Window Treatment Suppliers Retrench

Category at Five-Year Low Point

James Mammarella, Staff Staff, May 5, 2008

The fortunes of soft window treatment suppliers continued to toughen in 2007, with overall retail volume of $2.4 billion down 2.8% from 2006 — and off 7.7% from the level of $2.6 billion reached in 2003.

The revenue trend is clear: Retail sales were flat in 2004 compared to 2003, then fell 3.8% to $2.5 billion in 2005, and dropped another 3.0% to $2.425 billion in 2006. The tally of $2.357 billion in the past year reflected a downturn in business that affected each and every tier of retail analyzed by HTT. And 2008 has started, suppliers say, with various major retailers being extremely stingy in re-ordering stock as they work through first-half inventories.

If anything, the soft sales environment is spurring manufacturers to invest in new fashion, new fabrication and new levels of customer service.

"In this kind of climate, you have one shot, you want to place one product," said Jason Carr, founder and principal of Softline Home Fashions, Gardena, Calif., "Then you have to make sure the buyer has confidence in the supply chain."

"You want to make sure you feel more important to that one retailer," said Carr, "because now they are more cautious with each vendor they're letting in."

Before service, of course, comes product — and Softline has introduced an ambitious range of new items and expanded lines.

"Linen types, dry looks, feathering in different applications, grommets; we've introduced Eco Chic, a 100% cotton linen-look panel with embroidery — and our first product recycled from water bottles, our Ecoya line," said Carr. "Several retailers picked it up; it has a hand a bit different than polyester."

If the industry as a whole has seen business level out in the past year, there is still cause for optimism.

One positive glimmer, suggested Loren Sweet, ceo of Carson, Calif.-based Brentwood Originals, comes from indications that the pendulum is starting to swing back from the direct-importing business that so much of the retail market has indulged in during recent years.

Sweet pointed to both Kohl's and Target as examples of merchants who have turned down the direct tap somewhat, which he reasons is partly due to the increased risk of carrying inventory on their own books in such tricky retail times.

"Target used to do much more direct in home textiles than they do now," Sweet said, adding that Kohl's also has trimmed its policy from "where they would own the goods overseas to cut out the much-abused middleman."

Speaking as an upstanding member of the "middlemen," Sweet said Bed Bath & Beyond stood in contrast, having never gone very deep into direct sourcing: "They know that they pay a little more but don't have to carry the inventory" or cover the shipping and freight costs. "Also they have the expertise of the suppliers" when buying from window treatment vendors, Sweet said.

Brentwood managed to score expanded real estate in some of its key retail accounts during 2007, Sweet noted, but not built on "any one thing." Among the up-trending programs, Brentwood has seen "nice success with blackouts, energy-efficient goods, especially suedes and pieced items."

Wider, 50-inch goods, he added, have also been moving well.

Product innovation was so important at Commonwealth Home Fashions, said vp national accounts Barry Goodman, that the company completely renovated its Fifth Ave. showroom for the most recent market — and trumpeted its new product offerings with a homegrown advertising campaign.

"We made a statement," said Goodman. "The brand new showroom was very well received" as were several key lines.

The interest shown in the three centerpiece programs at Montreal-based Commonwealth was enough to make Goodman "cautiously optimistic" on 2008.

"Outdoor is doing very well in online, catalog and retail," he said of the water-repellent, mildew-resistant line of solids and stripes featuring stainless steel grommets and new vinyl-tube bag packaging.

Another "well-received" debut: O2, the certified organic cotton line by Commonwealth, offered in a fabric bag of equivalent fabrication and coming in solids, stripes and plaids.

"We have a good-better-best story in our Thermalogic insulated program," Goodman said of the third main line. Commonwealth got in early, several markets ago, on the energy-saving and blackout segment of window coverings.

Thermalogic goods retail from $19 to as high as $59 per pair. Most makes are foam-backed in either polycotton, polysuede, vertical polyester stripes or cotton duck, Goodman said.

While Commonwealth volume was up in 2007, Goodman agreed with most other vendors that looming retail consolidation in 2008 means inventory control will be vital — and pricing issues volatile.

"We see 2008 as a transition year," said Jack Mahon, window division leader at Croscill Home, New York. "It will be similar to 2007 — but we project an upturn in the latter half, due to items and programs working at several retailers."

Picking up on the direct souring issue, Mahon said that the story is somewhat the same in private label.

While a given private label program can be executed with quality and initial gross margin advantage by a retailer, Mahon said, "you can become very insular. Your program is limited to what your people see. Your people can come up with great things — but they're not seeing everything."

Croscill, Mahon noted, has "maintained our brand and improved it. We offer our own, different perspective."

He predicted that as economic pressures come to bear, the pendulum will start to swing back toward refreshed, branded goods.

One advantage of constant design development, Mahon pointed out, is the ability to layer in updated colors, new valances and related trims and other looks in order to revive a solidly performing fashion basic program "and pick up a new item business."

Croscill has found retailers responding warmly to its three-year-old window hardware business, where "our design and sourcing teams have advanced the category."

Even with pressure on costs increasing, Mahon expects "another strong year" in the hardware segment, one that works well for a resource known, as Croscill is, for its opulent window jewelry and embellishments.

At New York-based S. Lichtenberg, senior vp Carl Goldstein agrees that product innovation is absolutely crucial: "It's all about the goods."

However, Goldstein is one to differ when it comes to the brand discussion in curtains and draperies.

"The retailer is the brand," Goldstein emphasizes. And while its retailer clients continued to add incremental business to S. Lichtenberg in 2007, he said, the industry as a whole is looking at a 2008 where "flat is the best-case scenario."

"I've always felt, that in tough economic times people tend to buy the opening price point and basic goods — and that's where our strength is," he offered. "In a recessionary period you find that the discount segment tends to be better — this segment has done better than the mid-price."

In the year ahead, however, the pressure on food, gasoline and other commodity prices — not to mention the housing woes — that started hitting consumers hard in last year's fourth quarter have only accelerated in the current year's first quarter.

S. Lichtenberg is doing the only thing a well-positioned vendor can do: "We continue to invest in new product. It's about having the right fashion goods," said Goldstein.

Distribution Channels ($millions)
2007 total retail sales: $2.357 billion down 2.8% from $2.4 billion in 2006

2007 2006 % change
*Other includes warehouse clubs and military exchanges.
Mid-Price Chains $1,051 $1,075 -2.2%
Discount Department Stores 675 680 -0.7
Home Textiles Specialty Chains 385 400 -3.8
Direct-to-Consumer 93 95 -2.1
Home Improvement Centers 47 50 -6.0
Single-Unit Specialty Stores 22 25 -12.0
Department Stores 22 25 -12.0
Off-Price Chains 22 25 -12.0
Variety/Closeout 21 25 -16.0
Other* 19 25 -24.0
$2,357 $2,425 -2.8%

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