Dwindling consumer confidence and economic uncertainty are marring prospects of the Zacks Furniture industry. Despite industry-wide headwinds in the furniture and home furnishings sector, including reduced home-related spending due to higher mortgage rates and housing affordability challenges, companies like La-Z-Boy Incorporated LZB, Sleep Number Corporation SNBR and Flexsteel Industries, Inc. FLXS are capitalizing on this period by strategically investing in technological advancements, product innovation and efficient cost management. These efforts, combined with accretive buyouts, are set to expand their global reach and strengthen their market positions. The industry is well-positioned to overcome current challenges and emerge stronger, driven by its commitment to innovation and operational efficiency.
Industry Description
The Zacks Furniture industry comprises manufacturers, designers and marketers of residential and commercial furnishing solutions. Some of the companies provide kitchen and bath cabinets as well as various engineered components and products in the United States, along with international markets. A few industry players also offer specialty rental services, such as modular and portable storage solutions as well as modular space and portable storage solutions. They are involved in designing and producing a wide variety of engineered components and products for homes, offices and automobiles. The industry players cater to different sectors, namely construction, energy, healthcare, security, government, retail, commercial, education and transportation.
4 Trends Shaping the Furniture Industry's Future
Dwindling Consumer Confidence & High Rates: The U.S. furniture industry is grappling with significant challenges as dwindling consumer confidence and elevated mortgage rates continue to weigh on demand. In December 2024, consumer confidence took a sharp downturn, with the Conference Board's consumer confidence index falling to 104.7 from 112.8 in November. This marked a growing pessimism about the economic outlook, fueled by uncertainties surrounding the Trump administration's policies. Consumers expressed less optimism about current business conditions and raised concerns about future labor market stability, the overall business environment and income prospects.
These economic pressures are prompting consumers to prioritize essentials, curbing discretionary spending on home furnishings and decor. High mortgage rates, in particular, are exacerbating the problem by reducing home-related expenditures. For the week that ended Jan. 9, 2025, the 30-year fixed-rate mortgage hovered just below 7% (at 6.93%), a level that continues to strain housing affordability. Elevated home prices and a shortage of entry-level housing further complicate the landscape, discouraging potential homebuyers — especially first-time buyers — from entering the market.
This reduced activity in the housing market has a direct impact on the furniture sector, which is closely tied to homebuilding and home improvement. With fewer new homeowners furnishing their spaces, the industry's sales growth faces headwinds. Until economic stability improves and mortgage rates moderate, the furniture industry is likely to remain under pressure from these converging challenges.
Higher Expenses: The industry players are engaged in active competition to enlarge their market share. In pursuit of this goal, industry players are intensifying their digital presence and refining shipping capabilities, leading to heightened investments. Also, the furniture industry is highly competitive, with home furnishing retailers, department stores and antique dealers having a hard time. The companies need to make incremental investments to address an expanding omnichannel environment, as shoppers tend to look for online options. Growth in online sales may continue to dent traditional furniture retailers’ market share as brands such as Etsy, Things Remembered, Costco and Amazon are finding their way into the market. Alongside these challenges, rising SG&A rates, increased labor and occupancy costs and elevated expenses related to marketing and stores could place a strain on profit margins. The labor market has struggled with the limited availability of labor, which is pushing up labor costs.
Innovation, Digital Marketing: Product innovation plays a decisive factor in market share gain in this industry. Players are investing in new products to improve the product mix in a competitive landscape and drive top-line growth. Also, millennials represent the largest consumer cohort in the furniture market. More money in the hands of this largest and most active generation of homebuyers should keep demand elevated. Customer experience is getting enhanced by innovative marketing techniques, emphasizing digital marketing, better merchandising, store remodeling and loyalty programs. These companies are utilizing advanced technology to enhance the overall customer experience, optimize their operations and provide innovative solutions. Companies that make strategic investments in digital innovation are poised to navigate challenges successfully and emerge as industry leaders.
