Retailers' expect sales growth

By Cinde W. Ingram -- Casual Living, 6/1/2006 12:00:00 AM

When the sun shines, retailers in our industry can hardly contain their optimistic outlooks.

Nearly two-thirds of retailers who responded to Casual Living's exclusive Store Operations Report said they expect this year's sales to top 2005 sales. Another third expect sales to stay about the same, while only 4% expect 2006 sales to be lower than 2005 sales.

Perhaps in explanation of their optimism, half of retail respondents reported their 2005 sales numbers were higher than 2004 sales totals. Slightly more than one-fourth of respondents said 2005 sales actually were lower than 2004 and nearly another one-fourth described them as about the same. The half reporting higher sales numbers must be located in the nation's sunny spots — away from areas that took the brunt of last year's severe storms.

Fifty percent was the median answer for close ratios, meaning respondents said half of all customers who shopped at their specialty casual furniture stores made a purchase. Special orders amounted to more than a third or 38% of respondents' casual furniture sales in 2005, while 10% of their special order sales were for other casual products. They expect those same percentage points for special order sales this year. Nearly all of the respondents, 96%, require a deposit on special orders. The median required deposit was 50% of the sale amount.

Fourteen percent of retail respondents also sell through store catalogs. Those who do said that part of their business accounts for 30% or just under a third of overall sales. Nearly 10% offer online ordering, and said that segment amounts to 5% of their sales.

When it comes to the merchandise mix, casual furniture still accounts for the bulk of our retail respondents' sales. Compared with retailers who responded to Casual Living's 2005 Store Performance Study, percentage points remained fairly consistent for other merchandise categories with the exception of outdoor heaters/hearth products, which declined as a percentage of sales by product.

On these pages, you'll see dining groups continue to lead casual furniture sales, with a 55% share. That percentage of sales declined five percentage points while deep seating/conversation groups gained five as compared to sales percentages from retailers who responded to last year's survey. Deep seating groups remained at higher median price points than dining groups. Chaise lounges and motion pieces each made up just under 10% of total sales.

Gas grill sales remained important to the merchandising mix of nearly all the specialty retailers who responded, although some expected to change their grill line-up. The 2006 percentage points increased slightly for charcoal and electric grills as well as grill islands, but declined slightly for gas grills and grill accessories.

Possibly in response to ongoing challenges from mass merchants and home improvement centers, the majority of casual furniture specialists who responded offer design services. Most provide design, delivery and installation services through their own staffs while others contract the work out or use a combination of staff and contract skills.

The amount of participation in early-buy programs was expected to stay constant, with half of retail respondents saying they participated in early-buy programs for the 2005 and 2006 selling seasons. One-fifth of retail respondents expect to belong to buying groups this year, up three percentage points from the 17% of respondents who belonged to buying groups in 2005.

One sunny spot in respondents' answers involved an extremely low (5% median) percentage point of goods received from vendors that must be returned or repaired.

Just as our business is seasonally driven, so is attendance at trade shows. More retailers said they plan to attend the major home furnishings markets this year than they attended in 2005. The National Hardware Show in Las Vegas was the only trade show that stayed constant in the number of casual furniture retail respondents planning to attend in 2006, compared with 2005.

Space Allocation

Percent of Total Space

Administration	7%
Other	1%
Warehouse	28%
Selling Space	64%

Sales Comparisons

Percent of retailers saying sales were ...

2005 sales compared with 2004

LOWER	26%
ABOUT THE SAME	24%
HIGHER	50%

Percent of retailers saying sales will be ...

