Window Treatments in Transition

James Mammarella, Nancy Zweirs, April 23, 2007

Suppliers of soft window treatments reported mixed results in what some called an inconsistent market or a "transition" year during 2006. In general, they did less business than in 2005 with regional and national mass merchants but slightly better with home specialty chains and the leading window fashions retailer, JCPenney.

Research by Home Textiles Today shows that overall window treatment retail volume dropped 3.0% in 2006 to a level of $2.425 billion.

This came on top of a 2005 sales downturn of 3.8% to $2.5 billion. The slower contraction in 2006, along with some early indications for 2007, led some vendors to see the market ahead in a more optimistic light. However, much depends on which part of the market they supply.

While reluctant to comment for attribution on specific retailers, suppliers were clear in their remarks about them, and about trends in the channels of distribution overall.

The distribution channel that saw volume drop off most significantly in 2006 was the big discounter chains, as suppliers noted Target had a decidedly sluggish year overall in soft home, Kmart struggled to bring focus to the window category, and Wal-Mart took tentative steps into goods priced at $30 or higher, but apparently then decided to modify its strategy and seek whole new supplier plans and ideas as 2007 approached. For the channel, sales fell by $95 million to $680 million.

Business picked up somewhat in the mid-price market, reaching $1.075 billion, while volume was moderately off to $400 million in the big-box specialty chain tier, where the second-largest merchandiser, Linens 'n Things, was concentrating more on reducing back stocks of inventory than in launching fresh programs.

"Last year was a disaster," said Bud Frankel, ceo and president of Arlee Home (New York), speaking of the entire market. Frankel said his own window division volume "was down about 5%" but he expects Arlee will realize a major upswing in 2007 due to the company's renewed focus on the category, dovetailing with the arrival of several new buyers within the ranks of mass market retailers.

In addition, Arlee has made recent investments in Chinese resources, and has been asked to consider one or more window treatment acquisitions.

"2006 was a rollercoaster," said Barry Goodman, vp national accounts, Commonwealth Home Fashions (Montreal). "It started off strong in the first quarter, but quarters two and three were weak, and then we finished with a strong fourth quarter."

Goodman, who said Commonwealth's 2006 revenues were up modestly, pointed to two channels that seem to be looking up for the future: direct-to-consumer and home improvement centers. "Catalogs were strong for us," he said, adding that the Canadian branch of a key U.S. do-it-yourself chain "is being aggressive. They show window properly, and the business is booming."

"It was a transitional year," said Loren Sweet, ceo of Brentwood Originals (Carson, Calif.) "'06 wasn't a great year, but midyear things started to change. We see '07 as a good year." Brentwood, which targets the big-box specialty stores and the mid-tier chains, saw solid renewals on a range of its window programs, Sweet said.

"JCPenney, Linens 'n Things, and Bed Bath & Beyond have all improved in-store presentation," he noted — not a bad idea in a transitional period. Sweet pointed to "new fixtures, signage, inventory control" and singled out JCPenney's new in-store online ordering pads that let consumers shop the entire range of products beyond what is seen on the shelves, with a choice of convenient delivery options.

"Giving the consumer decorator or decorative custom looks at very affordable ready-made prices: that's made it an exciting business. That's why the soft window business will continue to grow," said Carl Goldstein, senior vp at S. Lichtenberg (New York).

Goldstein said the company improved its business with regional chains, specialty retailers, and some of the home improvement centers — with mid-tier chains leading the pack.

"We enjoyed double-digit gains," enthused Jason Carr, founder, Softline Home Fashions (Gardena, Calif.), while acknowledging, "Margins fell slightly."

Carr said that some home specialty chains increased their orders to Softline in 2006, even though he felt "the larger chains are eating a part of their business."

The direct-to-consumer segment, Carr reported, is "increasing tremendously — a much larger presence in our business." He also lauded home improvement centers for intensifying their efforts on soft goods, saying the consumer recognizes that "today you can buy curtains and a dishwasher in the same store."

"We held our own" in a "flat year," said Jack Mahon, leader of the window division at Croscill Home (New York). He noted that merchants presented suppliers with the traditional challenges. "Retailers are looking for value in the fabric, they seek increased margins; and we always find a way to get more efficiency, more value into the equation — it has become more intensified," he said.

Mahon summed up, "Newness drives the business."

Croscill has prompted retailer interest with a range of heavyweight chenilles and textured fabrics. In a similar way, fashion and product innovation are helping each supplier gain some upward momentum in price points, while injecting promise into the category for retailers determined to entice the consumer.

As to what lies ahead in fashion, Goodman and Goldstein each pointed to pinch-pleats as a construction on its way up, especially as heavier-weight panels come in vogue among consumers who want their window coverings to help insulate rooms and conserve heating energy.

"I see embroideries growing again," remarked Goldstein. "They are gorgeous at affordable prices."

"Window has become a tactile thing," offered Sweet, noting that shortpile plush made with 100% polyester microfiber gives a velvety feel for a lower cost, meaning the retailer "makes a little extra money." Brentwood has also had good business in blackout curtains. "We do double-sided suede — it is not only a near-pure sunblock, it also has a beautiful hand; it drapes really well. And, it's warmer in the winter and cooler in summer."

Softline and S. Lichtenberg both pointed to faux silks as a major issue.

"We have been aggressive with our design team developing and launching new programs," said Carr, pointing to "our faux silk line with new applications of texture, pleating and crushing effects."

"It's another hot thing for us," said Frankel. "A crushed faux silk panel, gorgeous, it will retail around $7 for the 60-by-84."

Most rang the optimism bell as they surveyed 2007.

"We are very encouraged — we see a lot of new placement in 2007," said Sweet. "And people are looking at better quality, better price points, new blends, microfibers. The downside is, where the economy is going to be."

Goldstein said S. Lichtenberg had a fairly good first quarter, and opined, "I think the upper end is kind of soft." He referred to retailers being "really affected in the third quarter in 2006 by $3 a gallon gasoline." The flip side is energy-conservation awareness. "I see it growing, strong in 2007. I think foam-back is bigger; blackout is a new fabrication for the readymade popular-price segment. The consumer is educated."

"Demand from the jobbers, mass merchants and over-the-counter customers" is on the upswing at Softline, said Carr. "They continue to look for well-priced merchandise."

Distribution Channels
2006 total retail sales: $2.425 billion down 3.0% from $2.5 billion in 2005

% of Total 2006 Sales 2005 sales
*Other includes warehouse clubs and military exchanges
Mid-Price Chains 44 $1,075 $1,025
Discount Dept. Stores 28 680 775
Home Textiles Specialty Chains 17 400 450
Direct-to-Consumer 4 95 75
Home Improvement Centers 2 50 50
Department Stores 1 25 25
Single Unit Specialty Stores 1 25 25
Off-Price Chains 1 25 25
Variety/Closeout 1 25 25
Other* 1 25 25

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