Furniture and home furnishing stores are doing well with good margins and turnover rates but are slowly trending down.
There have been many positive Economic Trends for Furniture Stores. New and existing home sales have been rising, incomes are rising from a recession low, household debt is down, credit is available and interest rates remain low. Consumers feel wealthy because housing prices are rising and the stock market is rising. Birth rates hit a low point in about 1976 and rose steadily until 1991 when a small dip began. The people born during this 15 year period are forming new households now. Household formation historically begins at an average age of 25. This group was delayed by a series of economic crises beginning with the dot com bust in 2001 followed by the great recession in 2008 and still lingering. There is a great deal of pent up demand that is being satisfied as this Millennial Generation gets jobs and forms households. All of this has been good for the furniture business.
Of course, younger adults forming households for the first time need everything at once. They tend to shop at the large category dominant retailers where they can find it all at the lowest possible price. The big furniture retailers are doing very well. However, new home purchases are slowing because of rising mortgage rates and rising home prices. Retailers should not expect the increases seen since 2011 to continue. The furniture business will plateau but should remain healthy for the next few years.
The high end of the furniture business has been fueled by older people moving out of the big house in the suburbs where they raised a family and moving into a smaller but more expensive house in or near the city. They wanted some new pieces of furniture but were also interested in the designer coming out to be sure the upholstery matched the drapes and to help pick paint colors. They shopped for better quality furniture and wanted lots of service. This trend is currently peaking. As these people retire and move to fixed incomes their purchases will decline. Expect this decline to continue until about 2026 when the Millennial Generation starts to move out of the suburbs and into the city. A combination of retiring Baby Boomers and the following Baby Bust, Generation X, will cause this decline in high end furniture sales.
Please watch a video from a recent client where we conducted a Promotional Sale and the results he achieved: