Community Profile: Tupelo, Miss., Fights to Keep Furniture King

July 01, 2001

Mickey Holliman doesn't mince words when discussing the current state of his industry.

"I've been in the furniture business for 41 years, and I have never witnessed conditions as difficult as they are today," says the chairman of Furniture Brands International Inc.

Such a pronouncement is not encouraging news in Tupelo, Miss. Besides being the birthplace of the king of rock 'n' roll, Tupelo is king of the upholstered furniture industry. Within a 50-mile radius, more upholstered furniture is produced here than anywhere else in the world, according to local officials. About 6,700 people in Lee County work in the furniture industry, accounting for 34 percent of all manufacturing jobs. More than 100 furniture companies exist in northeastern Mississippi, but that figure has been slowly dropping in recent years.

Most of the furniture sector's woes have affected case goods (wooden products) rather than the upholstery side because the former can be produced more cheaply in foreign countries. As a result, the Tupelo area so far has been nicked, but not crippled, by the industry's downturn. Tupelo's unemployment rate is still about half that of the entire state. But enough red flags exist for one industry analyst, Stephen East of A.G. Edwards, to warn: "Any area that depends on furniture for its employment base better start working hard to get something else. The reality is that it's just not a business that makes sense in our high-labor-rate country."

The Impact of Imports

In a cutthroat business climate, more and more furniture companies are taking advantage of cheaper offshore labor in order to survive. The consequence has been domestic downsizing. Even St. Louis-based Furniture Brands, one of the largest manufacturers of residential furniture in the United States with sales of $2.1 billion last year, has been affected. It has announced that it will close five facilities, resulting in the loss of 1,200 jobs.

"Those numbers are going to grow before the year is over," Holliman says. "They probably will be substantially higher than that."

The closures affect some of the company's case goods plants in North Carolina and Virginia that produce the Thomasville and Broyhill brands. Lane Furniture Industries Inc., a subsidiary of Furniture Brands, is headquartered in Tupelo. In northeastern Mississippi, Lane produces furniture in four plants, three of which are in Lee County. The company is the largest manufacturer in the region with about 4,000 workers making recliners, stationary leather furniture and motion furniture (love seats or sofas with ends that recline).

Holliman, a Mississippi native who still lives in Tupelo, says he expects Furniture Brands' sales from imports to rise from 10 percent last year to as high as 30 percent over the next five years. He adds, however, that the company's Tupelo operations are the strongest in the company because upholstered furniture does not yet face a direct overseas threat. One reason is that foreign workers typically don't have the training to build the motion mechanisms. In addition, upholstered products, unlike case goods, cannot be flatpacked, a process that makes shipping from foreign markets more economical.

But the buffer Tupelo enjoys may be starting to ebb. Last year, Lane began to import leather covers from the Far East, mainly China. Although Holliman does not expect employment levels in Tupelo to be affected over the next three or four years, he adds, "Longer term, I think there's an excellent chance that we'll see payrolls even in this area be affected." Despite this warning, Holliman says that over the next six months, Lane will gain 150 new jobs in Tupelo because of a recent consolidation within the company.

Companies like Lane aren't as vulnerable to the offshore wage gap as smaller ones, says David Rumbarger, president and CEO of the Community Development Foundation in Tupelo.

"The ones that face the greatest threats are the mom and pop operations," Rumbarger says. "Furniture manufacturers that can diversify themselves and that have state-of-the-art processing facilities have been able to produce at a higher rate and a higher margin in order to compete."

For more than 50 years, the foundation has been working to promote economic development in the area, resulting in Lee becoming the leading manufacturing county in the state. Through a new five-year initiative called Future Focus, the foundation is attempting to further expand the job base, as East recommends. The campaign seeks to raise $1.6 million to recruit companies and industries, retain and expand existing businesses, develop the area's technology capabilities and provide more education and training for workers.

Luring new industry is even more critical in adjoining counties like Pontotoc and Chickasaw, where furniture makes up more than 70 percent of all manufacturing jobs. Incidents like the recent temporary closure of Kensington Furniture, which idled more than 500 employees in Pontotoc and Itawamba counties, have a more severe effect where furniture manufacturing is so concentrated.

