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Furniture/Furnishings Weekly

In the short four-day trading week (Good Friday), the performance of our Home Goods Retailer Index stands out: +4.5% versus +0.3% to +2.4% for the three market indexes shown on the right. Admittedly aided by several low-priced stocks, every issue save one posted a positive price performance for the week. Shares of high-end furniture retailer RH surged 21.2% after reporting 4Q23. Despite weaker revenue, partly due to storms and supply disruptions, management envisioned demand of +12% to +14% for FY24, which is good news in the face of a punk housing market and elevated mortgage rates. The high-end consumer may be ready to spend. Investors appeared to cheer this. Before the open on March 28, Home Depot announced it agreed to acquire SRS Distribution () for $18.3 billion, (using on-hand cash and new debt, subject to usual closing conditions and regulatory approvals, and targeted to close before the end of HD’s FY24). With the acquisition, HD said its addressable market will grow to ~$1 trillion. Beyond relaunches Overstock.com. The owner of online retailers Bed Bath & Beyond and Zulily announced the relaunch of its iconic brand with deals and discounts. MillerKnoll’s 3Q24 challenging. Sales in all three segments and orders in Americas Contract and Retail were down Y/Y. Margins were the bright spot, however, as management remains disciplined on cost. Our new revenue and EPS estimates reflect expectations that demand will remain challenging in the near term. During the week, its shares fell ~17%. Encouragingly, Steelcase and MillerKnoll both opined that customer activity/orders seem to be picking up in recent weeks. Kastle’s RTO ticked higher to 51.3% (see chart below) too as the trendline remains positive. More people back in the office translates into increased demand, eventually. While evidence mounts of an office furniture recession end, individual rebounds may progress at varying speeds for major players. To wit, orders for SCS were stronger than MLKN in the February quarter. MLKN’s leaders suggest the speed dichotomy occurred before, pointing, in part, to differing characteristics in legacy customer bases (smaller, entrepreneurial for MLKN versus larger, more established for SCS).