2 Retail Home Furnishing Stocks to Watch as Industry Pressures Grow

Industry Overview - The Zacks Retail-Home Furnishings industry is currently facing significant challenges due to economic uncertainty, high interest rates, inflation, and a slowing housing market [1][7] - Rising borrowing costs have led to reduced home sales and renovations, directly impacting demand for furniture and decor [1][7] - Consumer confidence has declined sharply, with The Conference Board's Consumer Confidence Index dropping to 98.3, marking the lowest reading since June 2024 [6] Current Trends - Companies are focusing on strengthening digital platforms, optimizing supply chains, and investing in product innovation to navigate economic headwinds [2][10] - Strategies such as designer collaborations, digital marketing, store remodeling, and loyalty programs are being implemented to maintain market share [2] - The industry is characterized by stiff competition from various retailers, including e-commerce giants like Wayfair and Amazon, which are intensifying pressure on traditional furniture retailers [8][9] Economic Indicators - The Federal Reserve has lowered its U.S. economic growth forecast to 1.7% for 2024, down from 2.1%, while inflation is projected to rise to 2.7% [5] - Interest rates remain unchanged at 4.25%-4.5%, but potential rate cuts are being signaled by policymakers [5] Industry Performance - The Zacks Retail-Home Furnishings industry currently holds a Zacks Industry Rank of 171, placing it in the bottom 31% of over 250 Zacks industries, indicating dull near-term prospects [11][12] - The industry's earnings estimates for 2025 have decreased from $11.59 to$11.24 per share, reflecting a loss of confidence among analysts [13] Stock Performance - The industry has underperformed the broader Zacks Retail-Wholesale sector and the S&P 500, losing 11.7% compared to the sector's 12% growth and the S&P 500's 8.9% gain over the past year [15] - The industry's current forward price-to-earnings ratio is 20.69, slightly lower than the S&P 500's 20.82 and the sector's 22.61 [18] Notable Companies - Ethan Allen: This company has seen retail segment orders grow by 15.8% and wholesale segment orders increase by 14.3%, aided by strategic promotions and a vertically integrated business model [20][21] - Williams-Sonoma: The company has benefited from a focus on digital initiatives and higher e-commerce penetration, with an upward estimate revision for fiscal 2025 earnings to $8.53 per share [24][25]