2006 sales compared with 2005

LOWER	4%
ABOUT THE SAME	32%
HIGHER	64%

Web Site

33% of retailers do not

OF THOSE WHO DON'T HAVE A WEB SITE

Future Plans

not planning one	29%
plans under consideration	47%
will launch site within the next 6–12 months	24%

Average Mark Up

Selling Price is Cost Times

less than 2	36%
2	39%
2.5	22%
3	3%

Frequency of Sales of Marked-Down Goods

Percent of Retailers

annually	20%
twice a year	32%
three to four times a year	25%
more than four times a year	23%

Average Mark-Down

median

20%

68% of products sold

Casual Furniture Carried 2005

	percent of retailers carrying	percent of sales	best-selling price price point
			median
dining groups	81%	55%	$1,299
deep seating	78%	25%	$2,000
motion pieces	75%	9%	$500
chaise lounges	75%	8%	$350
other	13%	3%	$262

Furniture Materials

Percent of Retailers

	carrying in 2005	planning to carry in 2006
aluminum, tubular	64%	81%
aluminum, cast	63%	83%
woven, all-weather	63%	84%
iron, cast, wrought	57%	70%
wood	53%	64%
wicker/rattan, indoor	36%	47%
other material	10%	13%

Dining Sets

Bar-Height vs Standard Height
Percent of Retailers Saying as a Percent of Total Dining Sales

	2005 bar-height sales were	2006 bar-height sales will be
HIGHER	26%	30%
ABOUT THE SAME	47%	61%
LOWER	27%	10%
	compared with 2004	compared with 2005

7-Piece vs. 5-Piece Height
Percent of Retailers Saying as a Percent of Total Dining Sales

	2005 7-piece sales were	2006 7-piece sales will be
HIGHER	28%	40%
ABOUT THE SAME	58%	52%
LOWER	14%	8%
	compared with 2004	compared with 2005

8% of products sold

Grills Carried

Percent of Retailers

	carrying in 2005	planning to carry in 2006
gas grills	92%	91%
grill accessories	71%	69%
charcoal grills	58%	62%
grill islands	44%	47%
electric grills	15%	18%

2% of products sold

Lighting Carried

Percent of Retailers

	carrying in 2005	planning to carry in 2006
lamps	90%	91%
torches	47%	48%
landscape	12%	18%
other lighting	6%	7%

Services Provided

	design	delivery	installation	landscape design
percent offering	72%	99%	89%	12%
using...
own staff	92%	89%	80%	70%
contract partners	2%	6%	11%	20%
both	6%	5%	9%	10%

2005 Direct Importing of Casual Furniture

percent of retailers importing casual furniture directly from overseas factories, not through a U.S. manufacturer's import program

83% do not import directly

AMONG RETAILERS NOT ALREADY IMPORTING

Future Plans

no plans	81%
will try direct importing	11%
not sure	8%

Import Percent of Casual Furniture Sales

MEDIAN PERCENT OF SALES FOR RETAILERS THAT IMPORT DIRECTLY OR PLAN TO IMPORT DIRECTLY

2005 actual	32%
2006 projected	20%

Retailers Found Overseas Factories Through

Percent of Retailers

factory exhibits at U.S. shows	29%
sourcing agent	27%
referral by other retailers	24%
factory exhibits at international shows	9%
trade advertising or articles in the trade press	6%
contacted directly by factory	3%

Direct Import Source Country

Percent of Retailers

China	53%
other Asian country	27%
Mexico	21%
Italy	15%
Other country	9%
Vietnam	6%
Canada	3%
other Latin American country	3%

U.S. Trade Show Attendance

Percent of Retailers
retailers attending in 2005

International Casual Furniture & Accessories Market, Chicago, Sept.	57%
International Casual Furniture, Pre-market, Chicago, July	26%
Hearth, Patio & Barbecue Expo, Feb./March	17%
National Hardware Show, Las Vegas, May	8%
International Gift & Home Furnishings Market, Atlanta, Jan.	19%
International Home Furnishings Market, High Point, N.C., March/April	19%
other U.S. markets	22%

Aside From Markets, Retailers Find New Products and Vendors From

Percent of Retailers

other includes customer referrals, fashion/home decor magazines, mailings and other dealers
sales reps	84%
trade pubs	55%
the Internet	32%
other	15%