t see the same swings as business cycles change. At the same time, their larger competitors have been riding the wave of residential building that has taken place in many areas of the country for the past several years, a wave that has largely bypassed the Valley because there hasn’t been room to build large housing tracts for years. Much of the traditional customer base for these retailers comes from homeowners remodeling, and the result is a more stable climate when housing trends shift. “It slowed down a little, but not dramatically,” said Ramin Matian, the owner of Italy 2000 in Sherman Oaks. Matian believes that his store is further insulated by the recent housing downturn because it carries high-end merchandise, and homes at the upper-end have been less impacted by the slowdown. The local climate looks a lot like the national environment last year, but this year, as housing starts and sales slowed further, several of the largest chains are reporting considerable sales declines. In 2006, furniture stores across the country posted a 6 percent sales gain, according to Furniture Today, an industry publication. But as sales this year have slumped further, some of these same retailers are seeing dramatic decreases. Ethan Allen Interiors Inc. reported net income dipped to $17.5 million or $0.54 per share on sales of $246.5 million for its fiscal third quarter ended March 31, compared to earnings of $20 million or $0.59 per share on revenues of $267.1 million for the comparable period a year ago. Furniture Brands International, which manufactures and markets such brands as Broyhill, Lane, Thomasville, Henredon and Drexel Heritage, last month said it expects to post a loss between $0.03 and $0.07 for the second quarter on a sales decline of 12 percent. The company earlier in the year moved to eliminate about 330 employees across its administrative and manufacturing staff. “What we’re seeing and hearing are two different things,” said Mitchell Litt, founder of Mitchell Litt Antiques and Furnishings with stores in Sherman Oaks and Encino. “What we hear in the trade, and it’s not just local, is there has been a fairly substantial slowdown in sales that may be influenced by houses not selling as quickly or it may be a fact of home prices not appreciating. Because we opened a second location nine months ago, we find our sales are holding up.” Litt has noticed that traffic at the store has slowed somewhat. “We’re seeing fewer people come through the door, but the people coming through the door are buying,” he said. The local retailers acknowledge that the industry as a whole has slowed, but they also believe that their niche or other factors specific to their stores are helping to buck the industry trend. At Litt, for example, there is an additional 15,000 square feet of retail selling space this year thanks to the opening of a warehouse showroom in Encino late last year. Special circumstances Similarly, Nicoletti Furniture Inc. in Sherman Oaks, has been open just under two years, and because the store is the only L.A. outlet for the Italian furniture manufacturer, and because it is still building its client base, it may not be seeing the softness evident in the rest of the industry, said Eddie Cohen, Nicoletti’s manager. “I started a year and a half ago, and I’m going up every month,” Cohen said. “But I understand it’s a tough market right now.” Conventional wisdom in the industry says that furniture stores do well when the housing market is booming, but they also do well when the market slows down because consumers choose to redecorate rather than move. But this housing slowdown has not yet proven that theory. “I think it’s better when people are buying houses,” said Cohen. The other factor affecting the perception of store owners who have been in business for several decades or more is the comparison between this housing slowdown and the one that occurred in the 1990s. That recession was so severe, store owners say it makes this one seem insignificant. “This is nothing even close to the 90s,” said Matian.

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