Chicago, IL – April 7, 2025 – Today, Zacks Equity Research discusses Flexsteel Industries, Inc. FLXS and Bassett Furniture Industries, Inc. BSET.
Industry: Furniture
Link: https://www.zacks.com/commentary/2440590/2-furniture-stocks-to-watch-defying-the-industry-downturn
The Zacks Furniture industry is facing challenges due to economic uncertainty and declining consumer confidence. Reduced home-related spending, influenced by higher mortgage rates and housing affordability issues, has impacted the sector. However, companies such as Flexsteel Industries, Inc. and Bassett Furniture Industries, Inc. are navigating these challenges by strategically investing in technological advancements, product innovation, and cost efficiency. Strategic investments and acquisitions are helping to enhance their global presence and market positions. With a continued emphasis on innovation and operational improvements, the industry is taking steps to manage current pressures and position itself for future growth.
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.
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 March 2025, U.S. consumer confidence dropped sharply to its lowest level in over a decade, with the Conference Board's index falling to 92.9—the weakest reading since January 2021. This decline reflects growing public concern over escalating tariffs and persistent inflationary pressures.
Advertisement: High Yield Savings Offers
Powered by Money.com - Yahoo may earn commission from the links above. Consumer confidence fell for the fourth straight month in March, slipping below the narrow range it had maintained since 2022. Expectations for the future grew increasingly bleak, with concerns about business conditions intensifying and confidence in future job prospects plunging to a 12-year low. Notably, optimism about future income—which had remained resilient in recent months—faded significantly.
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 April 3, 2025, the 30-year fixed-rate mortgage hovered around 6.64%, a level that continues to strain housing affordability.
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.
The Zacks Furniture industry is an eight-stock group within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #186, which places it in the bottom 24% 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 January 2025, the industry’s earnings estimates for 2025 have decreased to $1.52 per share from $1.73.
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.
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 33.2% compared with the broader sector’s 0.1% dip. The Zacks S&P 500 Composite has risen 9.5% over this period.
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 9.97X compared with the S&P 500’s 20.73X and the sector’s 17.71X.
Over the past five years, the industry has traded as high as 16.53X and as low as 8.14X, with the median being 10.98X.
We have selected two stocks from the Zacks universe of furniture stocks that have impressive growth prospects amid volatility.
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 10.7% (on a GAAP basis) for the fiscal second 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. Although new 25% tariffs on Mexico and Canada introduce uncertainty, given Flexsteel’s reliance on Mexican operations, the company is actively developing mitigation plans.
Flexsteel— a Zacks Rank #1 (Strong Buy) stock — has lost 14.3% in the past year. Nonetheless, earnings estimates for fiscal 2025 increased to $3.53 from $3.25 per share over the past 60 days, depicting analysts’ optimism over the company’s prospects. The Zacks Consensus Estimate for fiscal 2025 earnings per share (EPS) indicates 67.3% year-over-year growth. Also, Flexsteel earnings topped the consensus mark in all the last four quarters, with the average surprise being 19.8%. It also has a favorable VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bassett: Based in Bassett, VA, Bassett manufactures, markets, and retails home furnishings in the United States. The company has been focusing on cost reductions and improvement in efficiency. Bassett is also focused on product innovation and growth initiatives, including new collections and e-commerce. Its 2025 strategy is aimed at navigating weak demand while positioning for competitive growth.
Bassett— a Zacks Rank #3 (Hold) stock — has rallied 8.5% over the past year, performing better than its industry peers. The Zacks Consensus Estimate for 2025 EPS is currently pegged at 70 cents against the year-ago reported loss of 48 cents per share. Bassett earnings topped the consensus mark in the last reported quarter by 950%. It also has a favorable VGM Score of B.
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Flexsteel Industries, Inc. (FLXS) : Free Stock Analysis Report
Bassett Furniture Industries, Incorporated (BSET) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
