We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Increasing investments in home improvement and remodeling activities accompanied with technological advancements and solutions are expected to drive the Zacks Furniture industry's growth. Although supply-chain disruptions, greater inflation, continued investments in e-commerce and intense competition might keep margins under pressure, higher consumer spending, product innovation as well as accretive buyouts should favor the furniture industry. In addition, efficient cost management should lend support to industry players like WillScot Mobile Mini Holdings Corp., La-Z-Boy Inc. and Virco Mfg. Corp..
Industry Description
The Zacks Furniture industry comprises manufacturers, designers and marketers of residential as well as 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.
3 Trends Shaping the Furniture Industry's Future
Supply-Chain Issues, Rising Inflation & Higher Expenses: The companies have been witnessing supply-chain disruptions, especially in chemicals, semiconductors, labor and transportation, which are constraining volume growth. As such, consumers are increasingly concerned about rising inflation and many expect inflation to outpace income growth. This would represent a risk to spending, which makes up two-thirds of the economy. The industry players are distressed by the rising raw material prices and logistic expenses. The labor market has also tightened with limited availability of labor, thereby driving labor costs.
Also, the furniture industry is highly competitive, with home furnishing retailers, department stores and antique dealers giving a hard time. Again, companies need to make incremental investments to address an expanding omni-channel 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.
Higher Home Repair & Remodeling Activities: Higher spending by homeowners for home renovation has been benefiting the furniture industry. Homeowners remain committed to investing in their homes despite sharp product and material costs driven by supply-chain disruptions. The latest Leading Indicator of Remodeling Activity ("LIRA"), released by Harvard University's Joint Center for Housing Studies, predicts that expenditures for improvements and repairs to the owner-occupied housing stock are expected to grow throughout 2022 and into early next year.
LIRA expects residential renovation and maintenance spending to increase year over year and peak at 19.7% in the third quarter of this year before sliding downward to 15.1% in the first quarter of 2023. So, significant investments in renovation are expected to brighten the market outlook.
Innovation, Digital Marketing & Acquisitions: Product innovation plays a key decisive factor for 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, with an emphasis on digital marketing, better merchandising, store remodeling and loyalty programs. Furthermore, the industry players are pursuing acquisitions to broaden their product portfolio and expand geographic footprint as well as market share.
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 #193, which places it at 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 tepid 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 negative 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 April 2022, the industry's earnings estimates for 2022 have been revised 1.9% downward.
Despite the industry's gloomy near-term view, we will present a few stocks that one may consider adding to their portfolio. Before that, it's worth taking a look at the industry's shareholder returns and current valuation.
Industry Outperforms Sector, Lags S&P 500
The Zacks Furniture industry has outperformed the broader Zacks Consumer Discretionary sector but lagged the Zacks S&P 500 composite over the past year.
Over this period, the industry has lost 20.5% compared with the broader sector's 35.8% decline and the S&P 500's decrease of 3.5%.
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 13.46X compared with the S&P 500's 17.59X and the sector's 18.66X.
Over the past five years, the industry has traded as high as 19.25X and as low as 9.40X, with the median being 15.12X.
3 Furniture Stocks to Watch Now
We have selected one stock from the Zacks universe of furniture stocks that currently carry a Zacks Rank #2 (Buy). We have also highlighted two other stocks carrying a Zacks Rank #3 (Hold) with solid prospects. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
WillScot Mobile Mini Holdings: This Phoenix, AZ-based company provides modular space and portable storage solutions. The company is benefiting from continuous product innovation, solid segmental results and transformation of the legacy WillScot business into Mobile Mini's SAP platform. Record order backlog and broad-based end-market strength have been driving growth.
Despite macroeconomic uncertainties, WSC expects robust demand to continue into 2023 given order backlog, prospects for infrastructure investment, a net positive inflationary environment, own national account conversations, and the 14th month of ABI expansion, which is a strong leading indicator for non-residential construction customers. The recent acquisitions through April, and a robust pipeline added to the positives.
