Cindy Krebsbach used to like to browse for home furnishings at stores, including HomeGoods and Stein Mart, and would often roam through garden centers, looking for plants to brighten her home in Boca Raton, Fla.
"I stopped looking so I am not even tempted to purchase," Krebsbach says. "With our savings down with the stock market, and the price of food, gas and products that are a necessity going up, I've curbed all spending on things I don't absolutely have to have — especially for the house."
To the list of casualties from the housing recession — sinking home prices, waves of foreclosures, weak consumer spending, battered home builders — add another one: struggling home improvement and home furnishing stores.
Retail stores of all kinds have been hurt by the crisis in the mortgage and real estate industries. But the crisis has proven especially painful to stores that specialize in home merchandise. With fewer people buying homes, fewer people need new furniture or furnishings.
Even many homeowners who aren't moving are feeling so financially squeezed that they see redecorating as a luxury they can't afford right now.
People who face soaring gas and food prices still need to buy clothes. But they might not feel compelled to splurge for, say, a new sofa if they haven't already busted through the seat of the old one.
"The home business stinks right now," says retail strategist John Champion of consulting firm Kurt Salmon Associates. "The housing market softness and consumer confidence being almost half what it was a year ago is a one-two punch for home retailers. It's having a big impact across the board — in home departments, furniture stores and at Lowe's and Home Depot."
Last year, 15 U.S. furniture store chains went out of business, up from 10 closings in 2006 and five in 2005, according to the trade publication Furniture/Today. Two of the 100 largest chains — Wickes and Domain — have closed their doors this year.
"The list of the dead is getting longer and longer," says Ray Allegrezza, Furniture/Today's editor in chief. "And it's not like the stores that competed against them are now fat and happy. The business has not rebounded."
The sales decline for the home furniture industry is the worst since the 1982 recession, says Jerry Epperson, a Richmond, Va.-based investment banker who follows the industry. Hardest hit, Epperson says, are stores catering to the lower end of the market, including Ashley Furniture and Rooms to Go, and those based in economically vulnerable states such as Florida, Michigan and Ohio.
"They are finding business very difficult and going aggressively after customers with promotions we haven't seen historically," says Epperson of Mann Armistead & Epperson.
What that means, Allegrezza says, is that the deals available now on furniture are among the best that consumers have ever seen on a wide scale. It's not just price cutting that's made this a timely moment to buy furniture. In addition, overseas factories have warned that their prices are rising by up to 8%, which will likely be felt by U.S. shoppers in coming months.
Still, Epperson says, many shoppers seem to feel there's "no urgency to the purchase" when it comes to furniture. He warns that prices on leather and wood furniture could rise by up to 20% by the end of the year, thanks to the weakening dollar, the growing cost of raw materials, reduced export incentives and other factors.
Recently, Home Depot hd CEO Frank Blake declared 2007 one of the worst years ever for his company and predicted that store sales will be off about 5% again this year.
Deborah Murphy of Earlysville, Va., is still shopping at Home Depot and Lowe's low— but it's for a two-car addition that she and her husband built themselves because they couldn't afford to hire others. As for jazzing up the inside of her house, Murphy says that will have to wait.
"Nothing is broken," she says, "so why replace it just because I think (new furniture) might be nice to have?"
A possible silver lining
Some in the home-oriented retail business are holding out hope that the bleak economy, in a perverse way, will eventually deliver them a helpful shot in the arm. Their reasoning: With gas prices at record highs and little money left in many budgets for family trips, more people will be staying home in coming months. The more hours they're forced to look at that tattered couch, the more they'll feel compelled to pay for a new one. That, at least, is what retailers hope.
"There's a cocooning effect when travel and even going out to restaurants is impacted," says Farooq Kathwari, CEO of Ethan Allen eth. "Home is an important refuge. People still want to have a beautiful home."
That helps explain the thinking behind Debbie Cortopassi's home-furnishing shopping trips. Her home was just completely remodeled, so she's not venturing out as often, because now, "I love being at home," says Cortopassi of St. Louis. Yet, she still buys things that "add to the comfort of our home."
Some say, however, that such behavior has become the exception rather than the rule.
