Shoppers pull back on ‘big ticket’ items as furniture, appliance sales lag
The article notes that this earnings season shows a major challenge facing retailers: shoppers reluctant to make big purchases.
To some extent, this pullback is to be expected as interest rates stay high, the housing market has stalled, and consumers are gravitating towards services rather than goods. But retailers reporting results over the past several weeks have shown how even with an anticipated shift in consumer habits the impacts on results today are hard to ignore. For lower-income shoppers, inflation has played a major role in holding back on pricier items.
Data from the Institute for Supply Management out Friday showed manufacturing activity in August signaled contraction for a 10th consecutive month. Furniture and related products, along with appliances and components, were two of the 13 industries that saw activity decline during the period.
Prices are also reflecting the slowdown in demand.
The Bureau of Labor Statistics’ latest CPI report showed the cost of furnishings and supplies slipped 0.4% in July from the previous month, while major appliance prices declined 0.6% during the same period.
‘Furniture is more exposed’
As consumers rein in big ticket spending, the impacts on furniture and appliance makers aren't being evenly felt.
Shanton said that the costs associated with manufacturing appliances versus furniture enables vendors to lower prices on the former more easily than the latter.
Appliances tend to be manufactured abroad, where costs are lower, while furniture like couches or dining room sets are often made in the US for logistical reasons.
“Furniture is more exposed” to this shift in spending, he said. “Their cost structure is higher. So if they bring prices down as much as you're seeing with the appliance manufacturers, they would be in the red much faster.”
And the impacts have been felt among some privately held companies.
Taylorsville, N.C.-based Mitchell Gold + Bob Williams shut its doors last weekend, citing weak sales and trouble securing financing. Asheboro, N.C.-based Klaussner Furniture Industries closed earlier in August after 60 years in business because the company’s lender stopped providing capital. And late last year Big Lots’ major supplier United Furniture fired its 2,700 employees and later filed for bankruptcy protection, citing debts of more than $100 million.
Shanton adds: “As companies added additional capacity and labor to meet the demand during the pandemic, they now have to cut that back. And if they can't cut it back then they are actually closing plants and bankrupting entire companies.”
Consumers ‘on the cusp’
The slowdown in demand for durable goods isn't having a major impact on manufacturing jobs, so far.
The latest US employment report showed employment within the sector remained unchanged, though overtime edged down 0.1 hour to 3.0 hours. Part of the muted reaction may have to with strength in other areas of manufacturing, however.
Shanton said: “There's a shift going on within manufacturing. Auto right now is still holding the fort down and continuing to attract consumer spending.”