Why are furniture brand stock prices surging?
Retail Watch | Aug 10, 2023
Home furnishings retailers may still be dealing with the post-pandemic hangover, but you’d never know it from their stock prices. Even as the overall market continues on a monthslong winning streak, many public furniture and furnishings retailer stocks are outperforming it.
And while some of this is being driven by special circumstances (Overstock), better-than-expected performance (Ethan Allen, Arhaus) or performance that’s not as bad as expected (Wayfair), at least some of the uptick seems to be a case of investors betting that business will pick up soon universally for home furnishings retailers. So, why, in the midst of what most industry insiders see as a lackluster market, are these retailer stocks climbing?
Credit part of it, at least, to the general exuberance of the overall stock market. The Dow Jones is up nearly 25 percent over its 52-week low and the S&P 500 is up even more. A rising tide on Wall Street is floating a lot of boats … even one with leaky bottoms.
There is also a consensus among most of the people who are supposed to know most of the stuff that the American economy will probably escape an out-and-out recession, and that perhaps we are even on a general upswing as consumers regain the confidence that was spooked out of them by earlier dire predictions.
With ocean freight costs back to pre-pandemic levels—as little as 10 percent of what they were during the height (depth) of the pandemic-induced supply chain meltdown—retailers have better margins to work with, especially as they off-load the last of the bad inventory hastily stocked in the free-for-all ordering mayhem in late 2021 and early 2022.
And then there’s a whole range of company-specific issues that are driving the stock surge, including:
RH
Stock price up about 60 percent since the start of the year. Although it won’t release its second-quarter results for several weeks, it has been a big winner on Wall Street, perhaps living off the high of the opening of its U.K. store this spring, its first excursion into Europe. This comes as several high-profile investors, including Berkshire Hathaway’s Warren Buffett, have pulled out of its stock, and recent quarters have been trending down. It continues to be a darling of investors, though it still has a long way to go to get back to its stock price in the $700-plus range of two years ago.
Wayfair
Share price up 150 percent since January. No home retailing stock has roller-coasted its way through the past few years more than Wayfair, which is hitting 52-week highs after beating analyst estimates in its just-announced second quarter. It still showed losses after assorted accounting practices, but investors seem to think it has turned the corner on its cost structure and post-Covid swoon. Some analysts are looking for a further climb in its stock price through the rest of the year.
Ethan Allen
Up about 35 percent since the start of the year, although its fourth quarter and full-year results released this month showed declines in total revenues and mixed profitability. A special 50-cent dividend on top of its usual 36-cent dividend didn’t hurt, nor did its recognition as one of Newsweek’s America’s Best Retailers 2023. The company also unveiled a remodeled “Interior Design Destination” format at its Danbury, Connecticut, flagship.
Arhaus
Stock price up about 25 percent year-to-date. One of the few furniture retailers still aggressively expanding, the chain opened three more locations this past quarter, bringing its total to 85 stores. Sales for its second quarter increased 2.2 percent, although comp growth was slightly off.
Williams-Sonoma
Up about 17 percent year-to-date. This is the company that defied the home downturn longer than just about anybody else in the sector, though it finally showed some weakness in its last quarterly results, released in May. Still, profitability held up, and the brand, too, recently upped its dividend. Several product launches, including its GreenRow eco-friendly brand, are garnering positive attention if not yet bottom-line results.
Havertys
Stock price up about 10 percent since January. The Southeastern chain will release its second-quarter results later this month; in the meantime, it showed declines for its first quarter, reported in May, but said that compared to pre-pandemic levels its sales were up nearly 11 percent.
Overstock
Up nearly 60 percent since the start of the year. It took its steal-of-a-deal purchase of Bed Bath & Beyond to do so, but Overstock, now firmly ensconced as home-centric, is the other big winner this year so far. That comes as the e-commerce brand continues to lose top-line revenue and is no doubt trying to digest what it bought—no small task. Wall Street is loving the changeover, and it’s all on Overstock now to make it work.
Elsewhere in the home space, both Home Depot and Lowe’s seem to have overcome some spring pessimism about the home improvement sector, but remain on some analyst do-not-disturb lists as the overall housing construction market rebounds after its slowdown. And other retailers in the broader home space—like LL Flooring, Kirkland’s Home, The Container Store, Joann, Sleep Number and Bassett Furniture—are mostly in the red for the year, perhaps reflecting some underlying pessimism in their individual statuses more than the overall home business.
And if you’re playing the market and feeling lucky—punk—there’s always BBBYQ. That’s right, the remnants of the former Bed Bath & Beyond continues to trade on the penny stock market … although exactly what one is buying is more in the mind of meme-driven day traders than what most would consider reality. Nevertheless, you can pick up a share for about a quarter right now.
Clean out your sofa cushions—it will only cost you two bits.
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Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.
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