The sudden drop in consumer demand after more than a year of explosive buying has caught many in the furniture industry flat footed and left retailers and manufacturers with excessive inventory challenges. While the industry is universally affected, the impact varies greatly from one retailer to another and from one manufacturer to another.

Find out how retailers and manufacturers are solving the new inventory and demand equation in this exclusive Furniture Today report.

If you look at a three-year stacked basis of market demand, we’re still at historical highs. I’m still happy with the prospect of business. Our retailers say although their warehouses are full, they’re still bullish on market demand.

What we’re hearing is that traffic might be down a little retail. Tickets are still at a high level. We’re trading up with higher ticket prices. We’re in a strong position.

We’ve always been the last to adjust prices because we want to retain value proposition out of Vietnam warehouse. Our competitors have had to raise prices because of freight. Our adjustments might be different than others who are selling domestically.

Last year around this time, we saw a major surge in mattress industry purchases by consumers, mainly because they were flush with cash, hunkered down at home and spending to improve their lifestyles. It was an unprecedented spike in sales, unlike anything this industry has ever seen. Fast forward to now, where we are seeing a softening.

But candidly, when you compare actual sales, we are actually still ahead of where we were two years ago. To me, it looks less like a real decline and more like a return to normal.

When you analyze the softening, there is reason for optimism as well. Mattresses at moderate to luxury price points are doing very well. It is the value segment of the business that is starting to face headwinds. Yes, that consumer is starting to feel the effects of higher food and gas prices. But the higher-end buyer is still making investments in a better night’s sleep. They have the money and are still spending. So even with a slight dip, AUSP is actually rising for retailers and manufacturers because higher-priced goods are still selling well.

We are still running at full capacity in all our plants. In fact, we have been adding customers: in one of our plants, more than 100 new retailers over the past year. We have certainly altered the balance of production to more moderate and luxury collections to meet the needs of the market and our retailers, but overall, we’ve had consistent production.

We’ve made no changes to our inventory levels. We’re at the optimal stock level. We order based upon our demand. We don’t bring in more than we need, and we don’t have any trouble sourcing. All the supply chain disruptions and such seem to be behind us at this point. We do stock a little heavier than normal at times, but we take advantage of buying opportunities.

Our supply chain was actually helped by adding two new plants this year, one in Rialto, Calif., and the other in Chicago. With more capacity to meet demand, we were purchasing more raw material, and that translated to greater buying power.

We’re heading back to more traditional sales levels like we saw pre-pandemic. Last year, everyone was so focused just on producing existing product, but now there is a real hunger for new and innovative products, which is where we’re focusing our efforts for the remainder of the year.

Blu Sleep is not seeing a decline in regular sales; we have seen growth with customers looking for something new to spur their own growth concerns. Our partners have had to look at the addition of better business practices such as their e-commerce. In the big picture, it increased the urgency for many such as Blu Sleep, for a new vision of growth.

Business and production planning during the pandemic have made us revise our objectives.  We’ve had to revise lead times due to possible shortages and production time. It’s also been an exciting opportunity to identify innovations and new ways of working that may not have existed before. We have taken a step-by-step approach to create a detailed action plan that addresses specific business and workforce activities.

We are in a good position when it comes to inventories. The only problem we have had is with a few items that have seen bigger growth than expected, as customers are trying new products.

Forecasting has been a bit tricky as customers always want product available, but many are not willing to put in a formal forecast. This has created a need for improved and constant communication to be able to shift rapidly to meet those unexpected demands.

While we did see a softness in volume during the second quarter from some customers, new programs that we are launching with others are generating new revenue for us. Because of our national manufacturing and distribution footprint, Corsicana is the only national mattress brand that is exclusively committed to the value segment in the industry. That is leading to new opportunities for us.

One area of key focus for me was to streamline excess capacity to improve effectiveness and efficiency. That led to the closure of our Indiana and Virginia plants, whose production was easily absorbed by facilities in adjacent regions. I believe that we currently have the appropriate production model to support our business today.

