Furniture Industry Update

Furniture industry moves forward

By Karen M. Koenig

June 5, 2023 | 10:37 am CDT

Photo courtesy of Groupe Lacasse.

The economy, along with material costs and labor concerns continues to temper the sales outlook of many residential and contract furniture manufacturers.

According to Allied Market Research, North American demand for furniture — residential and commercial — will hit $400.1 billion by 2030, at a CAGR of 4.9% (2021-2030). The residential segment is forecast to have a greater market share due to ongoing home renovations, plus the growing infrastructure and real estate market. Commercial furniture growth continues to be driven by companies investing in furnishing offices for social distancing and flexible or hybrid workplaces. Smart furniture is also gaining popularity.

Preliminary figures by S&P Global Market Intelligence, published on BIFMA’s website, show the North American office and institutional furniture market size reached an estimated $24.7 billion in 2022, up 18.4 percent from 2021. The United States accounted for $16.2 billion, with Canada at $4.2 billion and Mexico at $4.3 billion.

Based on comments by manufacturers, 2023 is also projected to be relatively positive by many in the contract furniture market.

Steelcase (#5), for example, has seen 17 percent revenue growth for fiscal 2023, despite a challenging environment.

“In the Americas, our fourth quarter orders were stronger than we anticipated and drove revenue and earnings above our expectations,” said Sara Armbruster, president and CEO. “Although our fourth quarter orders were below the prior year, project business from large corporate customers improved sequentially from the third quarter. We’ve seen opportunity creation in the Americas grow on a year-over-year basis for eight of the last nine months, and in recent months, a notable number of larger companies in the United States have announced workplace strategies that emphasize the importance of an in-office presence.”

With the supply chain stabilizing in most cases, allowing for shorter lead times and steady supply, 2023 sales for Groupe Lacasse (#96) are projected to rise compared to 2022, said Sylvain Garneau, president and CEO. “Overall, it might be above 2019 (pre-COVID).”

Projections for 2024, however, are too early to tell.

“When your lead times are two to eight weeks, it is too early to say,” Garneau said. “There is still quite a bit of unknown for 2024: Recession or not? Will there be more returning to work in downtown or not? Will employers invest more in their workplaces to make them more attractive or not? It’s too far out at this time.”

See sidebars below: Changes in the FDMC 300, Outlook for outdoor furniture

On the residential side, new furniture orders dropped 17 percent in February compared to 2022, although up slightly from January 2023 figures, according to the latest issue of Furniture Insights produced by analyst and consulting firm Smith Leonard.

Yet a number of manufacturers remain bullish on projections for 2023 and beyond.

“I am pleased with our third quarter results and the progress the organization has made, especially as we consider the many consumer and macroeconomic headwinds we continue to face,” said Jerry Dittmer, president, and CEO of Flexsteel Industries (#28). “Despite the market challenges…. Our growth initiatives are working and gaining momentum, and we anticipate continuing that drive to deliver even higher sales in the fourth quarter compared to the third quarter results.”

La-Z-Boy (#13) and Ethan Allen (#32) also recorded strong third quarters for fiscal 2023. “We are pleased with our third quarter operating performance,” stated Farooq Kathwari, Ethan Allen chairman, president and CEO. “We are confident in the investments that we are making for the future, but recognize the need to remain cognizant of the slower economic environment in which we are currently operating in. We remain cautiously optimistic,” he added.

Gat Caperton, CEO of Gat Creek (#211), is also cautiously optimistic on 2023 sales growth. “Sales will be up slightly,” he noted.  “We’ll do well in the first half of the year, but the second half is shaping up to be a bit soft.” 

Projections for 2024, he added, are “good.”

We asked Caperton and Garneau to share some of their tips for success. “Stay focused and resilient!” Garneau said. “Leverage our strengths.”

Caperton added, “Adapt quickly to changes in demand. It’s too hard to predict accurately so you have to adapt quickly.”

He continued, “The past two years were amazingly consistent, given a large bubble of pandemic orders that needed to be worked off.”

Meeting the challenges
Optimism is tempered by concerns. For 2023, it comes down to the “steady ability to produce what is sold, with no major changes in the marketplace,” Garneau noted. 2024’s top concern: “Economic conditions overall.”

Caperton also cited concerns over a possible economic slowdown. “Capital is tight, and spending is down.” That said, “I think both will open up more by the end of 2023,” he added.

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