2 Furniture Stocks to Buy From Promising Industry Landscape

Industry Overview - The Zacks Furniture industry is experiencing growth through digital transformation, with investments in e-commerce, augmented reality (AR), and artificial intelligence (AI) enhancing customer experiences and operational efficiency [1] - The industry includes manufacturers, designers, and marketers of residential and commercial furnishing solutions, catering to various sectors such as construction, healthcare, and education [3] Trends and Innovations - There is a significant growth in e-commerce and digital transformation, with companies integrating AR and virtual reality (VR) to improve customer visualization of products [4] - The demand for multifunctional furniture is increasing, particularly among millennials and Gen Z, as urban living spaces become more compact [4][5] - Companies are focusing on product innovation and digital marketing to enhance customer experience and drive growth [5] Economic Environment - The furniture industry is facing economic uncertainties, including inflation and sluggish housing demand, which may impact consumer spending [2][7] - The Federal Reserve has revised its 2025 GDP growth forecast to 1.4% from 2.1%, reflecting concerns over inflation and economic conditions [7] - The housing market remains sluggish, with mortgage rates stabilizing between 6% and 7%, which is deterring potential buyers [8] Competitive Landscape - The industry is highly competitive, with companies investing in digital presence and shipping capabilities to capture market share [9] - Rising selling, general and administrative (SG&A) expenses, along with increased labor and occupancy costs, are putting pressure on profit margins [9] Performance Metrics - The Zacks Furniture industry has underperformed compared to the broader Zacks Consumer Discretionary sector and the S&P 500, declining 24.2% over the past year [12] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 9.11X, significantly lower than the S&P 500's 20.73X and the sector's 22.13X [15] Company Highlights - Virco Mfg. Corporation: The company has seen a gross margin improvement to 47.5% in the first quarter, benefiting from a favorable sales mix and U.S.-based manufacturing, which insulates it from tariffs [19] - Sleep Number Corporation: Despite a 16% year-over-year drop in net sales, the company has achieved gross margin expansion and is implementing cost-cutting measures to save $80 to $100 million annually [23]