New orders are on the upswing, and we are keeping up with those orders. Our backlog is growing, which is a good thing, and we can see that our focus on process improvement is already yielding results. Customers are telling us we are servicing them well, and that’s key to our strategy for achieving competitive advantage.

We launched many new products at the start of 2022, which have been well received and executed, and we have developed and launched new programs for key customers. We are now looking at how we can more efficiently deliver those products.

Since we excel in value price points and products with profiles of 15 inches or less, we are examining new ways of mattress compression and packaging to innovate the way we distribute and looking at our distribution model to refine packaging that can create further efficiency. One year from now, we expect a substantial portion of our new products to be packaged in compressed forms.

It varies by business segment, but overall demand at Covington remains good through the second quarter, especially demand for value-oriented collections. We have experienced more day-to-day volatility than pre-pandemic; however, we are tracking very consistently with 2021 results.

Our diverse customer base helps buffer that volatility. For instance, robust retail fabric sales helped to offset some of slow down with furniture manufacturers who were dealing with full warehouses. Scarce availability for shipping containers had the greatest impact to Covington’s production year-to-date. Product was flowing, but we had to flex our distribution and warehouse staffing to handle fewer but larger containers that sometimes arrived in bunches. This actually has prompted us to investigate installing more automation in our warehouse to improve efficiencies.

I feel Covington’s inventory position and service levels are very respectable, at least that is the feedback I receive when I speak to our sales team and customers. In the early days of the pandemic, we completely revamped our demand planning and forecasting system, and we are now benefitting from these new analytics. Our inventory levels in South Carolina are consistent with a year ago, with product constantly flowing. Our current backlog is actually higher than a year ago; … this is due in part to our having now fully integrated Magnolia Home Fashions into Covington’s business model. The Magnolia print collection has resonated equally well with furniture manufacturers and retailers, and it is very-well stocked.

We aren’t projecting any reductions to new product introduction nor SKU count for the balance of 2022 and for 2023. However, we did make a conscientious decision in 2021 to reduce new introductions to increase focus on the service of our existing programs which had been disrupted. One of our takeaways from the pandemic was to slightly winnow down new introductions and focus on improving service. We think this will be the new normal for Covington.

We have heard retail traffic has declined in some geographies, however, the shift to higher-end products has helped to offset the unit drag. Fortunately, our custom private-label programs are designed to support higher price points, which has provided big wins for many of our customers. We believe the retail customer is being more thoughtful about where and how they spend their money, so offering value has never been more critical. We are grateful for our customers who continue to expand their assortments with our tailored solutions.

We have built a manufacturing platform designed to adapt and our vertical integration model gives us a lot of flexibility. As the mix of sales shifts to more premium products we have adjusted including making sure we have the materials we need and production capacity to serve our customers.

We are in good shape to continue to deliver dealer-designed programs as a result of our lean practices and skilled labor pool. We are able to keep up with orders as we continue to grow our business.

Innovation and customization are at the heart of our company. As a result, we have ramped up our investments in new product development and proprietary component design. Our flexible and efficient operation allows us to go from concept to production faster than most traditional businesses.

Since expanding our leadership team we have been able to focus more of our time on the future while continuing to execute in the present.

While we saw a slowdown in April and May of this year, Memorial Day exceeded our expectations with sales even better than we saw in 2021. It seems the current industry challenges with inflation, rising energy and gas prices, the Ukraine war and other issues are affecting lower-priced mattress purchases more than the higher or luxury price point of $2,000 and above. We’re hearing that consumers with higher incomes are still out shopping and are willing to invest in a good night sleep.

We’re not seeing any negative impact on production. In fact, the slight decline we saw in the past two months (April and May) allowed us to reduce lead times.

Our orders are all made-to-order, so we don’t keep a stocked warehouse. That being said, our lead times are normal, and we are keeping up with all orders.

