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Furniture Industry to Grow Comfortably in 2021: 3 Top Picks

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Zacks Equity Research
·4 min read
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The furniture industry in the United States is well poised to continue on its growth trajectory especially after it witnessed a boom in sales during the third quarter. Notably, per a survey by the Home Furnishings Association in collaboration with Piper Sandler Companies, furniture retailers saw 8% average sales growth year over year in the third quarter compared to a decline of 8% in overall sales in the second quarter. They also expect overall growth of 15% on average in the fourth quarter even though some written orders from the third quarter were pushed into the fourth owing to supply chain issues.

The stay-at-home and social distancing orders that were put in place to curb the pandemic changed the needs of people. Notably, people felt the need to upgrade or modify their home furnishing as they began to stay and work from home. Moreover, as the pandemic forced brick-and-mortar stores to shut down to avoid the risk of spreading the virus, online sales of furniture rose. In fact, the survey found that online sales during the third quarter surged to a whopping 231% over the same quarter a year ago.

Moreover, the furniture industry also received a boost as the pandemic resulted in people preferring to own single-family homes. Reflective of that, the Commerce Department reported that single-family housing starts rose 0.4% in November to a seasonally adjusted annual rate of 1.186 million units which is the highest level since April 2007, as quoted in a Reuters article. The article further mentioned that this was the seventh straight month of increase for single-family housing starts as pent-up demand along with ultra-low interest rates aided the gain.

Meanwhile, existing home sales continued to register year-over-year gains in November. The National Association of Realtors stated that single-family home sales for November were up 25.6% from the year-ago period even though sales dropped 2.4% from October. Notably, per a forecast by realtor.com, single-family housing starts are projected to grow 9% in 2021 while existing home sales are expected to grow 7% in the next year. Moreover, the work-from-home trend is set to continue next year as well. Per a report by Global Workplace Analytics, 25-30% of the workforce is expected to work from home for multiple days a week by the end of 2021.

Such estimates are positive for the furniture industry as people continue to move to newly purchased homes and work remotely. In fact, Statista estimated the furniture market to show revenue growth of 6.4% in 2021 following a dip of 10.3% in 2020. Moreover, Statista also estimated that the furniture market will grow 3% annually (CAGR 2020-2025).

3 Top Picks

The furniture industry looks poised to witness strong growth going forward as the work-from-home trend continues. Meanwhile, booming single-family housing starts and existing home sales are also sure to lend support. This makes it a good time to invest in furniture stocks that stand to benefit from this trend. We have selected three such stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bassett Furniture Industries Inc. BSET manufactures, markets and retails home furnishing in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for next-year earnings increased 43.8% over the past 60 days. The company’s expected earnings growth rate for next year is more than 100%.

Leggett & Platt, Incorporated LEG designs and produces various engineered components and products worldwide. It operates through three segments, namely, Bedding Products; Furniture, Flooring & Textile Products; and Specialized Products. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for next-year earnings increased 3.2% over the past 60 days. The company’s expected earnings growth rate for next year is 24.2%.

La-Z-Boy Incorporated LZB manufactures, markets, imports, exports, distributes and retails upholstery furniture products, accessories and case goods furniture products in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings increased 12.2% over the past 60 days. The company’s expected earnings growth rate for next year is 11%.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

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