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Furniture/Furnishings Weekly

Furniture/furnishings stocks trailed the broader market. The Water Tower Research Commercial/Contract Index (-1.7%), Residential Manufacturers & Suppliers Index (-2.0%), and Home Goods Retailers Index (-2.0%) trailed the broader market indexes and the Mass Retailers Index (-1.3% to +1.3%) last week. LOVE 1Q25 paints a picture of continued weakness in residential furniture even as the company appears to be continuing to gain share. Showroom (-2.3%), omnichannel (-14.8%), internet (-9%), and other (-17.1%) led to a total sales decline of 6.1% amid an elevated promotional environment even as 35 new showrooms helped offset comparable sales weakness. Management expects its FY25 sales to be down 10%, which aligns with its industry outlook. LOVE’s “re-commerce” initiative, where consumers can sell or trade their old furniture, taps into one of the dominant trends in retail fashion in recent years, piquing our interest; a trend to watch. Memorial Day Weekend (MDW) mattress sales show some signs of strength. A recent small survey (representing about 600 locations) of mattress retailers (capturing ~1.25bp of total retail locations nationwide) suggests MDW sales were up >10%, the strongest May since 2022. Noise and limited sample size suggest caution in extrapolating to the industry as a whole, however. Is furniture still on the outs as consumers buckle down given inflation and economic uncertainty? That’s the story USA Today reported, even as spending on experiences remains strong. Anecdotal evidence continues to suggest lower-/mid-end consumers are deferring furniture purchases and trading down, seeking value when buying even as the higher end of the market remains relatively more buoyant. Are formal dining rooms out? Fewer homes/apartments have one as household demographics change (Figure 1) and living space shrinks. Hybrid work improves employee retention without sacrificing performance. A new Nature paper reports on a randomized controlled trial (RCT) demonstrating that improved employee retention comes at no cost to employee career progression or productivity. RCTs are important because they can demonstrate causality. Lower turnover at ‘no cost’ to employee human capital development or firm productivity is a win-win for firms and talent. Collaboration remains a challenge, however, and the metaverse does not appear to be the solution some hoped for. The challenge with hybrid is that remote work hampers innovation (Figure 2) and VR, so far, has not solved this. Shirking in hybrid work remains a concern and regulation may push some industries to prioritize return-to-office. Wells Fargo fired several remote workers for ‘simulating’ keyboard activity as US financial regulator FINRA imposes new work-from-home guidance that makes remote work governance more challenging for firms. SCS and LZB report this week.