retail watch | Mar 2, 2023 |
Home retailers get a 2023 reality check

Most retailers would tell you that their home boom ended last spring, but there were a few who kept the magic alive throughout 2022. Now the most recent round of earnings reports shows that even those holdouts are feeling the post-pandemic crash. For home retailers, the mood on Wall Street seems to be that things could get worse before they get better.

Both Home Depot and Lowe’s excelled during the stay-at-home boom in remodeling and renovation in 2020 and 2021, and in 2022 continued to outperform retail in general. But in their recently reported Q4 results, both brands said that the housing market slowdown and consumers spooked by inflation and recession talk are finally starting to take their toll on business, and the brands don’t foresee any reversal for the balance of the year.

In the meantime, TJX, the king of off-price retailers with nameplates like HomeGoods, Homesense, T.J. Maxx and Marshalls, last week performed an astonishingly honest self-appraisal, reporting softer sales and saying it couldn’t quite figure out what was happening with its home sector or the home furnishings business as a whole.

On the digital side, Wayfair continued its long comedown from frothy pandemic highs. The e-commerce giant is bleeding shoppers—not to mention red ink—and its customer counts are back to where they were in 2019. The brand continues to talk about better times ahead, a pitch it’s been making for some time even as its financial results continue to slide (and its plans for a flagship location in Chicago are pushed back from 2023 to 2024).

Does this mean that the home boom is officially over for everyone—even the lucky holdouts and savvy operators? Well, yes and no.

Home Depot and Lowe’s have been excellent harbingers for the remodeling and redecorating space, and while their businesses have certainly fallen, they are mostly still in positive territory. The two brands aren’t overly optimistic for the rest of the year, but the tone of their outlook is more realistic than outright pessimistic—they each just say the ongoing lag in the housing market will continue to impact revenue. Not exactly a prediction of certain doom.

And some retailers are still feeling the love. Right in the middle of a big expansion push, flooring chain Floor & Decor just reported a 24 percent increase in year-over-year sales for 2022. A big chunk of that came from new stores, but even its comp store numbers showed a 9.2 percent jump for the year.

Havertys, the regional furniture chain based in the Southeast, also posted strong results for its fourth quarter and year, with numbers up on both the top and bottom lines. Comp store sales were up 3.4 percent for the year, and up even more in the fourth quarter, at 5.8 percent. The retailer said it saw “headwinds” for the upcoming year as the housing market continues to struggle, but that it remains “cautiously optimistic.”

TJX struck a similar tone, with CEO Ernie Herrman telling investors that “the bottom line is we’re being conservative in our plans but … we think we come out on the other side [as] an even bigger player [in the] fashion home business than anybody thought we would be.”

Executives from both TJX, without naming names, and Overstock—which did name names—said they expect to gain market share from competitors as Bed Bath & Beyond and Wayfair struggle and, in BBB’s case, downsize.

With the mix of forecasts and reports, you really can’t blame Herrman for his candid take on the state of the business: “We’re still trying to figure out the home trend nationally.”

Homepage photo: ©MarkoVS87/Adobe Stock


Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.

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