The housing sector has been on a high over the past year, with sales surging on skyrocketing demand. The soaring sales came despite rising raw material and labor costs. This is because of growing demand as people are willing to shell out more.
This boom is not only helping the housing market but also proving beneficial for industries like furniture and furnishings.
Home Market Continues to Grow
Higher prices of lumber and raw materials, and rising labor cost have been causes of concern. Yet, these haven’t impacted demand of new homes much. Mortgage rates too have been on the rise this year but people are still ready to pay more. This has led to skyrocketing sales and rising homebuilder confidence.
The Commerce Department said on Oct 26 that sales of new single-family homes jumped a solid 14% to a seasonally adjusted annual rate of 800,000 units in September. Besides, existing home sales increased 7% in September to hit an eight-month high, according to the National Association of Realtors.
Homebuilder confidence rose 4 points to a reading of 80 from September’s reading of 76, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
Home Sales Driving Furniture, Furnishing Sales
Higher demand for new homes is not only helping the homebuilding industry but also is driving sales of furniture and furnishings. This has made the furniture and furnishings industries the direct beneficiaries of the housing boom.
Given this scenario, demand for furniture products is likely to escalate in the coming months. According to the latest report from the National Retail Federation, sales at furniture and home furnishings stores were up 0.2% month over month in September and 13.7% year over year.
According to a study by Reportlinker.com, the U.S. furniture market is estimated to reach $105.2 billion in 2021. The United States currently accounts for a 22% of the global furniture market.
Also, according to the Census Bureau, retail sales rose 0.7% in September, beating analysts’ expectations of a 0.2% decline. Moreover, the approaching holiday season should boost furniture and furnishings sales.
The work and learn-from-home culture due to the pandemic gave a boost to the furniture and furnishings industries as consumers have been investing more on home-improvement projects. This is likely to continue in the future too with no sign of the pandemic ebbing.
Stocks to Watch
In such a scenario, we suggest four stocks from the furniture and home furnishings industries that possess strong growth potential and have witnessed robust earnings estimate revisions in the last 30 days.
Ethan Allen (NYSE:ETD) Interiors Inc. ETD is a leading interior design company as well asmanufacturer and retailer of quality home furnishings.The company offers free interior design service to its clients and sells a full range of furniture products and decorative accessories through ethanallen.com and a network of the Design Centers in the United States and abroad.
The company’s expected earnings growth rate for the current year is 30.8%. The Zacks Consensus Estimate for current-year earnings has improved 16.1% over the past 60 days.Ethan Allen sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Tempur Sealy (NYSE:TPX) International TPX is involved in the development, manufacturing and marketing of bedding products primarily in North America and internationally. It provides mattresses, adjustable bases, pillows. and other sleep and relaxation products.
The company’s expected earnings growth rate for the current year is 71.2%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. Tempur Sealy has a Zacks Rank #2 (Buy).
RH (NYSE:RH) RH is a leading luxury retailer in the home furnishing space. The company offers dominant merchandise assortments across a growing number of categories, including furniture, lighting, textiles, bath ware, décor, outdoor and garden, tableware, and child and teen furnishings.
The company’s expected earnings growth rate for the current year is 45.3%. The Zacks Consensus Estimate for current-year earnings has improved 14% over the past 60 days. RH carries a Zacks Rank #1.
LaZBoy (NYSE:LZB) LZB is one of the world's leading residential furniture producers, marketing furniture for every room of the home. The La-Z-Boy Upholstery segment comprises La-Z-Boy and England. The Casegoods segment consists of three brands: American Drew, Hammary and Kincaid.
The company’s expected earnings growth rate for the current year is 28.2%. Its shares have gained 7.4% in the past three months. LaZBoy has a Zacks Rank #3 (Hold).
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Tempur Sealy International, Inc. (TPX): Free Stock Analysis Report
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