US furniture retailers like RH and Williams-Sonoma are struggling to sell products in a tight housing market.
The unaffordable housing market is stretching wallets and making new furniture less of a priority for buyers.
A slew of furniture brands have reported weaker earnings in the most recent quarter.
High mortgage rates and expensive property prices have made buying a home increasingly unaffordable, but the repercussions extend beyond just the housing market.
Furniture retailers have reported weaker sales as Americans, who are struggling to break into the housing market, aren’t buying the usual amount of couches, tables, and home goods.
“We continue to expect the luxury housing market and broader economy to remain challenging throughout fiscal 2023 and into next year as mortgage rates continue to trend at 20-year highs,” furniture seller RH said in its latest earnings report last week.
During the quarter ending July 29, the high-end retailer reported a 19% drop in revenue.
Similarly, Williams-Sonoma, the brand behind Pottery Barn and West Elm, reported an 11.9% year-over-year decline for sales in the second-quarter, and net revenues dropped 13%. Profits fell from $928.81 million in the same quarter last year to $757.56 million. The company revised their outlook for 2023 to expect a lower net revenue growth, in the range of -5% and -10%.
Then there’s Virginia-based furniture retailer Hooker Furnishings, which reported a 36% drop in second-quarter revenue compared to a year ago, from $152.91 million to $97.8 million.
“We believe there are conflicting signals in the economy,” Hooker Furnishings chief executive Jeremy Hoff said during the company’s earnings call. “A housing shortage and the over 20-year high on fixed mortgage rates has slowed down housing activity. The continued rise in interest rates has suppressed consumer confidence.”
Adding on to the headwinds comes a new Bloomberg investor survey that concluded the resilient US consumer is about to lose steam by early next year. Over half of respondents anticipate that personal consumption will shrink in 2024.
To that point, economists at the San Francisco Federal Reserve Bank have said that excess savings from the pandemic could evaporate as soon as this month. That bodes poorly for furniture retail sellers that are already under pressure.
US households are seeing high borrowing costs eat into their savings, which in turn limits how much they can spend on home goods and other items. So far, resilient spending has staved off a deep recession, but if that dries up, so could the fortunes of the economy.
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