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Furniture/Furnishings Weekly

SCS and LZB both reported strong earnings. Steelcase gained 7.2% for the week after posting strong orders and margins in 1QFY25 with adjusted EPS of $0.16, beating consensus of $0.10 and our estimate of $0.11. LZB surged 12.4% after posting adjusted 4QFY24 EPS of $0.95 versus consensus of $0.70. It was a mixed week for the Water Tower Research Furniture/Furnishings indexes. The Commercial/Contract Furniture Index was up 3.3% for the week, while the Residential Manufacturers & Suppliers Index was down 1.1% and the Home Goods Retailers Index was down 1.2%. The broader market indexes were up modestly (0.6% to 0.8%), while the Mass Retailers Index was up 2.6%. SCS delivered strong margins on operational efficiencies and better pricing even as office furniture demand remains subdued. Order growth remained strong, however, as companies spend to entice more workers to return to the office post-pandemic/lockdowns. Investments in collaborative work environments remain priorities for large corporations, which are the mainstay of Steelcase’s customer base. Management also noted a strong interest in K-16 education as states invest in schools, and colleges and universities invest in facilities to entice enrollment. LZB management noted conditions in residential furniture remain challenged. 4QFY24 same-store sales were down 5% versus the industry estimate of -8% and it expects FY25 conditions to remain challenging, projecting total revenue to be down by as much as 5% for the year in the current macro environment, with any improvement likely to be a 2H story. ‘Excess’ cash may be exhausted, but Americans still have plenty of cash on hand. According to the SF Federal Reserve, the excess cash built up during the pandemic/lockdowns has likely been spent, as we noted previously. But that doesn’t necessarily mean that all consumers are tapped. Research from Bloomberg and Evercore ISI Research posted on X suggests that households still sit on more than $4 trillion in cash and cash equivalents (see Figure 1). Anecdotally, we continue to hear that spending at the higher end is holding up better than at the lower and mid-end. The skewness in household wealth (and cash on hand) might be a part of the explanation for this differential. The Department of Commerce (DoC) notes that residential furniture sales were down in May. Month-over-month, May sales were down 6.8%, while year-to-date versus the prior year, sales were down 7.9% as industry conditions remain challenging. MLKN and CULP report next week; NTZ holds its 1Q24 (quarter-end March) post-release conference call on Monday. These may shed additional insight into the state of the commercial and residential furniture industries.