Time to stop getting stuffing beat out of it?

• Position: Furniture industry - Industry Overview

Message to North Carolina furniture makers: Don't let the pessimism caused by the recent past limit your future. That's the optimistic pitch of analyst Jerry Epperson of Richmond, Va.-based Mann, Armistead & Epperson. Likewise, John A. Baugh, managing director of Wheat First Butcher Singer, also in Richmond, says, "We may be hasty in making this pronouncement, but we believe the turn is finally here."

If the furniture industry does rebound, it will certainly be after a long wait. And these notes of cheer came just as some of the industry's biggest players engaged in a massive game of musical chairs.

In late November, Taylor, Mich.-based Masco Corp. announced the sale of its entire furniture operation, the biggest in the nation, to a private-equity unit of New York-based Morgan Stanley Group Inc. A few days earlier, Armstrong World Industries Inc. of Lancaster, Pa., said it was selling Thomasville Furniture Industries to St. Louis-based Interco Inc. The fifth-largest manufacturer, High Point-based LADD Furniture Inc., had sold two of its 12 divisions by late 1995 and was looking for a buyer for two more. If all the deals go through, 9% of furniture production, all of it in North Carolina, will change hands.

"We are an industry in transition with a great deal of consolidation," Epperson told the International Home Furnishings Market in High Point this fall. But Epperson's message was this: More stores and factories are improving their performance than not. And if there's so little faith in furniture, why did Interco cough up $331 million for Thomasville and Morgan Stanley pay $1.1 billion to Masco for its lines?

The High Point-based American Furniture Manufacturers Association expected furniture shipments in 1995 to increase 6.1% to $21 billion, after increasing 10.4% in 1994. The AFMA predicts a 6.9% increase in 1996, to $22.5 billion. So why aren't furniture stocks on the upswing? Actually, they are, but it comes after 18 months of underperformance.

The furniture industry hit its lowest point of the year in April, when seasonally adjusted annualized sales dropped to just more than $46 billion. They never recovered to January's nearly $50 billion. Housing activity was improving toward the end of the year, but furniture tends to lag housing turnover by several months.

By the time the market opened in October, manufacturers were playing it safe. New products were basic since retailers were in no mood for fancy new lines and the big bucks it...