Furniture/Furnishings Weekly
Stocks have had a few good weeks and last week was another. The furniture/furnishings group has focused on restoring and defending margins. The “rolling recession” rolled over the sector this year. Despite sales pressure, earnings improved for the best in the group, notably the commercial/contract names, residential manufacturers, and select retailers. Costco, which includes furniture in its broad merchandise mix, reported 1QFY24 revenue of $57.8 billion, matching estimates. EPS of $3.58 beat consensus of $3.46 and increased Y/Y from $3.07. Comparable store sales excluding gasoline rose about 3.9% company-wide and about 2.6% in the US. Management noted its fresh food category was relatively strong, followed by other foods and sundries. There was no commentary on the absolute strength of non-food products. Management noted that non-food sales improved month by month through the quarter. Positive Costco results are encouraging. It shows its consumers are alive and kicking. But we don’t read too much into it as Costco is a best-in-class retailer that outperforms relentlessly. Herein, we included graphs (page 4) illustrating the correlation between existing home sales and furniture industry shipments. The graphs show a visual correlation from 2003 through December 2021. In 2022 and 2023, the correlation diverges. Existing home sales fell ~40% after December 2021, while furniture shipments were roughly flat. Shipments got a boost in 2022 from deliveries of an excessive pandemic-related backlog. Shipments in 2023 declined, but only modestly and returned to 2021 levels. Investors have an opportunity to learn more about the industry and the companies at the first Water Tower Research Furniture/Furnishings Virtual Conference on January 17, 2024. Seven companies have confirmed attendance. Details are available on our registration page and accessible in our full report.
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