THE FILMORE FURNITURE COMPANY
Over the past few years, Mr. John Filmore, owner of the Filmore Furniture Company, has
grown increasingly concerned over the performance of the company's chairs division,
which is located near Peterborough, Ontario. The company is well-established and enjoys
a good reputation and good relationships with its retailers. However, sales of the
company's chairs in 2018 were no higher than three years earlier, and profits have
declined by nearly 24%, from $340,000 in 2015 to $260,000 in 2018, as the following
comparative income statements show.
FILMORE FURNITURE COMPANY
Revenues
INCOME STATEMENT
(S thousands)
2015
CHAIRS DIVISION
$3,600
The Chair Division
2016
$3,620
2017
$3.630
2018
$3.610
The Industry and Economic Environment
In the early 1990s, the Canadian furniture industry suffered from a combination of
economic recession and growing import competition. After 1994, conditions improved as
the economy recovered and the decline in the Canadian dollar made imports more
expensive. Nonetheless, through the 2000's sales growth in general has been relatively
slow (3% to 5% annually), and competition from both domestic and foreign producers
very strong. Several Canadian furniture manufacturers closed, while others had used the
breathing space provided by the low Canadian dollar to reposition themselves in the
market and to improve efficiency in preparation for the increased competition that is
expected in the future.
Then the 2016 election of Donald Trump as President of the United States plunged the
industry into uncertainty again. Trump had stated that protection of jobs in the US
furniture industry was a priority. The renegotiation of the free trade agreement among
Canada, Mexico, and the US was also causing concern in the Canadian industry. Finally,
in a desperate ploy for re-election, the Ontario Liberals had increased the minimum wage
by 30%, from $11.60 to $15.00 per hour. Since approximately one-third of Filmore's
workers earned the minimum wage, this had an adverse impact on the Company's labour
expenses.
The Peterborough plant of Filmore Furniture has a skilled work force that is quite loyal to
the company, mainly because it provides reasonably steady employment in an area where
much employment is seasonal and unemployment is high. The plant produces three basic
models of chairs, in a variety of colours finishes and fabrics
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