Youth furniture outlook for 2009

Manufacturers speak on CPSC legislation

Lisa Casinger and Gerri Hunt -- Kids Today, 12/18/2008 9:04:00 AM

According to estimates by Furniture/Today market research and New York-based Easy Analytic Software Inc., youth and other adult bedroom sales hit $4.6 billion in 2008, or about 6% of overall furniture and bedding spending by consumers. That’s down 7% from 2007. Not good news perhaps, but the segment wasn’t hit as hard as others in the industry when it came to sales figures. However, this year the youth industry has been bombarded with new safety regulations that have left many manufacturers looking for clarification.

Tom Liddell, senior vice president of sales for Powell, said despite the economy the company has been “very pleased with our growth this year.” Powell has seen double-digit growth in its youth sales, the company’s largest product category.

Liddell says the major issues facing the industry this year are convincing consumers that the product they’re buying is safe.

“Powell has been certified lead-free since we started selling youth products,” he said. “We are also in compliance for all bunk and loft beds that we sell.”

Kerry Lebensburger, president of sales at Ashley, said the company’s youth business was “below our hopes” for 2008. He attributes this to the lack of disposable income.

“The need is still there to furnish the kids’ rooms, but the parents are reluctant to spend a lot of money on the room,” Lebensburger said.

In 2007 Ashley’s wood groups sold very well, he said, but he’s starting to see consumers switch to laminates as the economy weakens. Pinpointing what percentage of the business is derived from youth is a challenge for Ashley since many pieces they consider master bedroom are actually being purchased for youth bedrooms.

American Woodcrafters’ youth sales account for 60% of its business and President and CEO Lao Labra said overall sales were flat for 2008.

“The economy has played a part in the flat sales this year, but it’s not just the consumers but the retailers who are worried,” Labra said. “Youth furniture isn’t typically a postponable purchase like adult, but this year it has been. Also, the retailers are being conservative as well and don’t want to take risks on new groups or expanding into the youth category.”

Labra said aside from the economy, a major concern now is the Consumer Products Safety Improvement Act of 2008, signed into law on August 14. Also known as H.R. 4040, the bill requires manufacturers and importers to subject products intended for use by individuals under the age of 12 to certify that they have passed strict mandatory U.S. safety standards on lead and phthalate

While manufacturers agree with the purpose behind the bill—getting rid of lead and phthalates in children’s products—the CPSIA itself is a cumbersome and ambiguous document.

The time table calls for lead paint testing by accredited, third-party labs and certification by manufacturers by Dec. 21, 2008, with a sequence of other deadlines throughout 2009 for specific product categories and components.

Many manufacturers already had been testing products internally and have spent much of this year reviewing their sourcing options as well as third-party testing facilities.

Glenn Prillaman, executive vice president, marketing and sales for Young America (youth sales account for a third to half of Stanley’s business) said the company’s business was slighting below 2007 for most of the year until October, “when softer retail conditions seemed to get worse.”

Prillaman, along with other manufacturers, believes the major issues in the youth industry this year were tied to product safety and the questions regarding the regulatory rulings as well as the “future financial health of many suppliers and retailers.”

Kevin Walker, who joined Young America this fall as vice president of product and sale management, said Stanley has been proactive with all of the product testing mandates and at press time the company already is 95% compliant..

“Retailers also are going to be hard hit with these rulings,” Walker said. “They will have to maintain a chain of custody on the product and some of them aren’t yet aware of this. There is a sell-through period, which theoretically means there’s time to sell everything off the floor and replace it by the time the deadlines roll around.”

Walker said that while the process of implementing timelines and protocols can get done without a problem, in the end the products most likely will look and feel differently than what consumers are used to.

Lea Inds. also experienced a downturn this year. Earl Wang, vice president product development, echoed Prillaman’s statement that business was better the first half of the year but “since late September and October business has become very challenging.”

“Everything seems to be happening here in the second half of the year,” Wang said. “The drop in consumer confidence, credit issues for retailers and consumers, decline in business (specifically retail traffic) and the major emphasis on the new CPSIA. All of this has a negative impact, not just on youth, but on the entire furniture industry.”

Wang says Lea has been working on its compliance issues as well, and agrees that the many layers to the new rulings make it confusing.

“However, this industry has been good at trying to police itself when it comes to safety,” he said. “We’re good stewards and I don’t think people disagree that it’s a good practice.”

Style
Manufacturers, responding to the economy and consumer demand, were guarded with their youth introductions, both in number of skus and styles. Collections were pared down and many of the offerings tended to be more traditional in nature.

While white groups are a mainstay for girls, floral motifs were played down in favor of ribbon or vine carvings and hand-painted designs. Distressed looks also emerged, like battered wood and rubbed-off finishes.

MP3-compatibility became more popular for boys, as technology is being incorporated into furniture design, from headboards to small entertainment cabinets that fit well in the bedroom. Sports have shown up in new ways, such as one group that looks like a gym locker room, and headboards resembling sports balls.

Color finishes popped up, especially lavender, green, blue and orange. Going a step further are basic pieces with panels or color blocks on headboards and drawer fronts.

And storage continued to thrive, from trundles to bunk stairs containing drawers to hutches and headboards with hidden compartments.

2009 Outlook
Most manufacturers don’t expect business to pick up during the first part of 2009. Though Liddell is optimistic, saying Powell looks for growth next year based on it’s success this year, most others are being conservative.

“We are expecting it to be a tough year,” Wang said. “But we have guarded optimism for the youth business in that we think it may be a little more recession proof than other home furnishings categories, and our blended business model of domestic products and imports will help diversify our business, but it’s going to be a tough year.”

Prillaman sees the confusion following the safety regulations impacting retailers as they look for suppliers they can trust and Labra and Lebensburger are conservatively optimistic.