Residential furniture and home goods retailer issues performed well last week versus the market, while the Commercial/Contract Furniture stocks, by and large, tread water. Our Residential Manufacturers & Suppliers index advanced 3.2%, outperforming the broader market indexes (up between 1.6 to 1.8%), while our Home Goods Retailers and Mass Retailers indexes each grew by 0.7%. Only our Commercial/Contract Furniture Index lagged, down 0.3%.

The announcement that AI Dream, a multi-sleep brand licensing company and division of Singapore-based PE Hillhouse Investment Management, acquired the US King Koil mattress business piqued our interest. AI already owns the King Koil brand in Asian markets and plans, ostensibly, to accelerate King Koil’s US growth and develop expansion opportunities beyond Aisa. In the wake of punk US sales and a series of USITC anti-dumping rulings against various Asian countries, it suggests the belief for improving longer-term prospects for domestic producers.

Quarterly reports from PROG Holdings, Sleep Number, and Ethan Allen point to weak demand though each suggested reasons for optimism. PROG Holdings, citing longer replacement cycles, lower household formation, and weak housing, pointed to persisting weak furniture and bedding demand after the post-pandemic demand pull-through. Sleep Number, which reported a sales decline of 11% against weak year-ago comps, noted mattresses’‘historic recession,’ with demand down ‘mid-single digits.’ It suggested bedding remained weak through April’s first three weeks yet sees low single-digit growth in 2H24 as comp hurdles ease. Ethan Allen had a sharp drop in sales (-21.4%) and orders (-8.6% in retail and -14.6% in wholesale) during its 3QFY24 but noted evidence suggesting improving demand in April as consumers show more interest in their homes after focusing more on travel and other areas recently.

Could the November election complicate North American trade and disrupt sourcing strategies? Automakers think it might according to reporting by the Financial Times (gated). Given increased trade tensions with China, Mexico has become increasingly important for furniture and bedding makers. A retooling or (worst case) collapse of the USMCA would introduce further complications with respect to supply chains and sourcing.

The March Architectural Billings Index fell to 43.6 from 49.5 in February. Commercial projects were particularly affected.

KPMG US chief economist warns “inflation is hot, it’s getting sticky and more broad based” (FT, gated). Higher for longer (affecting housing, demand) increasingly is consensus.

Busy earnings schedule ahead. Reports from HNI, FLXS, LEG, HVT, ARHS, W, UPBD, FND, and FRG should shed additional light on conditions for office and residential furniture.

Source: Budd Bugatch is a senior research analyst at Water Tower Research, an investor engagement strategies and open-access research platform. For information visit watertowerresearch.com.