retail watch | Feb 24, 2022 |
The home boom is slowing down, but it’s far from over

Imagine that you’re sitting at your computer in December 2019, trying to predict how business will be in the coming years. In your wildest dreams, you couldn’t possibly project that 27 months later, in February 2022, you’d be up anywhere from 18 percent to as much as 50 percent—and that even if sales start to level off as the year progresses, you’re still way ahead of the game. Crazy as it would have sounded then, that’s exactly the position that retailers of home furnishings products find themselves in today. They’ve come off one of the most incredible runs in their lifetimes, and even as it looks like the days of crazy increases are over, sales remain much higher than they were in the past.

As big public retailers report their financial results this month, they are continuing to post impressive double-digit gains for the quarter that included last year’s holiday shopping and stretched into the first month of 2022. Most are still forecasting growth for the balance of this year, though nowhere near the rates they’ve experienced since the early days of the pandemic-induced frenzy of home spending.

From home specialists like Home Depot, Lowe’s and Overstock to sellers of general merchandise that includes home products like Macy’s, TJX and Walmart, the news was much the same: home remains a key category, and there are no signs that consumer spending is shifting to out-of-home pursuits, or that supply chain problems, cost increases and product shortages are going to cause the home boom to suddenly die out.

Take the big do-it-yourself twins, Home Depot and Lowe’s. Each reported this week that their fourth-quarter business was up (the former by 11 percent, the latter by nearly 5 percent); both also registered solid double-digit gains for the year, driven by consumer DIY spending as well as purchases by professional builders and contractors amid a housing market that remains red-hot. Interestingly, each toned down their expectations for the rest of this year, saying they expected 2022 to essentially be flat, plus or minus a percentage point. That’s a big comedown from the past two years—but if these projections bear out, they will still finish the year with revenues up some 30 percent over pre-pandemic results. Those are steep increases that most businesses would kill for.

And then there’s Wayfair. Obviously with its online-only business, it was one of the biggest winners of the past two pandemic years, putting up astonishing numbers and reporting its first profits since going public more than a decade ago. Unfortunately, just as obviously, as lockdowns have ended and shoppers started returning to physical stores, the company is paying the price for not having any. Its revenue for the fourth quarter dropped 11.4 percent, with a net loss on the bottom line of just over $200 million. Its annual results, which reflect the boom in 2021, showed a smaller drop, with net revenue down just 3.1 percent. The company also recorded a net loss for the entire fiscal year. Wayfair’s announcement that it would start opening stores this year—several are expected as soon as this spring for some of its sub-brands like Joss & Main and AllModern—seem to acknowledge the imbalance of its customer-facing offerings, although this modest start will barely put a dent in that mix.

On the general merchandise side, meanwhile, retailers like Macy’s and TJX also reported strong quarters, even if the latter missed analyst’s projections. But TJX said its overall home furnishings sales, led by its HomeGoods brand, outperformed its apparel business, and the company continues to see good upside potential through 2022. Macy’s had an outstanding fourth quarter, with its overall business boosted by a 12 percent gain in online sales. Yet it, too, said it expects 2022 to essentially be flat, though the company did not break out specific home furnishings projections.

Still to come are more results from general retailers like Target and home specialists like RH and Williams-Sonoma. All three have been putting up outstanding numbers over the past year, and the market will be looking closely to see what their new results say about consumer spending in general and the home business specifically.

For now, the single biggest factor in the continuing good times for the overall home goods and services sector is the strength in the housing market. Lowe’s CEO Marvin Ellison said it best in talking to CNBC this week: “When home prices go up, consumers have confidence to invest in their homes.”

And up they have gone: Over the past year in major metropolitan areas housing prices have skyrocketed 18.8 percent, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index—the largest increase since the index began in 1987. The ride may be slowing down, but it’s far from over.

Homepage image: ©Michael Flippo/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.

Want to stay informed? Sign up for our newsletter, which recaps the week’s stories, and get in-depth industry news and analysis each quarter by subscribing to our print magazine. Join BOH Insider for discounts, workshops and access to special events such as the Future of Home conference.