Furniture/Furnishings Weekly
The commercial/contract (office) furniture stocks rallied last week following HNI’s strong 3Q23 earnings report. The commercial/contract furniture issues rose more than 12.7%, outperforming the broad indexes, with HNI leading the group. HNI’s 3Q report reinforced the sector story. Sales remain challenging. Improved pricing, a focus on costs, and eliminating unprofitable distractions restored margins. Yet, the timing of a rebound in office furniture demand is an open question. But it will happen. When it does, HNI, Steelcase, and MillerKnoll are positioned for strong earnings growth. Also, Steelcase inked a stock repurchase agreement with a broker to buy back up to 2 million shares. The week featured a handful of other earnings reports, with mixed results. In residential furniture, Haverty’s reported its 3Q23, with EPS of $1.02 versus $0.91 expected. Sales missed, falling 19% Y/Y, with written sales down 12% on a comp store basis. Forward expectations came down. Despite top-line pressure, the stock rose 14% for the week. We attribute that to good margin performance and lower interest rates. Flexsteel’s 1QFY24 missed expectations, reporting EPS of $0.14 versus consensus of $0.24. Reported revenue also missed due to the elimination of ocean freight surcharges. Excluding the surcharge ($7 million), unit volume rose 6.8%. Gross margin improved Y/Y. Mattress maker TempurSealy missed, reporting EPS of $0.77 versus $0.81 expected. Leggett & Platt, a mattress industry supplier, likewise missed, reporting $0.36 versus $0.40 expected. Revenue missed and the company guided lower. The near- to medium-term outlook for the US mattress industry looks sluggish. In home furnishings, Arhaus reported 3Q above expectations on both EPS ($0.14 versus $0.12) and revenue ($326 million versus $318 million). Lovesac reported a loss of per share of $0.04 for its July quarter, bringing its filings current and restating past results, following a previously disclosed delay. Both ARHS and LOVE moved higher on the reports.
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