Stump Reports Insights from Fall 2022 High Point Market
Charlotte, NC, October 28, 2022-Stump & Company issued the following post-show insights reports on the 2022 fall High Point Market.
In 2021, no one could get inventory due to Covid factory closures, scarcity (and price) of ocean containers, and other supply chain challenges. Today, most are over-inventoried as shipments continued to flow in while orders began to slow. Add to this, container rates have plummeted, now returning to levels below the Covid increases. This is forcing companies to curtail freight surcharges and are now dealing with inventory values with the much higher container rates embedded in the cost of goods. We believe it will take three to six months for this issue to balance out and return to normal.
Recession or not?
Most feel that the furniture industry has been in a recession since early summer, with reported orders off 30% or so. The high end would dispute this, as they have lived off large backlogs and many are still continuing to enjoy growth in orders, particularly those servicing the designer trade. With public stock prices low and housing starts dwindling, some fear a choppy rest of 2022 and 2023. We remain optimistic that the stock market is correcting back into positive territory, that inflation is being curbed, and that consumers will regain confidence post-election. A big unknown is geo-political tensions amongst key trading partners. We are encouraging our clients to consider a “bridge over Covid” and compare 2019 to 2022 to get a clearer sense of growth without the Covid noise in the middle. Most of the industry is operating well above 2019 levels.
Strong vs. Weak
We heard amazing stories of many companies doing well, with growth rates over 40% this year and margins expanding. We also met with many struggling companies that are at a breaking point due to inventory surges, too much debt, lack of capital availability, and general weariness of fighting the battles of the day. We believe there will be many business failures in this next season and that the strong will be opportunistic and acquire assets and people to propel them forward and capture more marketshare.
These confluences of factors have created a dynamic M&A environment; we have several deals that will be publicly announced before the end of the year, our backlog is deep, and we are excited about various sectors of the market, including:
* Outdoor/casual sector is seeing continued interest and we believe there is solid growth for suppliers in this category.
* E-Commerce is a huge opportunity for our industry, with growth two to three times the industry average.
* Domestic upholstery is in high demand, as retailers prefer “made in North American” goods to reduce lead times and dependency on international supply chains.
* Real Estate is an important aspect of M&A as companies rethink their global manufacturing and fulfillment footprint.