A Postponable Purchase

Diminished consumer confidence and higher energy prices continue to take their toll throughout the economy, including the furniture industry. Those in the industry use the term "postponable purchase" to help explain slumping sales.

"Furniture is obviously a discretionary item," East says. "Consumers can delay the purchase of furniture for as long as they wish, and they do. If you're seeing utilities and automobile gas bills jump up a couple hundred bucks a month, that's a monthly payment for a room of furniture—a very nice room of furniture."

Says Holliman, "Maybe the consumer looks at that old sofa and decides it doesn't look quite as bad as she thought it did at first."

The industry was stung last year when retailers Montgomery Ward and Heileg-Meyers Co. filed for bankruptcy, resulting in massive store closings—302 for Heileg-Meyers, including 19 in Mississippi. Another retailer, Roberds, liquidated all of its stores, too. One of the ramifications of these closings is an inventory backlog, which, in turn, led to Lane's first layoffs ever in Tupelo last year. The company cut about 200 jobs.

Not everything these days is doom and gloom for the industry. Interest rates continue to drop for those looking to finance their purchases, and housing sales have remained relatively strong. On average, there is a lag of between six and 18 months between purchasing a new home and furnishing it.

"As goes housing, so goes furniture," says Jimmy Green, chairman of PeopLoungers Inc. of Nettleton, Miss., a $55 million company that also specializes in upholstered motion furniture. "Interest rates and housing are two things that definitely drive furniture sales."

Man building new chairs
Foreign competition and a souring economy caused Lane Furniture to lay off 200 employees last year, but the company remains the largest furniture manufacturer in northeastern Mississippi. Here, a Lane worker attaches the footrest to a recliner.


To Market, To Market

Twice a year, you'd have better luck catching Elvis perform one more homecoming concert at the Tupelo Fairgrounds than you would finding an available hotel room in town. Each February and August, Tupelo dishes out Southern hospitality for several days to hundreds of furniture exhibitors and more than 30,000 buyers at the Tupelo Furniture Market.

What began with 35 exhibitors at a Ramada Inn in 1987 has erupted to nearly 1,000 exhibitors from around the world showing their wares throughout 1.5 million square feet of space. The show is the second largest in the country. Only the High Point, N.C., market, established 74 years earlier, is larger.

V.M. Cleveland, Tupelo Furniture Market CEO, says that organizers originally thought of holding the market in the larger, more-accessible city of Memphis.

"But bigger is not always better," Cleveland says. "The manufacturers here had enough confidence that Tupelo could put on a good show."

Says the Community Development Foundation's Rumbarger: "I think the manufacturers here at that time wanted people to come see their plants. They wanted buyers to see where their furniture was built so they could see the quality."

Cleveland says plans are in the works to expand the Furniture Market to 2 million square feet. He and his staff of 35 hope to top 1,000 exhibitors for the first time at the August show.

The market is just one aspect of the furniture industry's remarkable growth in the Tupelo area since Ukrainian immigrant Morris Futorian opened his first plant in 1948 in New Albany, Miss. He moved here from Chicago to develop his concept of mass-producing furniture. Local officials like Jim High of the Downtown Tupelo Main Street Association take pride in the town's accomplishments since then.

"We're a little town, not on a major interstate highway, not on a waterway—and over the past 50 years, we have become a dominant factor in the industrial economy of this region," High says.

Staying dominant in furniture will demand a refortified effort as new economic obstacles now appear before Tupelo's main industry.

Tupelo, Miss., by the numbers

Population 34,211
Labor Force 20,949
Unemployment Rate
Per Capita Personal Income
Top Five Employers
North Mississippi Health Services
Lane Furniture Industries Inc.
Cooper Tire & Rubber Co.
Tupelo City Schools
Tecumseh Products Co.

NOTE: Employment figures are for all of Lee County.

About the Author
Steve Greene

Steve Greene is an assistant vice president with the St. Louis Fed External Engagement and Corporate Communications Division.

Steve Greene

Steve Greene is an assistant vice president with the St. Louis Fed External Engagement and Corporate Communications Division.

Views expressed in Regional Economist are not necessarily those of the St. Louis Fed or Federal Reserve System.

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