for immediate posting
CHICAGO, Illinois – January 14, 2022 – Today, Zacks Equity Research Williams-Sonoma, Inc. WSM and Tempur Sealy International, Inc. TPX and The Lovesac Co. LOVE and Ethan Allen Interiors Inc. ETD.
Industry: home furnishing
Despite continued investments in e-commerce, bottlenecks in the supply chain and rising costs of raw materials may keep margins under pressure, consumers’ increased desire to shop, continued housing market momentum, and effective cost management, as well as a continued focus on product innovation are expected to drive . Retail home furnishings industry Zacks.
Also, it should support efforts to redesign the supply chain network and rationalize product offerings as well as investments in brand marketing and digital marketing Williams-Sonoma, Inc.And Tempur Sealy International, Inc.And Lovesac Company And Ethan Allen Interiors Inc.
The Zacks Home Furniture Retail Industry includes the retailers that offer home furnishing products under various categories. The merchandise assortment includes furniture, garden accessories, framed art, lighting, mirrors, candles, tableware, lamps, picture frames, shower items, rugs, artificial floral products, and children’s and teens’ furnishings.
Industry players also develop, manufacture, market and distribute bedding products. The companies also provide home and security products for residential home repair, remodeling, new construction and security applications. They are engaged in the manufacture, assembly and sale of faucets, accessories, kitchen sinks and waste disposal.
3 trends shaping the future of the home furnishings retail industry
Strong residential and R&R markets, higher consumer spendingThe industry, which is highly dependent on economic conditions and the housing market in the US, is expected to benefit from the strong momentum of the US housing market. Lower mortgage rates have led to an increase in new home sales, which in turn should continue to boost home furnishing activity in the near term.
Meanwhile, the COVID-19 pandemic has encouraged consumers to do more DIY or other home improvement projects. Therefore, the industry will benefit from the strong rise in repair and redesign activities.
Despite the resurgence of COVID-19 infections and reduced fiscal stimulus, US consumer confidence improved further in December 2021. This indicates that the economy is expected to continue growing in 2022 amid headwinds such as higher prices and the emergence of the Omicron variable.
Powerful digital platform, product reinvention and marketing moves: Supply chain optimization and e-commerce channel optimization are expected to lead the way. Indeed, e-commerce came to the rescue of the retail sector amid the uncertainty caused by the pandemic. This digital platform will continue to play a major role in the long run, as people find online shopping more convenient and secure.
Product innovation plays a major role in increasing the market share in this industry. Companies aim to innovate products and collaborate with famous brands as well as designers to maintain exclusivity. Also, the customer experience is enhanced by innovative marketing techniques, focusing on digital marketing, better merchandising, store remodeling and loyalty programs.
Supply chain issues, intense competition and labor expensesIndustry players grapple with supply chain bottlenecks. Due to worldwide supply issues, companies have been experiencing some stock delays, product shortages and manufacturing delays. Accelerating costs for raw materials and freight (including shipping through e-commerce) as well as higher staffing-related expenses have put pressure on companies’ profit margins.
Meanwhile, the home furnishings industry is highly competitive, featuring the interior design trade, specialty stores, antiques dealers, national and regional home furnishing retailers as well as department stores. Online retailers who focus on home furnishing also pose a threat. Competitive product pricing has been affecting margins. Although sales building initiatives for industry participants have reaped positive results, they also have high costs.
Zacks Industry Rating Indicates Bright Prospects
Zacks Retail-Home Furnishings is a group of nine stocks within the Zacks Wholesale Retail segment. The industry currently ranks Zacks Industry #61, placing it in the top 24% of over 250 Zacks Industries.
The group’s Zacks Industry Rating, which essentially represents the Zacks average rating of all member stocks, indicates an impressive near-term outlook. Our research shows that the top 50% of industries ranked in Zacks outperform the bottom 50% by a factor of more than 2 to 1.
Before we introduce a few stocks you might want to consider for your portfolio, let’s take a look at stock market performance and a recent valuation picture of the industry.
Industry outperforms sector, S&P 500 puzzles
The Zacks retail home furnishings industry has outperformed the broader Zacks retail and wholesale sector but has lagged behind the Zacks S&P 500 Composite Index over the past year.
The industry is up 15.8% compared to the S&P 500’s 25% growth. The broader sector is down 11.9% over the period.
Current rating of the industry
On the basis of the forward 12-month P/E ratio, which is typically used to value retail home furniture inventory, the industry is currently trading at 12.6 compared to the S&P 500’s 21.5 and 25.6 for the sector.
Over the past five years, the industry has traded as low as 22.7X and as low as 11.4X, with an average of 15.7X.
4 Stock of Home Furnishing Furniture Retail
We’ve picked two stocks from the Zacks retail home furnishings segment that currently have a Zacks rating of #1 (strong buy) or 2 (buy). We’ve also highlighted two other Zacks #3 (Hold) rated stocks with strong odds. you can see The full list of Zacks #1 stocks today is here.
luvsackHeadquartered in Stamford, this company retails home furnishing products such as alternative furniture stores, partitions, bean bag chairs, bean bag chairs and other accessories. Lovesac is experiencing profitable growth across all sales channels.
For the third quarter of fiscal year 2022, showroom sales grew approximately 70% and Internet sales increased approximately 40%. The recently launched Mobile Concierge service and unique business model with concentrated SKU number and manufacturing spread across multiple geographies bode well.
LOVE currently outperforms Zacks at #1 and has an expected earnings growth rate of 42% for fiscal year 2023. Its stock has advanced 10.7% over the past year. Lovesac has seen an upward revision of 57.9% to fiscal year 2023 earnings over the past 60 days.
Tempur Seale International.Headquartered in Lexington, Kentucky, this company is involved in the development, manufacture, and marketing of bedding products. Strong industry demand, its global leadership position in the industry, and the success of its multi-channel distribution strategy have solidified Tempur’s presence.
TPX currently holds a Zacks #2 rating and has an expected earnings growth rate of 17.2% for 2022. Its shares are up 55.3% over the past year. Tempur has seen an upward revision of 0.8% for its 2022 earnings over the past 60 days.
Ethan Allen Interiors Inc.Headquartered in Danbury, this company operates as an interior design firm, manufacturer, and retailer of home furnishings. The company has benefited from its wide range of offerings, a strong network of retail design centers, and a focus on interior design services as well as technology improvement.
Earnings for Ethan Allen, Zacks’ No. 3 company, is expected to grow 30.8% for fiscal 2022. It’s up 14.6% over the past year.
Williams SonomaThis is a multi-channel specialty retailer based in San Francisco, California. Williams-Sonoma has benefited from a strong housing market, focus on digital initiatives, increased e-commerce penetration, and product offering.
E-commerce penetration accounted for 67% of total revenue for the third quarter of fiscal 2021. In addition to the continued strengthening of the e-commerce channel, supply chain optimization and disciplined cost control are expected to drive growth.
Williams-Sonoma, a Zacks company, has gained 21.2% over the past year. Earnings estimates for the current year have moved 3% north over the past seven days.
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Tempur Sealy International, Inc. (TPX): Free Stock Analysis Report
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