Will they keep coming out of the woodwork?

• Position: Furniture industry in North Carolina - Industry Overview

Tar Heel furniture manufacturers are hoping the strong recovery of housing starts and resales since mid-1995 will finally push homeowners into furniture stores. "The industry is positioned to do better in 1997 because purchases have been deferred, and at some point they have to come on through," says Fred Schuermann, chief executive of High Point-based LADD Furniture Inc.

But so far it's been wishful thinking. Furniture sales gains have been, in Schuermann's words, "lackluster." But that's not to say the $20 billion-a-year business has fallen dormant. Companies continue to shuffle their decks.

In January 1996, St. Louis-based Interco, parent of furniture makers Broyhill and Lane, bought Thomasville Furniture for $339 million, then Interco changed its name to Furniture Brands International. It has emerged as a powerful midpriced-furniture manufacturer, ranked second in volume with annual sales of $1.6 billion.

Tired of unsatisfactory returns in its furniture business, Masco Inc. decided to ditch Thomasville-based Masco Home Furnishings, the industry's largest manufacturer with annual sales of $2 billion. In November 1995, an investor group led by Morgan Stanley agreed to pay nearly $1.1 billion in cash and assume $25 million in bank debt. But the deal fell through.

In April, investors led by a Citicorp Venture Capital fund stepped in, also offering $1.1 billion. But Masco agreed to less cash - $760 million. The remainder is debt and stock that gives Taylor, Mich.-based Masco a 15% stake in the new company, called Lifestyle Furnishings International Ltd. Over the previous decade, Masco had paid $1.7 billion for the assets. Shedding the business resulted in a big hit: a fourth-quarter 1995 noncash charge of $650 million.

LADD sold four of its 12 divisions over the past year, following through on its strategy to reduce debt and unload operations that lost money or didn't fit the company's focus on upholstered and wood furniture. The latest to go was Daystrom Furniture. A deal to sell the maker of metal dinette sets collapsed, so LADD closed the factory in South Boston, Va. In October, LADD sold the plant and machinery. Despite its down-sizing, LADD remains the fifth-largest furniture maker, with 1996 sales estimated at $520 million.

According to the High Point-based American Furniture Manufacturers Association, furniture shipments were expected to hit $20 billion in 1996, a 5.9% gain after a dismal 1.7% rise a year earlier. Reflecting a small...