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Supplier slowdown: Business not quite booming

New York — When both Wal-Mart and Target announced last week that June sales were tracking at the low end of expectations, it came as small surprise to many home textiles suppliers.

As retailers across a spectrum of channels reported strong first quarter results over the past 10 weeks, suppliers said they were noticing little of that glow translating into fatter reorders.

Parsing out why business isn't booming — or even describing in which ways it has slackened — is another matter. Explanations range from tight inventory controls to consumer disinterest in the category, among others.

"The POS has softened up across the board, in all channels of distribution," said Barry Leonard, president of New York-based Ex-Cell Home Fashions, who doesn't see any seasonal aspects to the slump. "We went all over the numbers, and there was a real slowdown, even versus last year."

Lawrence Home Fashions' Carl Legault, executive sales director, noted that some of the large retailers are trying to clean up their financials by keeping inventories low. "We are seeing retailers making smaller orders more frequently now, instead of larger orders once a month. Business has been steadily increasing, though," he said.

Some even dispute how widespread the first quarter retail bounce may have been.

"Most of our customers are still showing last year's numbers, meaning they are relatively flat, and have not seen any of these increases we've been reading about in the papers," said Bob Altbaier, senior vice president of Down Lite International, based in Mason, Ohio.

Added Loren Sweet, president of Carson, Calif.-based Brentwood Originals: "I've never known a retailer that cut his inventory if his business was good. So I suspect business went south first and then they leaned their inventories."

Others suspect shifting consumer priorities may be partially responsible for cautious buying patterns.

Mohawk Home's Merle Johnson, vice president of marketing, noted that outside the home department, fashion and seasonal merchandise have remained strong sellers. "So does that mean when people are buying those products they aren't buying home? And so many people are remodeling their homes right now — spending $20,000 to put on an addition — I don't know what they have left over to spend on furnishings."

Lacey Mills, based in Catersville, Ga., is seeing "a slightly slow period" on basic core items, but consistent growth on fashion and trendy goods, said John Hale, co-owner.

"I think many retailers were ready to pull out of the recession before the consumers were, and they really loaded up on inventory this spring," he added. "I think there are many retailers that tried too hard to capture every customer instead of focusing on the main demographic they have, and it has left many big players with a very over-assorted offering that does not fit their customer."

Added Jeff Meadows, division vice president of Dalton, Ga.-based Shaw Living, "I think it takes a while for retailers to get through their inventories after loading up in the first quarter."

Although the Northwest Company has seen re-order business holding relatively steady, some retailers have been pushing back deliveries, said Ross Auerbach, president. "In some cases, the retailer is redoing the department and wants to hold off for a couple of weeks while they reorganize the goods on the floor. And in some cases, they are trying to keep their departmental inventories down," he said.

Buyers are buying closer to the season and to their needs, "putting pressure on vendors to deliver in record times and to sharper price points," said Pavan Uttam, vice president of marketing at Milli Home Décor by Marsha Cutler, based in New York. "Home and apparel sales are cyclical."

Richard Gould, vice president and national sales manager of Long Beach, Calif.-based Foreston Trends, believes consumers are simply focused on vacation travel. "They have similar thoughts every June, but from what I'm witnessing at the airports, they're busier and crazier than ever," he said.

John Emrani, president of Melrose Home Collections, based in Los Angeles, said, "Everyone is slowing down a bit and saving their money. Retailers are taking a little more time to make their buying decisions than they have in the past. So we believe they will continue to be cautious in their spending."

Stores need to do a better job of compelling consumers to open their wallets, according to Bob Gehm, president of Sheridan Home, based in New York.

"Until there's some excitement out there, some fresh-looking product, why should we expect that business is going to be anything but tough?" he said. "You can't get people to buy unless you excite them."

Said Lonnie Scheps, vice president of sales and marketing for foam sleep-products supplier Hudson Industries, "You have a lot of things going on that could make for an interesting second half of 2004. High inflation levels are affecting all aspects of the business. Labor levels, chemicals, raw materials and shipping costs are all going up. It's a trickle-up situation that's causing a lot of problems."

Business has been mixed, not by channel but by retailer, noted Michael Bernstein, CEO of New York-based DWI Holdings, home of the Royal Sateen and Calvin Klein Home domestics brands.

"Some are doing fantastically well and want more merchandise than they can get — and are trying to get as much as they can before quotas go out. Right now, you can't place an order for goods out of Brazil. There is absolutely nothing to be had," he said.

"But the other thing that's really hurting is that the buyers don't buy anymore," he added. "The planners do the buying, the financial guys. The planners tend to look at aggregate inventories, not door-by-door inventories, and that hurts every retailer who operates that way."

Revere Mills reads the softness as more of a short-term slowing down related to clearance season, according to Dan Harris, vice president of marketing and product development for the Niles, Ill.-based towel supplier. "Stores did not stock up heavily for spring selling," he said. However, "our bookings for the third and fourth quarter are very strong."

Mark Siegel, president and CEO of New York-based Elrene Home Fashions, said his retail customers are expecting business to pick up for the fall. "They are trying to maximize their business by being in business. And by maximize, I mean it's the gamble that business will be as good or better than last year because they can't do business if they don't have the inventory."

George Kouri, president of Braintree, Mass.-based Avonhome, dismissed the idea of a slowdown altogether.

"I don't see too much to date in the way of retailers thinning inventories, as our programs are progressing as anticipated regarding fulfillment and replenishment," he added. "All in all, I expect the fall season to be strong as was spring."

Bob Hickman, vice president of sales and marketing of Des Plaines, Ill.-based United Feather & Down, surmised that if suppliers see business as soft, it's probably a case of better inventory management at retail. "They keep turning the faucet on and off," he said.

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