The demand for luxury bedding is still strong, and we are forecasting to finish the year ahead of last year, thanks to our current and new retailers. We’re moving forward with our product development strategy and plans for the rest of this year and into 2023 for both the U.S. and export markets. Our goal is to ensure that our product offering with Aireloom, Kluft and Marshall continues to remain relevant to our retail partners and end consumers.

We’re also committed to reducing lead times and increasing service and delivery to our retail partners who are telling us that luxury bedding sales are going strong and outperforming their lower-priced mattresses. We are planning to expand capacity with the addition of a third U.S. factory, which we expect to be up and running by the fourth quarter this year.

Our order rate for May is actually up over last year, but the last two weeks were off around 15%. I still think the summer will slow around 15%.

We will continue to expand our capacities through the summer and the rest of the year.  I think this is a short-term dip. We want to use it to catch up on our lead-times.

We remain optimistic and continue to ramp up our marketing efforts.

There’s been a slight softening of our GhostBed.com sales, which we believe is partly due to the economy and world events.

However, we have seen a much stronger response from our retail partners and new retail partners who want to put brands on their floor that will drive traffic like our Venus Williams collection. The ever-growing collection has been a hit for retailers all over the country, which is why we’ve made updates and added some new and exciting products to the line-up.

Overall, our business is solid, which we are very fortunate for.

While the last year has seen supply chain struggles, it hasn’t impacted our current production in any major way. We have long-term relationships with our production facilities so their level of commitment to us in unmatched. In fact, we’ve added a plant to support sales growth over the past few months.

GhostBed has always maintained a high inventory level, with seven warehouses across the country. We also have multiple factories. All of our mattresses are made domestically, so there weren’t any real issues.

We are constantly working with our retail partners to find better ways to design and deliver the right products and marketing, as we navigate through the end of the year and into 2023. We always continue to look for new, innovative products, so our development process never ends.

There is a little softening in the market right now, mainly in the value segment. Moderate and luxury price points continue to do well for us, I believe because of the profile of our dealers (independent and with a customer base more focused on quality and service).

The other trend we are seeing is a pickup in our hotel and university/private school business, which is strong and filling any gaps we may see from the softness of the value segment.

We have not seen any interruption. Between our moderate and luxury collections, which are strong, and the increase in contract business, we have maintained a busy production schedule.

Gold Bond’s business model functions around orders coming in on Mondays and delivery of those products that week. We do not operate with any backlogs and have been utilizing a successful, just-in-time production platform for decades. Also, our long-term loyalty to our suppliers has insured no interruption of supplies so we can meet those commitments.

It is too early to really predict the true impact of the Fed’s economic moves through the remainder of the year. There is no doubt that will influence the mood of the consumer. If there is one thing we have learned from the pandemic, it is the importance of being nimble to respond quickly to marketplace changes. We will continue that strategy over the next 12 to 18 months.

However, we are also seeing an interesting trend from consumers under 40 years old. Unlike their parents and grandparents, they are making more of an investment in better quality sleep, and they are driving up AUSP with our retail partners. This trend is significant for many reasons, and we believe an important sign of optimism for the near term.

We are busy, and we are not experiencing the wild swings of the past two years that have been so irregular.

In my opinion, business is normalizing to pre-pandemic levels. We are a few points shy of budget, but we budgeted for a significant increase this year. We noticed a change in February when the war broke out, and I think all the inflammatory news coming about inflation on top of that made it sound worse than it really is. For us, the sky is not falling; it’s just a more challenging environment.

Business is consistent, and we are no longer experiencing the supply chain issues that made everything so erratic during the pandemic. We are able to plan better, and that means we’ve been able to normalize production.

Inventory fluctuates as business fluctuates, but we have plenty to meet our demands, and we’re meeting all of our delivery commitments, which is important. Based on what happened to the supply chain last year, we were over-cautious and made significant investments in securing components and materials to ensure we can weather any unforeseen disruptions down the road.

We have created a complete portfolio spanning the ultra-premium luxury categories, led by our technology driven Smartlife product which continues to be received very well as it rolls out and to bring new customers into the stores. We have introduced a second generation Smartlife mattress with advanced cooling technology, and our team continues to actively develop product that stands out in the marketplace to give consumers compelling reasons to buy.

