US furniture retailers are seeing a slowdown in sales as Americans who are already struggling to afford homes in today’s market aren’t shelling out for a new dining table or couch.
Last week, high-end furniture retailer RH reported $800 million in revenue in the three months ended July 29 — a 19% drop from last year’s period, when revenues hit $992 million.
The company attributed the dip to the stalling housing market, where mortgage rates are sitting at the highest level since 2001, forcing many homeowners in major US cities to sell at a loss.
“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,” the company said in its earnings report.
Williams-Sonoma, the San Francisco-based firm behind pricey interior stores Pottery Barn and West Elm, posted its second-quarter earnings late last month, which showed year-over-year decreases across the board.
Aside from net revenues falling 13% from last year, to $1.86 billion, Williams-Sonoma’s profits also fell to $757.56 million — down from $928.81 million in 2022 — while operating income, comparable brand revenue and merchandise inventories also decreased.
In addition, Williams-Sonoma reported a 20% revenue decline for West Elm, and a 10% dip in sales for Pottery Barn.
Virginia-based luxury furniture retailer Hooker Furnishings also reported losses for the quarter, when revenue slid to $97.8 million — down 36% from $152.91 million a year ago.
Net incomes at the manufacturer — which sells its home goods at Wayfair and Macy’s — also took a massive hit year over year, from $5.54 million to a dismal $785,000.
Hooker’s chief executive Jeremy Hoff also attributed the company’s losses to mortgage rates, which have “slowed down housing activity.”
“The continued rise in interest rates has suppressed customer — consumer confidence,” Hoff added during an earnings call with investors following the company’s earnings report.
Perhaps also because of sky-high benchmark 30-year home loans — which climbed to 7.23% from 7.09% last month, per mortgage buyer Freddie Mac — investors also appear insecure about the future of the furniture industry, as shares of RH fell nearly 18%, to $313.23, in the past five days — since the company reported its second-quarter earnings.
A year ago, the average 30-year home loan rate was 5.55%.
Hooker Furnishing’s share price, meanwhile, fell nearly 9%, to $19.16, while Williams-Sonoma’s stock slipped less than 1%, to $142.52, in the same five-day period
Representatives for RH, Williams-Sonoma and Hooker Furnishings did not immediately respond to The Post’s request for comment.
The shift in consumer spending on furniture makes sense, as home buyers face an ongoing affordability crisis and consumer spending is expected to shrink in early 2024 — the first quarterly decline since the start of the pandemic, according to Bloomberg’s latest Markets Live Plus survey.
More than half of 526 respondents, or 56%, believe that personal consumption in the US will turn negative in the new year, while another 21% said the reversal will happen even sooner, in the final quarter of 2023, Bloomberg found.
The outlet blamed the pessimism on high borrowing costs affecting household budgets and COVID-era savings drying out.
Thus, the “nepo baby” discussion has found its way from social media into the real estate market, where recent findings from the brokerage Redfin reveal that a significant portion of young homebuyers used family money to afford a down payment for a home.
According to Redfin’s survey of more than 500 buyers under 30 years old, 38% had financial assistance from relatives for their down payment.
The situation is significantly a result of the current crisis of housing unaffordability, especially as inflation keeps its grip tight on the American economy.
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