by The partner in Stump and Company goes beyond all the noise to explain the furniture industry’s bigger boom
By Bo Stump
CHARLOTTE, N.C. — As Marvin Gaye says, “what’s going on?”
In this modern world, we see many big movements:
- Supply chain issues are huge, with container prices now well over $10,000 per can with little relief in sight. Most industry folks think this will continue into Q4.
- Foam is starting to get some relief and normal flows are expected by mid-to-late June.
- Gas shortages are a short-term issue on the East Coast due to the cyber-attack last week and panic buying. We anticipate an easing this week and normal gas availability is expected within a week.
- It’s three weeks until the rescheduled June market and plans are being made to gear up for the crowds in High Point, following a strong Premarket in April. Will Covid prevent this from being strong, or will the masses show up?
- Price increases for wood and plywood — and most furniture raw materials — are creating pressure on manufacturers to raise prices on its customers.
- Covid seems to be getting under control in the United States, and Europe is beginning to re-open, but India and other less-developed countries are struggling mightily.
- The U.S. political scene remains as bitter and divided as ever.
- International tensions are high around the globe, with hot spots in the Middle East, Russia, and Western China.
- Tariffs on goods from China continue with no end in sight, and new threats of tariffs are on the horizon.
- Taxes are sure to go up.
Despite all the above noise, the home furnishings market is booming. More people are spending more time at home and want new furniture. Many are still working from home and want a better home-office set-up, and their employer is helping to pay for it. People also want to get outdoors more, and casual/outdoor furniture is selling like hotcakes. E-commerce is the new growth channel and Covid has accelerated the consumer purchasing pattern for both large and small items online.
And while people are now traveling again, eating out at restaurants, and spending money on other leisure activities, we see no letup in demand for furniture. Most analysts forecast another several years of strong growth in the industry. And as more people rejoin the workforce, whether due to Covid concerns, temporary boosts to unemployment benefits, or simply the availability of jobs in a resurgent economy, they should have money for the home. Plus, base wages are rising with the $15/hour minimum wage initiative.
So, it appears that despite the complicated world (and isn’t it always a complex world?) that the home furnishings industry has regained its strong position in the eyes of the consumer.
For the M&A industry, this is good news. Buyers see this confidence and growth outlook. Sellers want to beat the tax man and the capital gain increases that are surely coming. Money is abundant (and cheap) from banks, and private equity firms/family offices are flush with capital that needs to be deployed after a bumpy 2020. Add to the mix the strategic buyers with high stock prices and healthy balance sheets, and international players that still see the U.S. as the biggest consumer market in the world, and the picture remains rosy.
What’s going on with you?
Bo Stump is a partner in Charlotte, N.C.-based Stump & Co., a mergers and acquisition specialist for the home furnishings industry.