"People will be staying home more, but they will not be spending more for home goods," says Christina DeMesquita, a former housewares manager and buyer for department stores. "They will be trying to pay for gas and their mortgages."
Ethan Allen is betting that DeMesquita is wrong. Though the chain closed 18 locations by the end of March, it will have opened at least 20 new interior-design centers by the end of August. The company is turning its furniture stores into full-scale interior-design centers — showrooms that help customers conceive different looks with their furniture and accessories. Its goal is for fewer stores to serve more people with better locations spread through larger geographic areas.
Ethan Allen is also hoping that one particular service it offers — free design consultations in customers' homes — will help it compete better in a tight-fisted economy, even with fewer locations.
"If you're just selling furniture as a commodity," Kathwari says, "you have a tougher time."
Ethan Allen is also hiring more interior designers, many of whom are young and bring a more cutting-edge style to the once-staid retailer. Allegrezza says these "young, hip designers" are one reason Ethan Allen hasn't been as hard hit as many other furniture retailers. Epperson agrees that Ethan Allen's "in-store personnel is second to none." That said, he notes that its higher-end customers aren't likely suffering as much in the current housing mess.
What's essential in selling furniture in this economy is convincing people that it's "important for their overall being," says Ann Raider, an executive vice president at Affinity Solutions, which helps retailers, including Home Depot and Pier 1 pir, build customer loyalty.
Furniture retailers are "highlighting the comfort of the home," Raider says.
They also recognize that more people now feel as though any furniture they buy needs to last, so it's "becoming an investment." That sentiment has led some retailers to revive more "safe colors," she says, such as beiges and browns that people are less likely to grow tired of.
HomeGoods, part of TJX tjx (which also owns T.J. Maxx and Marshalls), says its business continues to grow, and it credits its "off-price" discount model. The 289-store chain sells home "fashions," which stress smaller home-accent pieces rather than large-size furniture (though it does sell some big pieces).
"HomeGoods has been doing absolutely terrifically over the last three years," says TJX spokeswoman Sherry Lang. "We have always seen growth through recessionary times."
Still, even discounters need to make adjustments in this economy. Lang says HomeGoods has been keeping inventories leaner and has ordered its buyers to pursue merchandise more aggressively to snag the best deals.
Is home-related retail destined to suffer in these tight-fisted times? Not, Champion says, if stores learn some lessons from discounters including Wal-Mart wmt.
"They need to talk the money out of the pockets of consumers," Champion says.
Getting them in the door
Most important is simply drawing consumers into stores — something Wal-Mart achieved successfully over the holidays by focusing attention on a few tantalizing deals on home entertainment and other products. Retailers including Home Depot and Sears shld (which owns Kmart and Lands' End) are also offering deals linked to the tax rebates that many shoppers are starting to receive this week.
"If you put a good value in front of people, you can improve sales," Champion says. "There's money to spend, but it's discretionary."
Yet, while there may be plenty of merchandise for the home in stores, cutbacks in staffing could lead to customer service snags that might turn already wary shoppers away.
"It's more difficult to respond with service in these times," Champion says. "But there are things that the clerks in those stores can do, like make sure the consumer feels welcome and asking if they need help."
To that end, many home-oriented retailers are offering long-term periods — sometimes up to three years — before customers owe interest or even up to two years before they need to make payments on purchases. But Champion says he thinks that's probably a mistake for the stores.
"That's driving customers to buy who are questioning whether they are going to be able to pay," he says. "That's not a particularly good business model."
Besides, such deals often carry back interest when they aren't paid up on time, making them unwise for anyone except shoppers who know they'll have the money and won't forget to pay.
If someone can't make the payments after the term is up, the stores can always take the furniture back, but as Epperson notes, "What's left to repossess?"
Jean Brown of Charlotte isn't buying any furniture, or any other major items for her house, no matter what the deals. Her total home purchases of late? A ladder, paint stick and paint.
Krebsbach, too, says she knows that if she browses at home stores, she'll wind up buying products, such as bathroom mats or tissue-box holders, that she really doesn't need.
Still, she loves to score good deals, and, after all, you can't find them if you're not shopping. If gas and food prices eventually come down, she may step up her shopping.
"Then," she says, "I'd be more relaxed about it."