Retail earnings point to consumer pullback on furniture, appliances
Recent earnings reports from retailers such as Big Lots (BIG), Home Depot (HD), Lowe's (LOW), and Best Buy (BBY), showed that consumers are pulling back their spending on big-ticket items like appliances and furniture.
Yahoo Finance Markets Reporter Ines Ferre explains the consumer shift to "spending more on services and less on goods," as well as how this spending pullback is causing "some cracks in manufacturing," particularly "for the furniture side," with the shutdown of furniture companies United Furniture and Mitchell Gold + Bob Williams.
Video Transcript
ALEXANDRA CANAL: So it seems like consumers, they don't want to be paying the big bucks anymore.
INES FERRE: No, not those big ticket items. And we really kind of saw it across the board when it came to appliances, when it comes to furniture as well. And you can see that some of the retailers that posted their results for this last earnings, Best Buy saying that demand for appliances, that pulled back.
They did see an increase in vendor-funded promotions. Similarity also when it came to Lowe's as well. And Home Depot saw softer demand for big ticket discretionary items, citing patio, siding, appliances.
We even had results from Big Lots and Big Lots said that its core lower income consumer really was under pressure and was not spending in the bigger ticket items like patio furniture sets. So this gives you a bigger picture of what's happening.
Of course, that a lot of this is because of the pull forward that you saw with these items during the pandemic as consumers were at home. They were sprucing up their houses. They were buying things. They were moving around a lot. But now you've got the housing market that's basically frozen. And you have consumers that are spending more on services and less on goods.
But what is also indicating is that we are seeing some cracks in manufacturing when it comes to, at least for the furniture side because a lot of the furniture is actually made when you talk about big dining room sets, sofa sets, a lot of that is made in the US, whereby they're not brought from abroad that much because you can't fit that many in these big containers.
So we have seen some closures of some factories, especially in North Carolina last year. You saw United Furniture, which was a big supplier for Big Lots and also Mitchell Gold over the weekend-- Mitchell Gold and Bob Williams shutting its doors. And that's a big furniture company. These are private companies. But it gives you a little bit of color of what's happening with furniture, with appliances, these big ticket items, these durable goods.
AKIKO FUJITA: And, Ines, what does this ultimately tell us though, about the outlook for the labor force within that manufacturing industry?
INES FERRE: Yeah. Well, it'll be interesting to see because tomorrow we have the jobs number coming out. And last month, we had seen-- or the month prior I should say, that we had seen that in manufacturing, you saw a contraction of about 2,000 jobs. That's not that much.
But if you take a look at the ISM manufacturing index, you saw that it came in at 46.4 for the month of July. So that ticked up slightly. But nonetheless, the ninth straight month of contraction. And this is new orders and production. And factory employment actually dropped to a three-year low.
So what that's indicating is that we are seeing more layoffs when it comes to that manufacturing sector. So I'll be certainly keeping an eye out on manufacturing tomorrow when that jobs report comes out.
