Once creaky, sales turn sturdy for US furniture makers

In her recent bestselling book "Factory Man," journalist Beth Macy tells the story of John Bassett III who fought relentlessly to keep 700 workers employed at his Bassett Furniture Company in Bassett, Virginia, despite fierce competition from furniture makers in China. The tale is a story of one executive's attempt to push back against the forces of globalization.

It turns out that others in the once-proud furniture-making towns of Virginia and North Carolina are having renewed success, too, after years of being battered by cheap labor and cheaper prices deployed by overseas competitors.

Indeed, U.S.-based furniture manufacturers saw retail sales jump to $95.3 billion in 2013, according to the American Home Furnishings Alliance. And one analyst projects sales this year are up 5.5 percent.

The recovery can be attributed to rising costs in China and rising preference among consumers for quality "Made in America" furniture, according to analysts and manufacturers. The recovery in the housing market, although slow, has also helped as more buyers look to furnish new homes.

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The U.S. furniture industry took its first big hit when China started producing furniture at low labor costs and low prices in the late 1980s, affecting manufacturers large and small. In North Carolina alone, employment in the furniture industry, once a major economic engine in the state, fell by 56 percent between 1992 and 2012, to 35,601 workers, according to a report from the Duke University Center on Globalization, Governance & Competitiveness. The state's share in employment in the U.S. furniture industry decreased from 13.1 percent to 9.5 percent during the same 20-year period.

But the furniture industry is hoping those dark days are behind it. "A lot of manufacturers are real survivors that have learned a lesson or two and learned to compete in the last couple of years," said furniture analyst Jerry Epperson, founder of Mann, Armistead, & Epperson, an investment banking and research firm. He pegs sales growth at more than 5 percent this year.

Hardwood Artisans CEO Mark Gatterdam works in his manufacturing plant in Elwood, Va.
Landon Dowdy | CNBC
Hardwood Artisans CEO Mark Gatterdam works in his manufacturing plant in Elwood, Va.

One key to the revival is custom furniture. "While still keeping within North Carolina's traditional niche of household furniture, coming out of the economic recession many top companies in the state are concentrating on higher price-points and customized products," the Duke report said. "Upscale and customized furniture are much less likely to be off-shored because they require more skill to produce, are harder to ship, and lack standardization, thus cutting out a tenable niche for domestic production to remain competitive against foreign imports."

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Mark Gatterdam, CEO of furniture manufacturer Hardwood Artisans with one plant in Elkwood, Virginia, said he has seen more than a 20 percent increase in sales in the past two years. He said that stems from sticking to his model of using good quality wood and offering a lifetime warranty. He has hired three new employees in the past three weeks and is considering hiring more to keep up with the demand.

But a 32-year veteran of the furniture business, Gatterdam said he is still angry about the abuse he felt from the Chinese undercutting his business. "Raped. ... I'm sorry that's the first word that comes to mind." Gatterdam said. "I felt like the U.S. was being raped. I don't know how else to say it. The fact that we were allowing this to happen." He said at times someone in his office would have to go unpaid.

Hardwood Artisan employee training a new hire in the factory.
Landon Dowdy | CNBC
Hardwood Artisan employee training a new hire in the factory.

At Bassett Furniture Industries, a publicly traded company separate from the company profiled in the book "Factory Man," senior vice president Bruce Cohenour said: "We've expanded and are doing some aggressive things. We are opening more stores than we have in 10 years—totaling to 100 of our own retail stores. It's a pretty good sign that we feel great about what we are doing."

With total sales growing every year the past three years, Cohenour said Bassett is hiring more people and expanding its plants. Bassett sales have increased 10.4 percent from $77.2 million in August 2013, to $85.2 million in August 2014. The stock surged steadily the past three years with more than a 200 percent increase from $4.23 per share in January 2011, to more than $17 this month.

Still, the U.S. may never return to its former dominance in furniture. Analyst Epperson said it would be challenging for the industry to completely recover in America, but the U.S. can benefit from the access to lumber and the well-developed skill, especially in upholstery.

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The recovery shows positive signs for the future as furniture manufacturers from all over the country gathered together last week for the High Point furniture market in North Carolina, one of the industry's biggest events for buyers and sellers. With 80,000 people in attendance, the city's population doubles. Tom Conley, president and CEO of High Point Market Authority, expects "a very good market perhaps one of the best in years."