While the industry is seeing a tightening of demand across the price spectrum, we believe there has never been a better time to take share and continue to grow our business.

We ended up ahead in prior year orders in May. I will say that we are seeing kind of a return to pre-pandemic demand. It’s turned more regional.

On a unit volume level, things have decreased significantly. Legacy is up over 2021 significantly but down unit wise.

Some retailers beat last year’s Memorial Day. Others were flat. Others were behind. The majority of areas still reported higher business but not all. Southeast Florida and Midwest are seeing the strongest results. Metro New York is not doing as well as, say, Southeast Tennessee.

Optimistic for future. The economy in short term may see some bumps. Employment still strong, but Millennials have more wealth.

Freight rates are also slowly coming down. I recently traveled to Asia to visit eight factories. All had available capacity. That has to do a lot with price increases over the next few years. On a unit volume level, things have decreased significantly. Open up capacity on ocean rates. Legacy is up over 2021 significantly, but down unit wise.

Due to our forward position in the value chain, we began to see signs of demand softening in Q4 of 2021. The ongoing geopolitical uncertainty, disruption in the energy markets and overall inflation has continued to impact demand through the first part of 2022.  Our primary focus is on our customers and being in position to support their needs. We are following the signals from our customers and meticulously balancing production and inventory to maintain a solid supply position.

We’ve learned from the experiences of the last two years, applying many of those best practices as we continue to diligently monitor global commodities, transportation and labor. We are in a good position to support our customers.

Our goal is to always employ an innovation mindset, understanding the market, assessing challenges and developing solutions. We continue to invest in developing products to meet the needs of our customers and their consumers.

We are not seeing any demand decline on our end, and we’re tracking above where we were last year. That’s really saying something because last year we had our best year ever. Despite the recent increase in interest rates, food and gas prices, we haven’t been impacted.

We’ve been consistent. We recently purchased our own foam plant in Italy, which has helped a lot with our capacity and the ability to produce our Italian-made products quicker and more efficiently.

We are in a strong inventory position.

Over the last year, we’ve revamped all of our product lines, including the MagniStretch, MagniCool and Dolce Vita collections, which continue to be some of our best-selling products and are currently available in retailers all over the country. Our main product center in Italy has the capacity to produce more than 10,000 mattresses a day, so we can more than accommodate our global demand.

We are not altering a strategy that has been working for us for many years. Magniflex stands apart in product design because of our high-end Italian design, paying close attention to every detail, which can be seen in our new MagniStretch and MagniCool collections. The secret to our success is that we are always actively developing new products that excite retailers and consumers. We’re not slowing down at all. We’re in growth mode, working on innovative ways to promote our wide range of bedding solutions, right down to improving the design and navigation of our website so we can capitalize on the demand we continue to see for our mattresses.

After Memorial Day sales, we have retailers in some parts of the country remarking they had excellent sales while others were slow. There’s too many variables going on right now to gauge the depth or length of a slowdown. Is there one? Yes.

We’ve worked to adjust our product mix to include more production from our Mexico plant with both development of new products and bringing production of some of our bestselling collections here.  Increasingly long lead times on Asia imports has made it harder to react quickly to changing demand.  We feel fortunate that we have such a great resource close to home with our Mexico factory.

Last year our lead times stretched to as long as nine months in Asia. We’ve had all the goods we’ve been waiting so long for arrive in the past two to three months. We want to fulfill our backlog and base new orders on future demand.

Our price increases over the past 18 months have been pretty dramatic when compared with historical increases, but they have also been mostly due to ocean freight cost increases. We are hopeful that as container rates stabilize, we will be able to lower the surcharge that we were forced to implement on our import collections.

We’re focusing our attention on having our sales reps work even closer with their buyers to support them in any way we can but not in any additional advertising.

Like retailers, manufacturers and distributors, we have select collections that we’re promoting.

