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New Year Won't Get Any Easier

New York —They exude grit and determination but home textiles suppliers are still torn about business in the New Year, finding plenty to worry about.

HTT conducted an informal survey among supplier executives and found optimism slim. More prevalent were their concerns about the impact on the industry from retailer consolidations, supplier shakeouts, raw materials price increases, high interest rates, and reduced spending by consumers.

Here's how some executives — in their own words — size up the year ahead:

Bob Altbaier, senior vice president, Down Lite International:

“I think the retail environment will replicate what we've been seeing this year. I think the down alternative business will continue to grow and be strong into 2006 because of the issues we've been seeing with raw material costs on down and foam. We will see the same kind of results in spring '06 as we did in spring '05.”

Bud Frankel, CEO, Arlee Home Fashions:

“For the first half of the year, we're looking great. Our numbers are way up and our bookings are way up over last year, and it's basically because of the pillows-and-throw sets and our pet beds.”

George Kouri, president, Avonhome:

“The first half of 2006 is expected to be strong for us as well.”

Gary Matthews, president and CEO, Sleep Innovations:

“My expectation is there's going to be a shakeout in the industry. The increasing cost of foam is forcing domestic manufacturers to look at alternative materials. My instinct is that there will be new approaches, products and innovations for selling memory foam in the coming year. ... The heads-up is to ensure that second-tier suppliers maintain high quality and don't damage the reputation of the category.”

Lonnie Scheps, vice president of sales and marketing, Hudson Industries:

“It's going to be a very interesting year next year. There are probably a few manufacturers who should be passing along costs to retailers now before it's too late because it's inevitable. ... I think management on both the retail and manufacturing sides will have their mettle tested next year. But with difficulties also come opportunities.”

Loren Sweet, president, Brentwood Originals:

“I am cautious about spring. Consumers will have a hangover from excessive holiday shopping [perhaps]. I'm placing my bets on the second half of next year with big savings in the customer's mind versus this year and hopefully less pressure on interest rates and hopefully more positive news in general. It's been a tough year for bad news. But fall '06 is still along way off.”

Dale Talbert, vice president, Veratex:

“I think the first half of '06 will just be a continuation of the fall of '05. The mergers between Sears and Kmart and Federated and May have been difficult, and I think we'll see both of their businesses struggling to do well into the near future. The business climate will not be tremendously good or bad. The people who are struggling will continue to struggle until they get their acts together. Those doing well will continue to do so. I think single-digit increases will be the norm in the industry throughout the first half of '06. Our first quarter is shaping up to be one of the strongest quarters for us because of a strong new design team, some strong placements out of the August and fall markets, and the fruits of our work in the rug area are beginning to come together.”

Vivie von Walstrom, director of design and marketing, Venus Home:

“The housing market is slowing down. A major fall in housing starts is forecast for this quarter. Higher interest rates are beginning to take a toll on the home resale market. The continuing conflict in Iraq is taking its toll on the public. Growth is continuing to slow. Slow growth will put pressure on the retail sector. And yields for longer term debt securities are lower than yields for shorter term, which equals a hint of recession. And hope I'm wrong. I feel as if the wheels have come off, actually.”

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