The reported failure of the new Gateshead M&S furniture store to meet sales targets, and news of a downturn in demand at MFI‘s retail operation, highlight concerns about the impact of rising interest rates and intensified competition in the furniture market.
Yet the latest survey by the CBI, covering April trading, shows a balance of 53% of furniture retailers achieved a rise in year-on-year sales volumes, whereas in March only 4% did so. But this had followed two months of reasonably buoyant demand, with balances of 60% and 25% of furniture outlets reporting year-on-year increases.
In contrast the British Retail Consortium, in its report for April, comments that “overall furniture sales were difficult”, although there were a few bright spots, such as beds. In March the consortium reported that kitchen and bathroom furniture sales had improved, boosted by promotions, but upholstery sales were weak.
Official estimates of sales by household goods stores – separate figures on furniture sales are not published at present – point to an annual rise of 4.6% in the value of spending during the three months to April. However, this category includes the booming consumer electronics sector. Total retail sales value grew 5% over the same period.
Government figures for the fourth quarter of last year reveal that the value of consumer spending on furniture and furnishings (but excluding carpets) was 1.2% higher than at the same time in 2002. This followed a year-on-year drop of 1.4% in the year to the third quarter, annual growth of 1.6% in the second quarter, and 2.3% in the first. The value of furniture sales in the whole of last year was up by just 0.9%, after soaring by nearly 21% in 2002.
Spending patterns
Without the effect of retail price changes, and allowing for seasonal variations, the picture of spending on furniture is even less bright, with an annual fall of 1.2% in the fourth quarter and a 2.4% drop in the second. On this measure, sales in 2003 were down by 0.8%, compared with annual growth of 18.5% the previous year.
There is little evidence of a sustainable improvement in demand for furniture emerging in the near future. A poll by Martin Hamblin GfK of consumer attitudes to the purchase of big-ticket items such as furniture turned down in March, only to bounce back in April and remain little changed in May, to remain below the ann-ual average.
In a new forecast of retail sales growth, market analyst Verdict predicts a total rise of 4.1% in 2004. It notes that homewares will perform a little better this year than in 2003, but a stronger showing in the middle two quarters will not be maintained. Moreover, it warns that growth next year will not meet the expectations of many retailers expanding into the home markets and “the high growth levels seen in the late 1990s will be more than halved”.
And there is scant cheer for UK wooden furniture manufacturers in export markets. Last year overseas shipments fell by 5.4%, while imports rose by 16.6%. The latest figures on UK furniture manufacturing indicate that output of kitchen furniture for home and overseas markets rose in total by 1.3% between the two latest quarters to March, and was 2.2% higher than at the same time in 2003. Output of other domestic furniture was 6% lower than in the previous quarter, and 4.4% lower than in the corresponding period last year.
Factory-gate prices for bedroom, dining and living room furniture held steady between March and April this year, according to National Statistics. At the annual rate prices rose by 5.2% in April, the same rate as in the previous month. Manufacturers’ factory gate prices for kitchen furniture were also unchanged in April, but rose by 3.5% over the year, down from 3.7% in the 12 months to March.
High street prices
In the high street, furniture prices are on a roller coaster. An annual increase of 3.1% in April followed a fall of 0.1% the previous month, and a rise of 3.5% in February.
The latest statistics and surveys leave no doubt that the UK furniture trade is passing through turbulent times, even while activity in the housing market, which traditionally drives demand, remains strong and consumers’ appetite for debt remains unstemmed.