It’s important that we have inventory available for our customers, especially after the collective frustration of the stock outs of the past couple of years.  But collections come and go, and we are moving through some old inventory to make room for the exciting new products that we introduced this spring.

It’s important that we have inventory available for our customers, especially after the collective frustration of the stock outs of the past couple of years.

Like most of the industry, at the onset of the pandemic we saw a drop in demand. However, in the past 12 months, we’ve seen demand pick up quickly. Customers are coming to us because they want to onshore the sourcing of their products, including the fabrics. Being headquartered in the U.S. with multiple manufacturing facilities across the Southeast, we’re uniquely positioned to meet that demand.

It’s no surprise that labor challenges are affecting every industry and really challenging operations at a variety of levels. We’re seeing this in our facilities as well as with raw material supply, but as a large, diverse textile company, we are in a better position than most to handle the demands of the industry.

Our raw material inventory is up from 2021 so that we can be ready to service customers as we’ve seen the demand rebound in 2022. Our finished goods inventory is on pace with where we were in 2021, and we have purposely kept a low inventory of finished goods to be able to react to market trends faster. We just announced an exciting introduction for our company: our entrance into the outdoor fabric market, and the products that make up the first collection are in stock and ready to ship. That’s something we’re especially excited about knowing that the demand for performance outdoor fabrics is through the roof right now.

While we’re prioritizing servicing our existing customers in a timely manner, we’re seeing the highest volume of new product inquiries than we’ve seen in many years.

Retail traffic has seen a decline, but it’s important to keep in mind the demand level we saw during COVID. Our OEM business has seen a slight drop this year due to some larger accounts, but Mlily branded business is up from last year.

Overall, we are well-positioned to withstand some decline in demand for a while, thanks to key decisions by our leadership team over the past couple of years. Due to our diligent adjustments, we are always actively balancing production, inventory and materials, so there is no significant impact in any of these areas.

Our five warehouses across the country are stocked to serve customers. We are not canceling orders, but we change numbers on purchase orders to adjust appropriately to the rate of sale and moving price points. This is not specific to the current state of the economy but more about how we closely monitor and assess market needs in line with our just-right inventory strategy.

We’ve been here before in terms of the movements of the market and economy. We expect the lower ticket product in the $699 to $799 for queen range to be the more active category. Mlily is known for building incredible value at these price points with the quality of materials and workmanship that are put into the beds. So while demand may be soft in the second half, we are confident that we can continue to bring products that meet consumer needs and pocketbooks.

We hear and see from some retailers that business is beginning to slow; however, our orders remain healthy.

Our production has not been impacted at this point however we are keeping a close eye on the market and have our standards set to react quickly with any changes.

We haven’t slowed in developing product. That’s the mainstay of our industry, to develop product that is current and trendsetting.

Outward has not seen a softening of demand for our Aperture Platform. In fact, demand has only intensified because innovative retailers and manufacturers are not pulling back in the uncertainty, they are moving to leapfrog ahead of their competition by continuing to invest in ways to make their businesses more effective and efficient.

Manufacturers understand that investing in dynamic imagery will help them sell through any excess inventory quickly and can help their dealers effectively promote products to consumers. We cannot install product fast enough. We are very blessed by an overwhelming response to the Aperture Platform in the home furnishings industry. It is a good challenge to have.

To meet this business growth, we are hiring in all departments and paying close attention to our customer success and onsite installation teams, who are responsible for implementation with our customers. We recently added two well-regarded home furnishings executives to our team who are working diligently with our customers.

We’re completing installs of the Aperture Platform’s rig as rapidly as our teams can move because the home furnishings industry has a need for our product. To keep up with the growing demand, we’ve hired 35 people in the last eight weeks.

The demand for the Aperture Platform has sent our product development into overdrive because we need to address the increasing diversity of customers. We started out focusing on the core furniture categories of case goods and upholstery, but we already see demand for what we do increasing in textiles, rugs and lighting. Every single month we are adding features, new backgrounds, updates and improvements as part of our software release cycle.

