Furnishings weekly industry report: Commercial stocks outperform
By Budd Bugatch
Water Tower Research

Budd Bugatch, senior research analyst, Water Tower Research

The DJ30 closed above 40,000 for the first time ever. Our Commercial/Contract Furniture Index (+2.3%) outperformed the broader market indexes (all three up +1.6%) and our Mass Retailers Index (+0.6%) last week. Residential Manufacturers & Suppliers (-3.8%) and Home Goods Retailers (-2.8%) trailed.

Forty-foot container rates spiking again. Drewry’s World Container Index rose 11% last week to $3,511 per 40-foot container. It had retreated from the nearly $4,000 peak touched in late January. Why? Red Sea geopolitical tensions and increased demand by North American importers (anticipating 2H24 inventory needs) implicated. For furniture and furnishings firms sourcing from Asia, the increased logistics costs are a potential margin headwind.

Walmart delivered an exquisite 1Q25 earnings report, while also reportedly cutting hundreds of corporate jobs and “asking” most remote workers to move to offices. Its Chief People Officer, citing benefits to culture and associate development, said, “We believe that being together, in person, makes us better.” We suspect less experienced and newer workers may be most affected by losing networking and learning opportunities with remote-only work. They should benefit from increased in-person peer interactions. For organizations, productivity and innovation may suffer when learning and networking are limited. If so, back-to-office and hybrid working benefit both workers and organizations.

Adam Neumann’s bid to regain control of WeWork, the company he co-founded, apparently won’t work (gated, Financial Times). In late April, it secured court approval of its disclosure statement and other motions paving the way for it to emerge from Chapter 11 by the end of May. The new WeWork will be much smaller, with the FT reporting that post-bankruptcy, it will have ~20 million square feet in its co-working office portfolio versus ~44 million square feet in late 2022. Co-working remains desirable for many. But can its operationally focused management make WeWork successful over the cycle? That’s yet to be answered.

Amenity-rich, well-located office buildings are seeing positive traction in London, with return-to-office up 18% Y/Y in March, according to Land Securities, which owns a central London office portfolio of £4.3 billion. Hybrid working appears to be the new normal, with Tuesday through Thursday significantly busier. Generalizing from London to North America always carries risk, given urban structure differences, but these trends are promising and tales about amenities and locations track to what we hear domestically.

In its 1Q24 earnings release, Home Depot noted results were affected by a delayed start to spring and continued softness in certain larger discretionary projects (kitchen and bath remodeling), similar to stories related by furniture and bedding manufacturers and retailers YTD in 2024.

Residential furniture imports tumbled 23% to $23.9 billion in 2023. Vietnam retains the top spot for the second year with $7.8 billion in imports. China imports were down 30%.

Source: Budd Bugatch is a senior research analyst at Water Tower Research, an investor engagement strategies and open-access research platform. For information visit watertowerresearch.com.


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