The Commerce Department reported yesterday that new home sales plunged a record 26 percent last year. The median price of homes barely budged. The dramatic housing downturn has rippled throughout the economy, and one sector especially affected is furniture stores. ideastream’s Dan Bobkoff reports.
For decades, that familiar Levitz jingle was a television mainstay.
AD: You’ll love it at Levitz!
But no longer. The one-time furniture giant is bankrupt and shutting its stores. It joins familiar names Bombay and Sofa Express as some of the casualties of 2007.
EPPERSON: The furniture industry has really suffered the last 16 months.
Jerry Epperson follows home furnishings at the Richmond, VA investment banking firm Mann, Armistead, and Epperson. He says the industry has been hit hard from the downturn in housing – when people buy new homes they often buy new furniture to fill them. And, he says, when the economy sours, new furniture is an easy purchase to put off.
EPPERSON: If your car breaks down, you have to get it fixed, if your clothes washer breaks, you have to get it fixed. You know, what’s going to go wrong with a chest of drawers.
Declines in housing and the associated credit crunch—not to mention increasing competition from low-end retailers like Ikea and Target—has created an exceedingly tough environment for low to midrange furniture retailers that are more dependent on credit.
But, while Sofa Express has closed up shop, other Ohio retailers say they’re weathering the storm.
John Reed is the CEO of Arhaus Furniture, which is based in Walton Hills. He says his company remains profitable, but that 2007 was a tough year for many in the business.
REED: I don’t hear a lot out there of people who are doing real well.
Reed agrees that the depressed housing market is hurting that part of the business. But he says more people staying-put is also an opportunity for stores like his.
REED: We’re really focusing on the folks who decided not to move and fix up their homes. So we’ve been able to get business that way.
But for lower end retailers that rely on customers with good credit, 2008 may be an even tougher year than 2007.