Furniture retailers struggle with depleted inventories after Vietnam lockdowns - The Entrepreneurial Way with A.I.

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Friday, December 3, 2021

Furniture retailers struggle with depleted inventories after Vietnam lockdowns

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Dive Brief:

  • Furniture companies face delayed orders and depleted inventories as factories in Vietnam work to ramp up production and address a backlog of orders following months of coronavirus lockdowns.
  • Pottery Barn parent company Williams-Sonoma is experiencing inventory delays, particularly in children's home furnishings, as suppliers in Vietnam work to boost production, CEO Laura Alber said during the company's Q3 earnings call. La-Z-Boy expects a temporary decline in sales in its casegoods business due to shipping and manufacturing delays, CFO Bob Lucian told analysts in November.
  • The two companies are working to shift manufacturing and sourcing to bypass transportation delays and other bottlenecks, executives said. La-Z-Boy is increasing production in plants in the U.S. and Mexico, while Williams-Sonoma is expanding its supplier base outside of Vietnam.

Dive Insight:

High demand for furniture and a slow manufacturing rebound in Vietnam is expected to keep inventory levels low well into 2022, executives said.

Factories in Vietnam reopened Oct. 1 after nearly three months of coronavirus lockdowns, and manufacturers face a large backlog of orders in addition to a steady stream of new ones. La-Z-Boy is only now shipping out orders it placed with suppliers in July.

"Our biggest challenge is the fact that, everything that we had ordered from them in July is all pretty much gone," Lucian said. "We received that and we're now shipping that out. It's going to take a while to fill up that supply chain and start getting product on the water coming over here."

Williams-Sonoma is experiencing record-high backorder levels due to delays out of Vietnam, and the company doesn't expect inventory levels to normalize until mid-2022, according to Alber.

Wayfair also expects "ripple effects from factory closures in Asia" to "cloud the picture through much of 2022," said CEO Niraj Shah during a Q3 earnings call.

Vietnam rose to become a major furniture exporter after U.S. imposed tariffs on furniture made in China beginning in 2018, pushing companies to find suppliers elsewhere. The country exported $10 billion worth of furniture in the first half of 2021, up 70% from the same period last year, according to an October webinar presented by the Vietnam Trade Promotion Agency.

But factory shutdowns in July quickly led to a steep decline in exports. Wood-based exports, used to make casegoods and other types of hard furniture, dropped by 30% year over year in August, according to the webinar.

Trade officials estimated it will take up to six months upon reopening for the country's manufacturing sector to recover. In the meantime, companies are looking outside of Vietnam for new suppliers to avoid port delays and other transportation bottlenecks.

Williams-Sonoma, for example, is beginning to source from "other parts of the world that we've never sourced in large quantity," according to Alber.

La-Z-Boy is adding production capacity in Mexico with plans to open a new factory in January, according to Lucian. But even the added capacity won't be enough for La-Z-Boy to significantly boost inventory levels, as facilities in Mexico aren't yet generating the efficiencies expected.

"Right now, with all the work we're doing increasing our capacity, we're just holding the backlog," Lucian said. "We're not really making any cuts into it."





via https://www.aiupnow.com

Sarah Zimmerman, Khareem Sudlow