Demand has definitely slowed down tremendously. Especially from second half of last year and beginning of this year. Slowing demand combined with the lasting effects of global supply chain crisis isn’t good. The lack of labor and high freight rates, it’s all bad.

We’ve implemented a significant reduction in our ocean freight surcharge percentage as a result of declining ocean freight costs. We’re monitoring the situation weekly and plan to eliminate it completely.

We’re optimistic people will need furniture forever. We’ll just have to ride it out of there is a recession. Hopefully it’s just a soft one. We’re combating it by getting into new product categories.

While there is certainly a slowdown in our industry, we are maintaining strong levels of sales at Phillips Collection and business remains up for us as we approach the midway point of 2022. We attribute our growth to residential and commercial interior designer business continuing to boom.

While we are still experiencing an increase in order volume, our margins, like everyone else, are tight. Inbound and outbound freight costs remain high, material prices are ever increasing, and it has made us keenly aware that we are approaching a breaking point industry-wide. Our customers have absorbed price increases from all of their vendors, and at a certain point the consumer will not be willing to pay those higher prices. So as demand softens, can we afford to lower prices? It’s a difficult question that we all have to address.

In this constantly shifting landscape, we have to find creative ways to reallocate funds and remain profitable. Clearing out inventory is always a great place to start, and with more tools at our disposal than ever to do so, we don’t have to purge those goods at pennies on the dollar anymore. We are always looking at new ways to move product faster without sacrificing margin.

We are a growing organization and thus see no future without investment in inventory. That is where we are putting our dollars. We base our purchasing on hard data but also with the guidance of past successes. Our bestsellers have to be in stock no matter what. Our introductions and restocking of the slower sellers are where we can be less aggressive. Throughout the pandemic we have prided ourselves on having incredible inventory and have become a resource to new customers who couldn’t find product elsewhere. It made us a consistent and dependable supplier to many existing and new clients.

We’re in a fairly unique situation in that we’re not seeing a decline as much as we are not seeing the usual summer increase. Historically speaking, we hear a starting gun go off with a bang around Memorial Day and then experience increases of 15% to 20% throughout the summer selling season before things settle back down again in the fall.

This season, while we’re still consistently seeing slight increases month over month, but it’s not the usual explosive summer growth we’ve traditionally experienced. Even so, we’re still experiencing positive growth, and we’re certainly not seeing substantial month-over-month declines in revenues or units.

We have not made any substantive changes to our production model. We are always refining processes and looking for new efficiencies, but because sales remain strong, we see no need to make any modifications at this time.

We build everything to order within five days and don’t stock finished goods, so inventory management is not a factor in our business. That said, we do have a substantial backlog beyond our retail channel in our dorm and contract business throughout California as students are returning to in-person learning and dorms need to be refreshed. Likewise, our hospitality business is bouncing back now that people are traveling again, and mattresses need to be changed.

We’ve adjusted our forecasting down slightly because we believe that general economic conditions, coupled with the unusual surge in business we have had in the past two years, will lead to a cooling off period in the industry through the end of the year. But it really has not had a substantial impact on our product development cycle.

In terms of where the consumer will be with their spending, I think this time next year will look much different. We will have learned to absorb supply chain disruptions due to the war in Ukraine, particularly in oil/gas prices. As we start to see some lower energy prices, consumer confidence will rise. That may be farther out, but I think the most likely scenario is that consumers will adjust to this new normal, just as they did during the pandemic. People are highly adaptable.

In 2021 Porter Designs started searching for manufacturing partners to create “Furniture with a Conscience.” Even though business was booming, we began noticing shifting demands from the retail customer, as well as our own awareness as a company, to make changes within our furniture production in order to save the planet.

Our first initiative was planting 10,000 trees with the Earthworm Foundation in India to replace our use of solid mango, sheesham and acacia woods, as well as add green cover to reduce carbon emissions.

And now we are manufacturing in Mexico using upholstery components which are recycled and recyclable. This includes the fabric, frame, springs, feet, and packaging. At the High Point Market, we introduced our new sustainable “Good Earth” upholstery program which was wonderfully received.

