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Furniture/Furnishings Weekly

An open call to readers. If you discover stories or data you think would be interesting to readers of our weekly report, which includes investors and industry insiders, please email us the links. We are always on the hunt for insight. We welcome any and all feedback on anything we have written. A good week for furniture and furnishings stocks. The Water Tower Research Commercial/Contract Index (+3.5%) and Home Goods Retailers Index (+2.5%) posted strong returns relative to the market (-0.5% to +0.1%) and the Mass Retailers Index (-0.6%). Our Residential Manufacturers & Suppliers Index (-0.5%) was in line with the broader market. The China price is now the highest in Asia. According to Science Is Strategic (citing Haver Analytics), unit labor rates in China are now ~2.5x to 4x higher than other Asian countries (see Figure 1). Geopolitical tension is one reason why supply chains are diversifying, but rising costs also play a role. Unit labor rates do not capture total costs nor are costs determinative in sourcing decisions. But rising costs will surely influence sourcing decisions. Ocean freight rates continue to be higher. The magnitude of the increase remains modest relative to the pandemic era spike (see Figure 2) according to the Financial Times. The primary concern seems to be the possibility of delays heading into 2H24, which could be “far more economically damaging.” This year is not 2022, however “there have definitely been lessons learnt’ from the pandemic.” The just in time operational model for supply chains seems—at least on the margin—is being transformed into something more resilient to shocks. It might not be the end of just in time, but it might be the beginning of just in case as an operating concept. “All your base are belong to us”. A truly astonishing story. According to recently released documents from the Department of Justice, operatives from North Korea (with the help of domestic accomplices), posing as US citizens and residents, applied for and were hired by at least 300 companies in the US to work remote jobs. Earning hard currency appears to be one motive, but espionage can’t be ruled out. We normally think about remote work in terms of tradeoffs, including flexibility for employees versus development opportunities, networking, and innovation. But remote work also opens up new attack surfaces to malicious entities. This may be another reason why firms push for return-to-office. Mexico the new base of Chinese operations? Furniture Today reports several new shipping routes between Mexico and China have been recently launched. This is congruent with the idea that supply chains are ‘lengthening’ in the tense geopolitical climate, with Chinese firms increasingly setting up operations in third countries and global supply chains become increasingly complex and opaque.