Utility Bedding Banks on Opening Price Points

Jill Rowen, Carole Sloan, April 6, 2009

Utility bedding — typically one of the home textiles industry's strongest segments — took its lumps alongside most other sectors in 2008. The category, which includes blankets, throws, sleep pillows and mattress pads, ended the year with a sales volume of $2.08 billon, down 12.2% from 2007's $2.36 billion. Most companies reported taking their biggest hit at the end of the year, when consumer confidence began to suffer most significantly.

Sleep pillows showed the largest drop, with volume down 15.2% from $900.0 million to $763.6 million. Buoyed by colder weather, and folks turning down their thermostats, blankets and throws decreased the least, a shrinkage of 8.6%.

Vendors and retailers alike are being forced to adjust their expectations. As Berkshire Blanket ceo Thomas Bowles noted, "Flat is the new up."

There was also little surprise in the results for volume distribution among retail channels. The demise of Linens 'n Things and the retail consolidation through out the country continues to shift the balance and upset the status quo. Vendors report that no one retailer captured the LNT consumer, however, as some of those shoppers went to the obvious competitor Bed Bath and Beyond, others went upstairs to mid-tier and better department stores, while still others went bargain shopping at off-price and mass merchants. In HTT's findings, mid-price chains, though down overall, gained market share within the category.

Suppliers report that retailers at the recent New York Market continued to buy, with an eye toward enticing shoppers back into their venues. Bright spots do exist even in this fragile economy. Not surprisingly, opening price points are ruling utility bedding — a category that many suggest fares better in such an economic climate than its decorative home textile counterparts.

"The utility sector has always performed better than decorative categories," said Beth Mack, chief merchandising officer, Hollander Home Fashions. "It is our job in the industry to 'create the need' of better sleep in these stressful times."

"We've been told by many of our retail partners that utility was the 'silver lining' within the home store over the past several months," agreed Jyl Davis, director of marketing, Downlite. "In particular, as it remained quite cold in much of the country, warming products seemed to do well with most retailers."

Even this category, however, had to contend with wary shoppers. "The consumer was gravitating toward more opening price point goods, therefore lowering the total dollar volume," noted Mack. "Opening price point pillows outsold mid- and upper-tier, and the down pillow business had large declines due to raw material costs."

For Louisville Bedding, it was a mixed bag. According to Mandy Talbert, product development manager, the company saw a drop in its mattress pad business, but a pick-up in both pillows and feather and down goods. "The utility category and especially something like mattress pads is a destination purchase," Talbert noted. "It's still a product people need and they will go out and buy. They may not be going out to buy that new car, but they will pick up that pillow."

"We fared well with our value-add product. I am not disappointed at all given the climate," reported Dan Schecter, vp sales and marketing, Carpenter. "Things that worked were and are products that meet and exceed consumer benefit needs. I will say that products that disappointed were returned to the retailer quickly. Shoppers are not messing around; if claims do not live up to consumer expectation, you've lost them as customers. I am happy to see this, and I expect consumers to make purchases based on benefit and problem resolution."

Robert Christnacht, division manager for home, Pendleton Woolen Mills, conceded that consumers were shopping with a more discerning eye. "Consumers are investing in a product rather than making a quick purchase decision," he noted.

According to Christnacht, "functional" is the company's preferred word for its blankets, rather than "utility." Part of what worked in 2008 and its strategy going forward is merchandising the right blankets as "fashion" bedding. In fact, a number of styles are now offered with coordinating pillow shams sold separately. The idea being that the cost of a fashionable blanket may be more palatable to a consumer than a more expensive bedding set.

Despite the cautiousness of consumers, they are still shopping somewhere, even though the number of retail doors has contracted. "I think Bed Bath & Beyond benefited the most from LNT leaving the scene, but I think others like JCPenney picked up share," observed Schecter. "If you look at the major players, JCPenney continues to do outstanding merchandising and marketing work."

"I don't think the industry will actually see the LNT equation re-distribute until the back-to-school timeframe," said Mack. "LNT had significant market presence in this category and the consumer will need to shop elsewhere this season. I believe all tiers of retail should see some benefit from the store closing."

"The key is getting out there and standing in front of customers with the best products at the best prices," noted Talbert. Louisville had a significant number of products at LNT, but found placement at Costco and Kohl's, she said.

Davis at Downlite noted that "as with many home textile suppliers to the industry, we saw a shift in buying power to the wholesale clubs and off-price retailers. With LNT out of the picture, we would expect this customer to purchase utility bedding at other department store or big-box retailers, so this business is probably being largely enjoyed by LNT's former competition."

According to Berkshire Blanket's Bowles, retailers are being especially careful with inventory. "I think you're going to see a lot more buying closer to season," he said. "They don't want excess inventory in the system." But he acknowledged the need to put some fashion and risk into the pipeline to get consumers' attention again. "We're still developing product that delivers a great 'touch.' That's what sells in our category," he said.

"We saw a lot of aggressive buying at market recently," noted John Crippen, vp, Blue Ridge Home Fashions. "Admittedly retailers are spending less than they did last year, but they want to have product that will entice costumers." As with most vendors, that has meant getting aggressive with pricing on existing programs as well as any new programs going forward. "We're giving our customers the best costing we can," he said.

"The shakeup at retail is a painful process, but I think it will make for a much healthier industry in the end,' noted Christnacht. "It is also a great time for entrepreneurs who have a good idea."

The next big question is where is the light at the end of the tunnel? The vendors HTT spoke to have realistic expectations with a touch of optimism, expecting some sign of recovery by end of year.

"I wish we could predict the economic timetable with consumer spending. Business has improved over the last month or two but it is still unpredictable," said Mack.

"I believe, personally, that we will begin to see sales strengthening in Q4," noted Schecter. "That is not to say we will not see upticks between now and then — after all, these products are consumables and require replacements."

"We are optimistic that fall '09 will be stronger than what we've seen over the past several months," stated Davis. "Downlite is continuing to supply our retail partners with innovative, value-priced, and beneficial bedding solutions to offer the customer."

Utility Bedding
Distribution Channels
($ millions)
2008 total retail sales: $2.075 billion down 12.2% from $2.362 billion in 2007

2008 2007 % CHANGE
* Other includes home improvement centers, military exchanges and gift/home accent stores.
Home textiles specialty chains $415.00 $543.3 -23.6%
Single-unit home textiles specialty stores 35.28 47.2 -25.3
Department stores 93.38 118.1 -20.9
Mid-price chains 174.30 189.0 -7.8
Discount department stores 1,211.80 1,299.1 -6.7
Off-price chains 20.75 23.6 -12.2
Variety/closeout 20.75 23.6 -12.2
Direct-to-consumer 41.50 47.2 -12.2
Warehouse clubs 41.50 47.2 -12.2
Total $2,075.0 2,362.0 -12.2%

Merchandise Mix
($ millions)

2008 2007 % change
Blankets $512.5 $561.0 -8.6%
Mattress pads 388.0 446.4 -13.1
Sleep pillows 763.6 900.0 -15.2
Throws 410.9 455.0 -9.7

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