Acquisitions & Focus on Public Sector: The industry players are pursuing acquisitions to broaden their product portfolio and expand their geographic footprint and market share. They are also prioritizing the diversification of their business portfolios, expanding their global footprint and strengthening their positions in resilient sectors such as healthcare and the public sector. The company and its peers are expected to benefit from strong global trends in infrastructure modernization.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Furniture industry is an eight-stock group within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #218, which places it in the bottom 13% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a lower earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since November 2024, the industry’s earnings estimates for 2025 have decreased to $1.73 per share (from $1.76).
Although the industry's short-term outlook remains uncertain, we will highlight a few stocks that investors might consider adding to their portfolios. But first, let's review the industry's recent shareholder returns and current valuation.
Industry Lags Sector & S&P 500
The Zacks Furniture industry has underperformed the broader Zacks Consumer Discretionary sector and the Zacks S&P 500 Composite over the past year.
Over this period, the industry has declined 22.4% against the broader sector’s 12% rise. The Zacks S&P 500 Composite has risen 25% over this period.
One-Year Price Performance
Furniture Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E), which is commonly used for valuing furniture stocks, the industry is currently trading at 10.7X compared with the S&P 500’s 22.13X and the sector’s 18.53X.
Over the past five years, the industry has traded as high as 16.53X and as low as 8.14X, with the median being 11X, as the chart below shows.
Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500
3 Furniture Stocks to Watch
We have selected three stocks from the Zacks universe of furniture stocks that have impressive growth prospects.
La-Z-Boy: Based in Monroe, MI, this company manufactures, markets, imports, exports, distributes and retails upholstery furniture products, accessories and casegoods furniture products. La-Z-Boy has been navigating a challenging macroeconomic environment while leveraging its strong brand and operational strategies. La-Z-Boy's strategic initiatives, with its iconic brand, diverse product portfolio and focus on high-quality custom furniture, play pivotal roles in driving demand. As a market leader in custom furniture known for comfort and quick delivery, LZB is well-positioned to outperform the industry and gain market share to leverage improved industry trends expected from interest rate cuts going forward. The company's strategy focuses on expanding its Retail segment, driving sales growth at double the industry rate and enhancing margins.
LZB — a Zacks Rank #2 (Buy) stock — has risen 18.5% over the past year. Earnings estimates for fiscal 2025 have increased to $2.99 (from $2.98) over the past 60 days. The estimated figure indicates 0.3% year-over-year growth. This company surpassed earnings estimates in two of the trailing four quarters, met in one and missed on another occasion, with the average surprise being 9.6%. It also carries an impressive VGM Score of B, making it a potentially interesting investment opportunity. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: LZB
Sleep Number: Headquartered in Minneapolis, MN, this company provides sleep solutions and services in the United States. It has been reaping benefits from solid demand for smart beds. It has been accelerating strategic initiatives, strengthening competitive advantages and creating meaningful value for customers, teams, business partners and shareholders.
SNBR — a Zacks Rank #3 (Hold) stock — has rallied 25.9% in the past year. The Zacks Consensus Estimate for 2025 earnings per share (EPS) indicates 150.9% year-over-year growth. SNBR earnings topped the consensus mark in all of the last four quarters, with the average surprise being 55.7%. It also has a favorable VGM Score of A.
Price and Consensus: SNBR
Flexsteel: Based in Dubuque, IA, Flexsteel operates as a manufacturer, importer and marketer of furniture for residential markets in the United States. Flexsteel has been gaining market share in its core markets and expanding into new areas through product development and innovation. The company has been effectively managing costs, leveraging higher sales and implementing supply chain cost-saving measures, resulting in improved margins and reduced SG&A expenses. The company's efforts in product portfolio management and productivity enhancements led to continued improvement in operating margins, now at 5.8% for the fiscal first quarter of 2025. Despite industry-wide demand challenges due to macroeconomic factors, Flexsteel's aggressive strategy in product innovation and marketing has been helping it sustain growth momentum.
FLXS — a Zacks Rank #3 stock — has surged 178.3% in the past year. The Zacks Consensus Estimate for fiscal 2025 EPS indicates 54% year-over-year growth. FLXS earnings topped the consensus mark in three of the last four quarters and met on one occasion, with the average surprise being 12.7%. It also has a favorable VGM Score of B.
Price and Consensus: FLXS
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