People Aren’t Buying Furniture Like They Used To
Furniture Retailers Experience Sales Slump
Last week, two furniture retailers reported a significant drop in sales compared to the previous year. Luxury furniture brand RH saw a 19% decrease in second-quarter revenue, while Hooker Furnishings, a Virginia-based furniture manufacturer, experienced a 36% plummet in revenue.
Investors are showing worry over the decline in sales. Shares of RH fell 16%, and Hooker Furnishings dropped 17%.
Slowdown in Furniture Retailers
These two companies join a growing list of furniture retailers experiencing a slowdown after years of growth due to stay-at-home trends during the pandemic. Williams-Sonoma reported a 20% revenue decline for West Elm and a 10% decline for Pottery Barn. Wayfair saw a 3.4% decline in second-quarter revenue, and La-Z-Boy reported a 20% drop in sales in August.
Shift in Consumer Spending
The decline in furniture sales is part of a larger shift in consumer spending since the pandemic. Consumers are now buying fewer large-ticket furniture pieces compared to a year ago as they shift their spending habits. The furniture category was one of many that benefited from increased spending on goods during the pandemic, but now there is an unwind of that trend.
Impact of Housing Market
The housing market also plays a role in the slowdown of furniture sales. Rising home prices and high mortgage rates make homes less affordable, resulting in less movement in the housing market and less money available for furniture purchases.
Furniture retailers expect the luxury housing market and overall economy to remain challenging in the coming years. Mortgage rates are at 20-year highs, and applications for home mortgages have dropped to a 27-year low.
Survival of Furniture Retailers
Not all furniture retailers have survived the current decline in demand. Mitchell Gold + Bob Williams, a national furniture chain, recently announced the closure of its operations due to significant challenges in the US furniture industry.
Potential for Recovery
Despite the current downtrend, some retailers are optimistic that people will start buying more furniture soon. Hooker Furnishings CEO Jeremy Hoff stated that incoming orders have been increasing each month compared to the previous year.
Factors Affecting Consumer Spending
However, broader economic factors may impact the US consumer’s ability and willingness to spend. The end of the pandemic pause on federal student loan repayments could be a potential headwind for homebuyers and overall furniture spending. Student loans began accruing interest in September, and payments are due starting in October.