WillScot, a Zacks Rank #2 stock, has gained 27.4% over the past year versus the industry's 20.5% drop. The company has an expected earnings growth rate of 73.7% for 2022.
La-Z-Boy: Based in Monroe, MI, this company manufactures, markets, imports, exports, distributes, and retails upholstery furniture products, accessories, and casegoods furniture products. LZB has been benefiting from strong demand trends across all business units.
Further, its solid cash position and investment in business bode well. The company has been navigating well through challenges like escalating commodity and freight costs with the help of higher pricing, strong brand presence, vast distribution through multiple channels and strategic investments across the business to drive market share gains.
La-Z-Boy's shares have dropped 40.9% in the past year. Nonetheless, earnings of La-Z-Boy — a Zacks Rank #3 company — are expected to grow 13.7% in fiscal 2022.
Virco Mfg.: Headquartered in Torrance, CA, this company designs, produces and distributes furniture in the United States. Although the company has been reeling under material cost increases, and higher costs associated with materials, freight and logistics, VIRC has been witnessing higher demand as stimulus funding aids recovery in the school furniture market. Notably, the fourth quarter is typically a slow time for orders in the seasonal cycle for school furniture.
Nonetheless, orders were up 65% during the fiscal fourth quarter of 2022 compared to the same period of the prior year. A higher funding level for public schools, as well as the competitive advantage it has from its domestic production and distribution model, has been enabling VIRC to consistently take market share from overseas competitors.
VIRC's shares have slipped 4% in the past year. Earnings of VIRC — a Zacks Rank #3 company — are expected to grow 134.7% in fiscal 2022.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Industry Outlook Highlights WillScot Mobile Mini Holdings, La-Z-Boy, and Virco
For Immediate Release
Chicago, IL – June 7, 2022 – Today, Zacks Equity Research discusses WillScot Mobile Mini Holdings Corp. (WSC - Free Report) , La-Z-Boy Inc. (LZB - Free Report) and Virco Mfg. Corp. (VIRC - Free Report) .
Industry: Furniture
Link: https://www.zacks.com/commentary/1934835/3-furniture-stocks-worth-watching-amid-supply-chain-woes
Increasing investments in home improvement and remodeling activities accompanied with technological advancements and solutions are expected to drive the Zacks Furniture industry's growth. Although supply-chain disruptions, greater inflation, continued investments in e-commerce and intense competition might keep margins under pressure, higher consumer spending, product innovation as well as accretive buyouts should favor the furniture industry. In addition, efficient cost management should lend support to industry players like WillScot Mobile Mini Holdings Corp., La-Z-Boy Inc. and Virco Mfg. Corp..
Industry Description
The Zacks Furniture industry comprises manufacturers, designers and marketers of residential as well as 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.
3 Trends Shaping the Furniture Industry's Future
Supply-Chain Issues, Rising Inflation & Higher Expenses: The companies have been witnessing supply-chain disruptions, especially in chemicals, semiconductors, labor and transportation, which are constraining volume growth. As such, consumers are increasingly concerned about rising inflation and many expect inflation to outpace income growth. This would represent a risk to spending, which makes up two-thirds of the economy. The industry players are distressed by the rising raw material prices and logistic expenses. The labor market has also tightened with limited availability of labor, thereby driving labor costs.
Also, the furniture industry is highly competitive, with home furnishing retailers, department stores and antique dealers giving a hard time. Again, companies need to make incremental investments to address an expanding omni-channel 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.
Higher Home Repair & Remodeling Activities: Higher spending by homeowners for home renovation has been benefiting the furniture industry. Homeowners remain committed to investing in their homes despite sharp product and material costs driven by supply-chain disruptions. The latest Leading Indicator of Remodeling Activity ("LIRA"), released by Harvard University's Joint Center for Housing Studies, predicts that expenditures for improvements and repairs to the owner-occupied housing stock are expected to grow throughout 2022 and into early next year.
