The housing sector has been strong for some time now, supported primarily by low interest rates. Also, the moving-to-the-suburbs trend for more space to better accommodate remote working has added to housing demand.
Rising home purchases and the improvement of existing homes are driving the demand for furniture. The home furniture market in the United States is poised to grow at a CAGR of 2% over the next four year to reach $8.08 billion by 2024. One of the most notable and disruptive shifts in the furniture industry is the rise of e-commerce. As a result, many e-commerce giants, including Amazon (AMZN), Wayfair (W), and Home Depot (HD) are offering a wide range of furniture products from many key brands as a part of their product portfolios.
Given this backdrop, we think it wise to bet on furniture stocks Williams-Sonoma, Inc. (WSM), La-Z-Boy Incorporated (LZB), Haverty Furniture Companies, Inc. (HVT) and Select Interior Concepts, Inc. (SIC). These companies are continuously expanding their market reach.
Williams-Sonoma, Inc. (WSM)
Based in San Francisco, WSM is an omni-channel specialty retailer of various home products. The company markets its products through e-commerce websites, direct-mail catalogs, and retail stores.
Earlier this month, WSM was included in the 2021 Bloomberg Gender-Equality Index (GEI). Its inclusion demonstrates WSM’s continued effort in creating a diverse and inclusive workplace that reflects the communities it serves. The inclusion also reflects a high level of disclosure and performance across various gender equality pillars.
Early this month, WSM launched a new collection of entertainment and tabletop items exclusively at Williams Sonoma and Pottery Barn in partnership with actress, author, and activist, Marlo Thomas. The Marlo Thomas Collection at WSM is expected to attract a large volume of potential customers.
WSM’s net revenues have increased 22.4% year-over-year to $1.77 billion in the fiscal third quarter, ended November 1, 2020, driven by accelerated sales activity across all brands. Its non-GAAP net operating income has increased 151.9% from its year ago value to $276.82 million, while its non-GAAP EPS has improved 151% to $2.56 over the same period.
Analysts expect WSM’s revenues to grow 17.7% year-over-year to $2.17 billion in the about-to-be reported quarter (ended January 31, 2021). A consensus EPS estimate of $3.38 for the fourth quarter represents a 58.7% improvement from the year ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 29.8% over the past six months.
WSM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
WSM has an A grade for Quality and Momentum, and B for Growth and Value. Of the 64 stocks in the A-rated Home Improvement & Goods Industry, WSM is ranked #11.
In total, we rate WSM on eight different levels. Beyond what we’ve stated above, we have also given WSM grades for Value and Sentiment. Get all WSM’s ratings here.
La-Z-Boy Incorporated (LZB)
Based Monroe, Michigan, LZB manufactures, markets, imports, exports, distributes and retails upholstered furniture products. It operates through Upholstery, Casegoods, and Retail segments. The company also produces reclining chairs and manufactures and distributes residential furniture.
LZB announced some leadership changes this month. Kurt L. Darrow will retire as President and CEO effective April 25, 2021, after which Melinda D. Whittington will take over the roles. Darrow will remain Chairman of the Board of Directors, in a non-executive capacity. Robert G. Lucian, Vice President, Finance, will succeed Whittington in the role of CFO.
LZB’s same-store sales increased 6.3% year-over-year in the third quarter ended January 23, 2021. Its gross profit has increased slightly from its year-ago value to $201.25 million, while its non-GAAP net income has risen 3.2% to $34.65 million over the same period. Its non-GAAP EPS has improved 2.8% year-over-year to $0.74 over the three-month period.
Analysts expect LZB’s revenues to grow 30.3% year-over-year to $501.10 million in the current quarter (ending April 30, 2021). A consensus EPS estimate of $0.75 for the fourth quarter represents a 53.1% improvement from the year-ago period. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 22% over the past six months.
LZB POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our ratings system. LZB has an A grade for Quality, and B for Growth. The stock is ranked #29 in the same industry.
Click here to see the additional POWR Ratings for LZB (Value, Momentum, Stability and Sentiment).
Haverty Furniture Companies, Inc. (HVT)
HVT operates as a specialty retailer of home furnishings and accessories in the United States. The company offers furniture merchandise under the Havertys brand name through its retail stores and through its Website. It also provides custom upholstery products and mattress product lines.
HVT’s net sales have increased 12.9% year-over-year to $241.34 million in the fourth quarter ended December 31, 2021. Its gross profit has risen 18.8% from its year-ago value to $137.62 million, yielding a gross margin of 57%, up 280 basis points year-over-year. Its adjusted EPS has improved 242.5% year-over-year to $1.37 over the three-month period.
Analysts expect HVT’s revenues to grow 11.3% year-over-year to $199.67 million in the current quarter (ending March 31, 2021). A consensus EPS estimate of $0.39 for the first quarter represents a 333.3% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three out of the trailing four quarters. The stock has gained 56.7% over the past six months.
The POWR Ratings are also high on HVT. It has an Overall Rating of A, which translates to a Strong Buy. The stock has also an A grade for Quality, Momentum, Value, and Growth. In 64 stocks of the same industry, it is ranked #1.
Click here to see the additional POWR Ratings for HVT (Stability and Sentiment).
Select Interior Concepts, Inc. (SIC)
SIC is a premier installer and nationwide distributor of interior building products with leading market positions in highly attractive U.S. markets. It operates through two segments: Residential Design Services and Architectural Surfaces Group. The company serves new residential and commercial construction markets and distributes its products to the repair and remodel market also.
Last November, SIC announced changes in connection with its senior leadership. Nadeem Moiz, has been appointed as Chief Operating Officer of Select Interior Concepts, in addition to his continuing role as CFO.
Given the economic impact of COVID-19 on housing construction and remodeling activity, SIC took steps to rationalize its cost structure and capital resources by undertaking various measures, including hiring freezes, targeted furloughs and workforce reductions across business units, along with its enforcement of strict controls on non-critical expenditures.
Given these initiatives, the company was able to reduce its costs by approximately $5 million during the third quarter ended September 30, 2020. Despite closures and a decline in commercial businesses, SIC reported revenues of $150.05 million. The company reported gross profit of $38.59 million in the third quarter, yielding a gross margin of $25.7%.
Analysts expect the company’s revenues to grow 3.6% year-over-year to $139.15 million in the current quarter (ending March 31, 2021). A consensus EPS estimate for the current quarter represents a 75% improvement from the year-ago value. The stock has gained 53.6% over the past six months.
SIC has an overall rating of B, which translates to a Buy in our ratings system. It is currently ranked #30 of 64 stocks in the same A-rated industry.
Get all SIC ratings here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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WSM shares were trading at $129.10 per share on Wednesday afternoon, up $0.50 (+0.39%). Year-to-date, WSM has gained 27.29%, versus a 4.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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