While furniture demand has slowed down since 2021, we’re definitely seeing an increased demand in sustainable initiatives. We have an entirely new Good Earth upholstery collection to show at Las Vegas Market. Our plans for the second half of this year and into 2023 are to continue this initiative and expand the Good Earth offerings.

We’re very aware of the current economic climate and monitor change very carefully; however, our strategy is to continue to innovate with state-of-the-art products that add value. This innovation has helped make up for the stagnant market conditions that we’re all experiencing.

We are implementing production more strategically. In addition to New Jersey, we have created a state-of-the-art manufacturing and distribution center in Troy, N.C., so we can be more responsive to our customers in that region. We are doing the same in Phoenix, where we will have a plant online shortly.

We have a solid backlog and are watching inventory levels closer than we ever have. We have a healthy log of customers and are focusing on managing everything as efficiently as possible.

Demand is definitely growing for our glass-free FR barrier solutions, mainly the IQ Fit line-up of products. Because of the high demand, we are steadfast in developing new solutions to make our products as efficient as we can. We are optimistic about the continued growth through the end of the year and into next year.

We’re seeing the same thing that others are seeing. There are the little bumps with the traditional bedding sales holidays, but overall across the industry there is a sizable decrease. A year ago it was very different with the high consumer demand. Everyone knew it was going to slow down, but no one could foresee the amount.

We have plenty of inventory, and we have added suppliers to the mix based on last year’s supply chain. Puffy is in a great position from a supply standpoint, and we can react very quickly.

As we continue to grow our retail partnerships, we’re constantly looking at how to evolve our product mix. We’re looking toward 2023 for new additions to the line for products that make sense for the marketplace in a timely manner that works for our supply partners and our retail partners.

We have certainly seen a softening in the market, which is only natural after seeing the kind of demand that we saw for home furnishings since the beginning of the pandemic. Now inventory levels are a little bit higher, which will result in less demand from our customers. That said, there is still a healthy appetite for upholstery fabric from what we can see, just a more normalized and slightly declining market.

We always try to make smart decisions about producing the right amounts of inventory. Thankfully, we still have a solid backlog and good predictive capabilities. In general, we want to make sure we maintain good stock levels of our best products so we can be quick to service ongoing programs and urgent projects.

Our backlog remains higher than any time in our history before the pandemic, as is our inventory level. We have more than 50,000 rolls of fabric in stock. We’ve been lucky to work with great partners who have in general kept us in a good position to react to customer needs and navigate the many surprises that have come over the last three years.

Our product development team is full speed ahead. At the beginning of the pandemic, we had a conversation about whether we should tighten up and put out less new product, but we decided then that as a product development company we wanted to keep our design momentum. That strategy worked out great for us in 2020, and 2021 and amidst the uncertain times, we continued our development cadence, releasing 300 to 400 new SKUs every six months. Our customers appreciate that dedication to new product, and we plan to follow the same model into any kind of economic downturn we might be predicting with new collections slated for fall, winter and spring.

We are very happy with the current demand at our Richloom Weaving facility, located in High Point. Despite the industry slowdown in some segments, we are in a period of heavy growth.

Even with the increase in demand, our domestic suppliers have done an incredible job keeping up with demand. Since 95% of our yarns are sourced within a 100-mile radius of the facility, we have been unaffected by the logistics upheaval in the industry. Having a domestic location has given us the ability to react quicker and remain efficient.

Our backlog is at a place we are happy with, supported by significant raw materials.

We are constantly working on new yarn development, colors, etc.; however in 2021 we were significantly hindered by the increase in production demand, which adversely affected our ability to run trials and be innovative. Now we are once again moving full speed ahead with development of new yarns, weaves and other technologies.

Foot traffic in retail stores for furniture and mattresses has declined slightly compared with the same period last year. There will always be demand for high quality products that offer unmatched value in the marketplace. As we all know, 2021 was somewhat of a phenomenon, and comparing this year’s figures to last year may not be fair.

