Furniture stocks don't share industry's gains.

• Position: Illustration - Statistical Data Included

Furniture-industry growth was so stellar in 1998 that analysts predicted it couldn't keep up the pace in '99. The High Point-based American Furniture Manufacturers Association, a nonprofit trade group, forecasted shipment growth would slow to 2.1%, down from 8.6%. But the industry pressed ahead, rolling out shipments the way college students knock back Budweisers. At the end of the year, the AFMA was predicting shipments would reach nearly $25 billion -- up 8.4%. Consumer furniture purchases are expected to top $61 billion, up from $58 billion.

"The robust economy is the driver," says Ivan Cutler, director of furniture-industry services at consulting company BDO Seidman LLP in High Point. "People feel good," meaning they're willing to plunk down for more than just the bare necessities. They'll buy that new couch -- and maybe that new dining-room set, too. "Baby boomers are buying more furniture and buying better furniture than ever before," says Jerry Epperson, furniture analyst at Richmond, Va.-based Mann, Armistead & Epperson Ltd. The industry is also experiencing a boom in the sales of children's furniture and home-office furniture.

The high times have translated into strong financial performances for furniture companies. For the first nine months of 1999, net earnings at Greensboro-based Ladd Furniture Inc. were up 45% from the same period in 1998. Earnings in the third quarter reached their highest level since 1989. At St. Louis-based Furniture Brands International Inc., which owns North Carolina-based Thomasville Furniture Industries Inc., Broyhill Furniture Industries Inc. and Lane Furniture Co., earnings were up 26.5% through September. Sales rose 7.1%, to $1.57 billion, bolstered mainly by Thomasville's new Ernest Hemingway collection. Based on shipments made and orders received, the line, introduced in March, is on target to become the most successful introduction in the industry's history, according to Furniture Brands spokesman Lynn Chipperfield.

Business was booming, but furniture stocks remained depressed in 1999 as interest rates rose. Because rising rates generally humble the housing market, investors expect furniture spending to fall. "We are perceived as an industry hooked to macroeconomic issues," Chipperfield says. "Furniture is a cyclical stock but not a cyclical business."

In late September, Furniture Brands' stock hit a 1999 low of $17.06 a share, down from $27.88 in January '99. In early December, it was up to about...