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Furniture/Furnishings Weekly

The market rotation continued to benefit many of the stocks in the Water Tower Research Furniture and Furnishings indexes. The Water Tower Research Commercial/Contract Furniture Index was up (+5.5%) and Home Goods Retailers Index was up (+4.7%) for the week, while the Residential Manufacturers & Suppliers Index pulled back slightly (-1.4%) overall, even as many individual issues within the index continued higher, as the rotation to smaller-cap and value stocks continued with the S&P 500 and Dow 30 (-1.9%) down, while the R2K (+1.8%) continued higher. The Water Tower Research Mass Retailers Index was down modestly (-0.4%). Conn’s files for Chapter 11 and announces closing of 106 stores. The company acquired Badcock Home Furnishings near the post-COVID demand peak and has suffered as industry-wide demand fell precipitously. Closeout sales will likely temporally further disrupt a number of local markets as inventory is liquidated. The store closing represents about 20% of the company’s combined total store count. Furniture Today reports 2024 has already seen six bankruptcies and more than 15k layoffs through the first six months of the year, reflecting the challenging macro conditions. Generative AI adoption differs widely by profession/role. Figure 1 illustrates adoption in terms of (1) the span of tasks, and (2) the intensity of use within tasks across different professions/organizational roles. Software engineering and marketing are the most affected by the current generation of AI technologies at this stage. The traditional 9-to-5 job will be obsolete by 2034 according to Reid Hoffman, co-founder of LinkedIn. The rise of gig working and the impact of AI on jobs underwrites his predictions, with Hoffman suggesting that 50% of the US workforce will consist of freelancers by that point. Such a scenario would entail a fairly radical change to the composition of the traditional corporate workforce and traditional corporate office space needs, offset by either a concomitant rise of co-working spaces (or similar third spaces) and/or increases in work-from-home type arrangements. These are trends/predictions that industry watchers and investors should take seriously even as we suspect that specific forecasts, like Hoffman’s, are likely to prove fanciful. “It’s difficult to make predictions, especially about the future” as Berra noted (a prediction that has been remarkable apt, ironically). For every action, there is an equal and opposite reaction. The same holds for predictions about the future of work. A recent viral tweet paints an alternative to gig work and freelancing. A busy week of earnings on deck. BYON, SNBR, ETD, HVT, UPBD, W, FND, and LEG report, providing additional insight into the current state of demand for retail furniture and furnishings.