The continued trend of remote working has made people focus on upgrading their houses to improve the quality of living. In addition, with the housing market continuing to remain resilient, the demand for home furnishings remains high. Furniture and home furnishing sales increased 7.2% in January.
Furthermore, the increased demand for comfortable and high-quality furniture should help manufacturers overcome high lumber prices by raising product pricing. The U.S. furniture industry is projected to generate total revenue of $239.37 billion in 2022 and grow at a CAGR of 3.5% over the next four years.
So, we think it could be wise to bet on fundamentally-sound furniture stocks Williams-Sonoma Inc.(WSM), Ethan Allen Interiors Inc.(ETD), Haverty Furniture Companies, Inc.(HVT), and Bassett Furniture Industries, Inc. (BSET) to cash in on the growing industry trend.
Williams-Sonoma Inc. (WSM)
WSM is an omnichannel specialty retailer of multiple products for the home. It also supplies cooking, dining, and entertaining products such as cookware, tools, electrics, cutlery, tabletop and bar, outdoor furniture, and a library of cookbooks under the Williams Sonoma brand, along with home furnishings and decorative accessories under the Williams Sonoma Home brand; and furniture, bedding, lighting, rugs, table essentials, and decorative accessories under the Pottery Barn brand.
Last month, Pottery Barn Kids and Pottery Barn Teen, members of WSM, announced new collections with the famous resort wear brand Lilly Pulitzer. The 'Lilly Pulitzer x Pottery Barn Kids' and 'Lilly Pulitzer x Pottery Barn Teen' collections launched new product categories to the partnership, including décor, textiles, sleepwear, backpacks, and water bottles in Lilly Pulitzer's signature prints. Jennifer Kellor, President, Pottery Barn Kids, and Pottery Barn Teen, stated that "Our collaboration with Lilly Pulitzer is the result of coming together as brands who value incredible design with exceptional quality,"
Also, in January, WSM announced its collaboration with Black Artists + Designers Guild (BADG), a global organization committed to developing a more equitable and overall creative culture through the improvement of independent Black makers. The new collaboration between Pottery and Barn and BADG comprises products designed for entertaining, hosting, and gathering.
WSM's net sales increased 16% year-over-year to $2.05 billion in the third quarter ended, October 31, 2021. Its operating income grew 16.1% from the year-ago value to $330.27 million, while its net income improved 12.2% year-over-year to $249.52 million over the period. The company's non-GAAP EPS increased 30% from its prior-year quarter to $3.32.
Analysts expect WSM's revenue to increase 12.4% year-over-year to $2.58 billion in the fourth quarter (ending January 2022). The company's EPS is expected to grow 22.3% year-over-year to $4.83 in the fourth quarter. In addition, the company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters. The stock has gained 4.1% over the past year.
WSM's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
WSM is also rated an A grade for Quality. Within the Home Improvement & Goods Industry, it is ranked #15 of 62 stocks.
To see additional POWR Ratings for Growth, Value, Stability, Sentiment, and Momentum for WSM, click here.
Ethan Allen Interiors Inc.(ETD)
ETD functions as an interior design company, manufacturer, and retailer of home furnishings in the United States, Mexico, Honduras, and Canada. It primarily operates in two segments, Wholesale and Retail. The company markets and distributes its products under the Ethan Allen brand through home furnishing retail networks and individual merchants and through the ethanallen.com website.
This month, ETD announced that it has further strengthened its vertically merged enterprise. Through its subsidiary, Ethan Allen Operations, Inc., the company purchased certain property, plant, and equipment assets of Dimension Wood Products Inc, a manufacturer of wood frames and machine parts. Farooq Kathwari, Ethan Allen's Chairman, stated that Dimension Wood Products' talented associates, workshop, and machinery would help them increase their control over raw materials, purchase parts, and labor costs, and maintain their high-quality standards.
Also, this month, ETD inaugurated its seventh location in Connecticut: a new Design Center in Westport. The new design center displays ETD's unique vision of American style along with putting value to ETD's appreciative interior design service, enhanced by 3D digital design tools, at the fore.
In the second quarter ended, December 31, 2021, ETD's net sales increased 16.4% year-over-year to $208.09 million. Its operating income grew 60.9% from the year-ago value to $36.29 million, while its adjusted net income grew 38.6% from the prior-year quarter to $24.26 million. The company's adjusted EPS increased 37.7% year-over-year to $0.95.
The consensus EPS estimate for the third quarter ended March 2022 represents a 30.2% improvement year-over-year to $0.76. Analysts expect revenue to increase 11.4% year-over-year to 197.10 million for the third quarter ending March 2022. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
ETD's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality. In the same industry, it is ranked #11.
In total, we rate ETD on eight different levels. Beyond what we've stated above, we have also given ETD grades for Growth, Value, Stability, Momentum, and Sentiment. Get all the ETD ratings here.
Haverty Furniture Companies, Inc. (HVT)
HVT operates as a specialty retailer of residential furniture and accessories. The company provides furniture merchandise under the Havertys brand name, custom upholstery products, eclectic looks, and mattress product lines under the Sealy, Tempur-Pedic, and Serta names private label Skye name.
During the fourth quarter ended December 31, 2021, HVT's net sales increased 10.2% year-over-year to $265.9 million. The gross profit grew 9% from the year-ago value to $150. The company's net income came in at $24.31 million, while its EPS amounted to $1.35 over this period.
HVT is expected to witness revenue growth of $1.03 billion representing year-over-year growth of 1.3% in fiscal 2022. The consensus EPS estimate of $4.78 for fiscal 2023 indicates a 4.60% improvement year-over-year. In addition, the company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
HVT's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. HVT is also rated an A grade for Quality and Value. Within the same industry, it is ranked #14.
Click here to see additional POWR Ratings for Growth, Stability, Sentiment, and Momentum for HVT.
Bassett Furniture Industries, Incorporated (BSET)
BSET operates as a manufacturer and retailer of home furnishings in the United States and internationally. Wholesale; Retail  company-owned Stores; and Logistical Services are the three main segments through which it operates. The company is also engaged in designing, manufacturing, sourcing, selling, and distributing furniture products.
For the fourth quarter ending November 27, 2021, BSET's net sales increased 9.7% year-over-year to $129.90 million. Its operating income came in at $7.11, while its net income amounted to $5.04 million. The company's EPS amounted to $0.52 over this period.
The consensus EPS estimate of $1.91 for fiscal 2022 represents a 4.4% improvement year-over-year. The analyst expects revenue to grow 3.3% year-over-year to $466.24 million for fiscal 2023. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
It is no surprise that BSET has an overall B rating, equating to Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B for Value. In the same industry, it is ranked #10.
In addition to the POWR Ratings grades I have just highlighted, you can see the BSET ratings for Growth, Momentum, Sentiment, and Stability.
WSM shares were trading at $140.85 per share on Thursday afternoon, up $6.93 (+5.17%). Year-to-date, WSM has declined -16.32%, versus a -9.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
4 Stocks to Buy as Furniture Sales Surge: Williams-Sonoma, Ethan Allen, Haverty, and Bassett StockNews.com
