Despite lingering supply chain constraints and other macroeconomic headwinds, the furniture industry has been booming over the past two years, thanks to robust demand for comfortable home furniture amid extended remote lifestyles and hybrid working environment. Furthermore, increased government spending on real estate development through commercial and residential projects should contribute to the industry's growth.
The U.S. furniture market is expected to generate $239.40 billion in revenues in 2022. According to a report by ReportLinker, the global furniture market is projected to reach $945.53 billion by 2030, growing at a 4.5% CAGR. The increased adoption of online furniture shopping is expected to boost the industry’s growth and revenue.
So, given the industry’s bright growth prospects, we think it could be wise to invest in the stocks of high-quality furniture companies Ethan Allen Interiors Inc. (ETD), La-Z-Boy Incorporated (LZB), and Bassett Furniture Industries, Incorporated (BSET).
Ethan Allen Interiors Inc. (ETD)
ETD is a Danbury, Conn.-based interior design company that manufactures and retails home furnishings in the U.S., Mexico, Honduras, and Canada. The company operates through two segments: Wholesale; and Retail. Its products include case goods items, comprising beds, tables, entertainment units, and home office furniture; home accent items, such as wall decors, mattresses, bedspreads, area rugs, and home and garden furnishings; and upholstery items consisting of sleepers, recliners, and other motion furniture.
On April 27, ETD’s board of directors increased the company’s regular quarterly cash dividend by 10% to $0.32 per share. “The Board’s decision today highlights our strong balance sheet allowing for these returns to shareholders. We believe we are well-positioned due to our relevant offerings, strong retail network, the personal service of our interior design professionals combined with technology, and our unique vertical integration structure,” said Farooq Kathwari, ETD’s Chairman, President, and CEO.
In February, ETD expanded its manufacturing in North Carolina by purchasing through its subsidiary, Ethan Allen Operations, Inc., certain property, plant, and equipment assets of Dimension Wood Products, Inc., a manufacturer of wood frames and machined parts located in Claremont, North Carolina. This is expected to increase the company’s control over raw materials, purchased parts, and labor costs.
ETD's net sales have increased 11.7% year-over-year to $696.33 million in its fiscal 2022 third quarter, ended March 31, 2022. Its adjusted gross profit improved 17.8% year-over-year to $119.46 million. Its adjusted operating income rose 59.9% year-over-year to $31.30 million. Also, the company’s adjusted net income and adjusted EPS came in at $23.70 million and $0.93, respectively, registering a rise of 61.5% and 60.3% from the prior-year period, respectively.
ETD's 59.47% trailing-12-month gross profit margin is 66% higher than the 35.82% industry average. The stock’s 24.28% trailing-12-month ROCE is 39.1% higher than the 17.45% industry average.
The $199.30 million consensus revenue estimate for its fiscal 2022 fourth quarter, ending June 30, 2022, represents an 11.8% improvement from the same period last year. Analysts expect the company’s EPS for the current quarter to come in at $0.81, representing an 8.8% increase year-over-year. It is no surprise that it has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 3% in price over the past nine months and closed yesterday’s trading session at $23.25.
ETD's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ETD has a grade of A for Quality. Within the Home Improvement & Goods industry, it is ranked #10 of 63 stocks. To see additional POWR Ratings (Stability, Growth, Momentum, Value, and Sentiment) for ETD, click here.
La-Z-Boy Incorporated (LZB)
LZB in Monroe, Mich., manufactures, markets, imports, exports, distributes, and retails upholstery furniture products, accessories, and case-goods furniture products in the United States, Canada, and internationally. The company operates through two segments: Wholesale; and Retail. It sells its products directly to La-Z-Boy Furniture Galleries stores, operators of La-Z-Boy Comfort Studio locations, dealers, and other independent retailers. It operates more than 159 company-owned La-Z-Boy Furniture Galleries stores.
In its fiscal 2022 third quarter, ended Jan. 22, 2022, LZB's sales grew 21.6% year-over-year to $571.57 million, and its gross profit improved 9% from the year-ago value to $219.37 million. The company’s operating income amounted to $39.49 million, registering a 14.7% rise year-over-year. In addition, its net income attributable to LZB per share rose 4.8% year-over-year to $0.65.
LZB's 39.55% trailing-12-month gross profit margin is 10.4% higher than the 35.82% industry average. Its trailing-12-month ROTC of 10.27% is 37.8% higher than the 7.45% industry average.
Analysts expect LZB's revenue for its fiscal year 2022, ending April 30, 2022, to come in at $2.34 billion, representing a 34.7% rise from the previous year. The company has topped the consensus revenue estimates in each of the trailing four quarters. Also, the Street expects the company's EPS for the current year to increase 13.2% year-over-year to $2.97.
Shares of LZB have declined 5.5% in price over the past month and closed yesterday’s trading session at $25.44.
LZB's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which translates to Buy in our proprietary rating system.
LZB has a B grade for Quality. Within the Home Improvement & Goods industry, it is ranked #8 of 63 stocks. To see additional POWR Ratings (Growth, Momentum, Stability, Value, and Sentiment) for LZB, click here.
Bassett Furniture Industries, Incorporated (BSET)
BSET manufactures, markets, distributes, and retails home furnishings in the United States and internationally. The Bassett, Va.-based company operates through three segments: Wholesale; Retail company-owned Stores; and Logistical Services. It operates more than 63 company-owned stores and 34 licensee-owned stores. In addition, BSET owns and leases retail store properties and distributes its products through other multiline furniture stores, mass merchants, and specialty stores.
In March, BSET’s board of directors declared a special dividend of $1.50 per share, which was paid on April 6, and a regular quarterly dividend of $0.14 per share, which was paid on May 27. In addition, the company increased its share repurchase authorization to $40 million. “We will use our operating cash flow and our balance sheet to more aggressively invest in our business. Meanwhile, we will continue to be opportunistic with share repurchases while continuing to evaluate our capital allocation strategy,” said Rob Spilman, BSET’s Chairman, and CEO.
BSET's net sales of furniture and accessories increased 15.9% year-over-year to $117.86 million in its fiscal 2022 first quarter, ended Feb.26, 2022. Its gross profit rose 7.5% year-over-year to $57.39 million. The company’s income from operations came in at $6.48 million, up 16.5% year-over-year. Its net income and earnings per share amounted to $5.57 million and $0.57, respectively, registering an increase of 38.9% and 42.5% from their year-ago values.
BSET's 45.12% trailing-12-month gross profit margin is 26% higher than the 35.82% industry average. Its 1.21% trailing-12-month asset turnover ratio is 17.2% higher than the 1.03% industry average.
Analysts expect BSET’s EPS for its fiscal 2022 third quarter, ending Aug. 31, 2022, to be $0.49, indicating a 56.5% increase year-over-year. The stock has improved 9.5% in price over the past three months and 12.4% over the past six months to close yesterday’s trading session at $17.23. Also, its year-to-date gain translates to 12.8%.
BSET's POWR Ratings reflect a strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
BSET has an A grade for Quality and B for Value. It is ranked #7 of 63 stocks in the Home Improvement & Goods industry. Click here to see BSET's POWR Ratings for Sentiment, Growth, Stability, and Momentum
ETD shares were trading at $23.01 per share on Wednesday morning, down $0.24 (-1.03%). Year-to-date, ETD has declined -10.33%, versus a -12.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 High-Quality Furniture Stocks to Buy in June StockNews.com
