Furniture Industry Sighs Despite Raising Prices Three Times in One Year...

Raw Material and Logistics Costs Rise, Moving Volume Drops to One-Third of Last Year
Furniture and Interior Demand Plummets "Q3 Outlook Also Bleak"

Hanssem Rehouse Designer (RD) using the Home Planner 2.0 program to conduct a 3D design consultation. [Photo by Hanssem]

[Asia Economy Reporter Kim Jong-hwa] The furniture industry is still struggling despite raising product prices three times in a year. This is because costs such as raw material prices and logistics expenses have surged, and demand for furniture purchases and interior design has sharply declined due to a decrease in moving households caused by a drop in housing sales.

According to the industry on the 4th, major domestic and international furniture companies have raised sales prices at least twice this year. Hanssem increased the prices of some frames in the popular Euro series bed models by 5-10% starting this month. In April, Hanssem raised prices of sofas, beds, desks, etc. by an average of 4%, and in February and March, it also increased prices of building materials such as windows and flooring, as well as kitchen and bathroom products by about 5% on average.

Hyundai Livart also raised prices of kitchen and bathroom products, sofas, and beds by 3-5% twice in January and June, and subsidiaries of the Fursys Group such as Sidiz and Ilroom raised prices of about 190 chair items, beds, and sofas by 3-4% in April and May. Enex, a kitchen furniture specialist, raised kitchen furniture prices by 5-10% in May, and Emons increased prices of some items such as beds, sofas, and dining tables by an average of 6.5% starting this month.

IKEA Korea raised prices of major items by an average of 3-25% twice in January and February this year, Sealy Korea raised prices of some best-selling mattress items by an average of 7.4% in July, and Tempur Korea raised mattress prices by about 3-5% three times in November last year, May this year, and this month.

Major furniture companies unanimously stated that they had no choice but to raise sales prices due to rising raw material prices, labor costs, and logistics expenses. However, despite two or three rounds of price increases, the furniture industry has yet to escape the slump.

The biggest cause is the sharp decline in housing sales. According to the Court Registry Information Plaza, the number of nationwide ownership transfer registration applications for collective buildings (apartments, multi-family houses, officetels, etc.) due to sales last month was 69,543, the lowest since September 2013 (60,974). Compared to July last year (117,779), it is about half. It also dropped by nearly 15,000 compared to June (83,500) a month earlier. Since housing sales are not happening, moving demand decreases, and without moving, there is no demand for furniture, interior, or remodeling, resulting in no sales.

Because of this, Hanssem's operating profit in the first quarter was 10 billion KRW, down 60.2% year-on-year, and sales also decreased by 4.9% to 526 billion KRW compared to the first quarter of last year. In fact, the number of interior construction package sets during this period was 517, down about 12% from 588 in the same period last year. A Hanssem official explained, "The rise in raw material prices is not a problem that ends in a day or two, and we have been preparing for it, so we are managing it. The biggest difficulty now is that housing sales are not happening. Moving has decreased to one-third of last year’s level, and interior and remodeling demand has sharply declined."

The outlook for the second quarter is also bleak. KB Securities forecast Hanssem's second-quarter sales to decrease by 8.1% year-on-year to 522.5 billion KRW, and operating profit to fall by 77.0% to 6.4 billion KRW. KB Securities expects poor performance due to the negative market environment caused by the decline in housing sales volume, the burden of cost ratio due to rising raw material prices, and increased fixed cost burden due to shrinking scale.

The situation is the same for other furniture companies. Hyundai Livart, whose first-quarter operating profit (2.9 billion KRW) fell 70.3% year-on-year, and Enex, which recorded an operating loss of 4.1 billion KRW in the same period, have not found a breakthrough other than housing market revitalization. Hyundai Livart was hit hard as the Ukraine war broke out just after launching the total interior brand Livart Jiptereo in February, and its business structure focused on B2B (special sales to construction companies) is a hindrance. It is expected to continue facing difficulties not only in the second quarter but also through the third quarter.

An industry insider said, "We hope the government will quickly ease real estate regulations and expand housing supply to revitalize the housing market," adding, "There is a limit to raising sales prices for companies to defend performance, so now we have no choice but to rely on government policies."

This content was produced with the assistance of AI translation services.