LIRA expects residential renovation and maintenance spending to increase year over year and peak at 19.7% in the third quarter of this year before sliding downward to 15.1% in the first quarter of 2023. So, significant investments in renovation are expected to brighten the market outlook.
Innovation, Digital Marketing & Acquisitions: Product innovation plays a key decisive factor for 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, with an emphasis on digital marketing, better merchandising, store remodeling and loyalty programs. Furthermore, the industry players are pursuing acquisitions to broaden their product portfolio and expand geographic footprint as well as market share.
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 #193, which places it at 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 tepid 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 negative 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 April 2022, the industry's earnings estimates for 2022 have been revised 1.9% downward.
Despite the industry's gloomy near-term view, we will present a few stocks that one may consider adding to their portfolio. Before that, it's worth taking a look at the industry's shareholder returns and current valuation.
Industry Outperforms Sector, Lags S&P 500
The Zacks Furniture industry has outperformed the broader Zacks Consumer Discretionary sector but lagged the Zacks S&P 500 composite over the past year.
Over this period, the industry has lost 20.5% compared with the broader sector's 35.8% decline and the S&P 500's decrease of 3.5%.
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 13.46X compared with the S&P 500's 17.59X and the sector's 18.66X.
Over the past five years, the industry has traded as high as 19.25X and as low as 9.40X, with the median being 15.12X.
3 Furniture Stocks to Watch Now
We have selected one stock from the Zacks universe of furniture stocks that currently carry a Zacks Rank #2 (Buy). We have also highlighted two other stocks carrying a Zacks Rank #3 (Hold) with solid prospects. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
WillScot Mobile Mini Holdings: This Phoenix, AZ-based company provides modular space and portable storage solutions. The company is benefiting from continuous product innovation, solid segmental results and transformation of the legacy WillScot business into Mobile Mini's SAP platform. Record order backlog and broad-based end-market strength have been driving growth.
Despite macroeconomic uncertainties, WSC expects robust demand to continue into 2023 given order backlog, prospects for infrastructure investment, a net positive inflationary environment, own national account conversations, and the 14th month of ABI expansion, which is a strong leading indicator for non-residential construction customers. The recent acquisitions through April, and a robust pipeline added to the positives.
WillScot, a Zacks Rank #2 stock, has gained 27.4% over the past year versus the industry's 20.5% drop. The company has an expected earnings growth rate of 73.7% for 2022.
La-Z-Boy: Based in Monroe, MI, this company manufactures, markets, imports, exports, distributes, and retails upholstery furniture products, accessories, and casegoods furniture products. LZB has been benefiting from strong demand trends across all business units.
Further, its solid cash position and investment in business bode well. The company has been navigating well through challenges like escalating commodity and freight costs with the help of higher pricing, strong brand presence, vast distribution through multiple channels and strategic investments across the business to drive market share gains.
La-Z-Boy's shares have dropped 40.9% in the past year. Nonetheless, earnings of La-Z-Boy — a Zacks Rank #3 company — are expected to grow 13.7% in fiscal 2022.
Virco Mfg.: Headquartered in Torrance, CA, this company designs, produces and distributes furniture in the United States. Although the company has been reeling under material cost increases, and higher costs associated with materials, freight and logistics, VIRC has been witnessing higher demand as stimulus funding aids recovery in the school furniture market. Notably, the fourth quarter is typically a slow time for orders in the seasonal cycle for school furniture.
Nonetheless, orders were up 65% during the fiscal fourth quarter of 2022 compared to the same period of the prior year. A higher funding level for public schools, as well as the competitive advantage it has from its domestic production and distribution model, has been enabling VIRC to consistently take market share from overseas competitors.
VIRC's shares have slipped 4% in the past year. Earnings of VIRC — a Zacks Rank #3 company — are expected to grow 134.7% in fiscal 2022.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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.