Our business is set up to be very nimble and adaptable to shifting market conditions. Also, our expanded distribution in new markets year after year have allowed us to grow even when demand slips. When you approach manufacturing with a bespoke product, where making one at a time is the permanent philosophy, volume is never a consideration.

Shifman maintained a unique position throughout the pandemic of shipping all orders on a timely basis without fail. We experienced enormous pressure and increased costs to satisfy that goal. The current situation is a bit more normalized, and some of that pressure has been alleviated. We have plenty of stock and are up to date on all our orders.

The post-pandemic demand never affected our product development. In fact, we created eight new lines during that period, and they have all been very well received and are selling incredibly well. Forecasting gets more difficult, but we see many opportunities within this great industry for growth in 2022 and 2023.

While it varies by dealer, overall, we are seeing a reduction in demand on a year-over-year basis. We are, however, offsetting the loss with new business and expansion of product assortment with existing dealers.

As needed, we are adjusting our production scheduling and staffing levels to align with current demand. We are able to remain current to the needs and requests of our dealers.

Southerland is on track with our plans for product updates and new development for fall 2022 and Q1 of 2023. Forecasting has always been critical for proper service levels to our dealers, and that continues in our current environment.

Spring Air’s business is actually running a few percentage points ahead of last year, when we added so many new retail customers and also gained new placements with existing accounts. We have been gaining momentum throughout the first half of this year with the roll out of our newly redesigned Chattam & Wells brand with key retailers across the country, including more than 100 Mattress Firm stores. While we are hearing there is less foot traffic in stores, our volume is up in terms of overall sales.

We continuing to grow our production and capacity because we are not interested in staying where we were yesterday or even where we will be tomorrow. Our production capacity is growing because we are adding licensees, domestically and abroad. For example, many of our domestic licensees have expanded their territories, to the point where we only have four states remaining.

We build everything as we receive orders. We are running three-day lead times on all our standard products and from five to seven business days on Chattam & Wells, which is amazing considering the brand’s extremely high stands and eight-stage production process. We are easily keeping up with orders because we do not rely on imported goods to make our beds, and our investments in machinery mean that we have the capacity to make more than 3,000 spring units a day on the East Coast, and more than 500 a day in the West.

We have also invested in foam cutting equipment throughout our growing licensing network to reduce supply chain challenges for the component that has plagued much of the industry. We bring in blocks of foam and cut as needed to any size a licensee needs, which translates into greater speed and efficiency.

Spring Air’s objective is to have a pipeline of innovations ready to roll out on short notice, because we believe consumers will be ready to try a variety of new products once the economy improves. Product development should never stop, because any complacency during a downturn will mean you are behind the ball when business picks back up.

The last three years have been a roller coaster. The real benchmark is 2019 units, and we are well above that measure.

We would still consider our incoming order rate to be very strong compared with historic levels, and we still have a significant backlog, so we are still stretching production. We purchased a new factory in Morganton, N.C., to help meet demand.  We are actively hiring skilled artisans in all areas of our company.

One of the advantages of a significant backlog is the ability to forecast exactly what components in materials are required. We have a sophisticated demand forecasting system that allows us to be fairly accurate. The only thing that we cannot control are supply chain delays.

It is highly unlikely we will lower prices in the near term. For this to happen, inflation would need to go away, and our suppliers would need to lower their prices. What is more likely is the merchandising of product and introduction of more products at entry-level price points in our competitive set.

The biggest drain on a furniture manufacturer is obsolete inventory. We do our best to limit it to manageable amounts.

Looking forward, we are neither optimistic nor pessimistic. We try to be realistic. On the negative side, we are dealing with increased interest rates, and the highest inflation in 40 years, an unpredictable stock market and a shift in discretionary spending back to travel.

On the positive, our target segment is affluent. Over the past two years their net worth has increased significantly. Furniture has always been a luxury of enduring value, and our niche in the marketplace for premium custom furniture is evergreen.

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