With all due apologies to Dickens, it wasn’t the worst of times, but it certainly wasn’t the best either.

As the big home furnishings retailers wind down financial reporting for the third quarter, it’s very much a mixed bag of results. There were few if any disasters (Bed Bath & Beyond is on a different reporting cycle), but the success stories were decidedly modest. And for nervous executives looking to use these numbers as a predictor for the holiday season—well, good luck. The inconsistency in both previous results and future expectations make for a cloudy crystal ball.

We can deduce a few generalizations, though. Inventory levels, which were pretty much the kiss of death this spring and summer, seem to have come down substantially. They are still high and nobody is subleasing out their warehouse yet, but it appears stock is at least somewhat under control. So too the dreaded supply chain. It was every retailer’s biggest headache only a short time ago, but now—bar a few small exceptions—you can get anything you want these days.

And then there are prices. They remain significantly higher than in 2021, but the rates of increase have steadied and in some cases leveled off as raw material, energy and labor costs have all moderated. The funny thing is that, despite higher price tags, consumers don’t seem all that restrained in their purchasing patterns. If they are spending less on home furnishings, it’s only because their money is instead going toward vacations, restaurants and Taylor Swift tickets (assuming they can get them).

Although the pandemic’s extreme retail conditions are leveling out in some ways, there’s still a range of performances to watch among those keeping score of the retail game.

The Winners
The top spot on the podium is once again held by Williams-Sonoma, parent of Pottery Barn, West Elm and its own eponymous brand. As it has for much of the past few years, Sonoma outperformed just about everyone, reporting comp brand sales up 8.1 percent, giving it a two-year comp of 25 percent. Even as its costs rose, hitting gross margin levels, the company still showed a nearly 3 percent increase in operating income. Most importantly, it predicts more of the same success, sticking with its forecast of mid-to-high single-digit annual top line growth. Can you say “market share gain”?

Two other winners were the do-it-yourself doppelgängers, Home Depot and Lowe’s. Both beat their Wall Street consensus forecasts, and each said they expect home remodeling to continue to drive their businesses for the rest of the fiscal year, even as the housing market has slowed. Both reported that business from pro contractors was better than consumer spending.

Three pure-play furniture specialty chains were also feeling some consumer love: Ethan Allen, Havertys and Arhaus all outperformed analyst estimates. With the trio’s emphasis on moderate- to higher-income customers, it appears that shoppers on the upper end of the spectrum are continuing to spend on furnishing their homes. (It’s worth noting that RH will not report its next numbers until the second week of December.)

The Losers
The less-desirable side of the quarterly financial ledger seemed to have more than its share of victims, from general merchandise retailers like Kohl’s to home-specific sellers like Wayfair. It was only the degree of decline that differed.

Wayfair’s sales dropped 9 percent from a year ago, and even if that decline was smaller than the previous quarter, well, it’s still declining. The e-commerce giant reported a $283 million loss, and its stock has dropped in the range of 80 percent this year.

Kohl’s, which has been struggling for much of the past two years as investor groups have publicly debated selling, breaking up or reshuffling the company (CEO Michelle Gass recently departed after all of the outside pressure), saw its same-store sales decline about 7 percent while adjusted operating profits plummeted 50 percent from a year ago. Still, that was better than analysts had expected. Perhaps more ominously, its inventory levels continued to climb, and it pulled guidance for the balance of the year, never a good sign.

The most surprising bad news came from Target, which earlier this year shocked Wall Street with bad results but seemed to have steadied more recently. Turns out, not so much. While its top line rose, its bottom line revenues tanked with adjusted earnings per share falling nearly 50 percent. Worse, the company doesn’t see a turnaround on the horizon, predicting same-store sales for next quarter will decline in the “low-single-digit” range.

Meanwhile, the biggest loser in the home business this year has been Bed Bath & Beyond, but we won’t know if that trend will continue until it reports its next results the first week of January. In the meantime, the retailer has unleashed an avalanche of promotions while raising cash and credit lines to get it through this period. Stay tuned.

Stuck in the Middle
It was not all black and white in the retail world this past quarter.

Walmart’s business was up, but it was largely driven by its grocery department, which accounts for more than half its overall revenues. That may be why its results outshone Target, which has a much smaller supermarket business. Macy’s had a lackluster quarter and predicted increased promotional activity for the holiday season, but raised its forecast for the balance of its fiscal year, driven largely by spending on apparel and beauty—not necessarily home. Nordstrom, like many big national retailers, predicted a later start for holiday spending, but one that would remain highly promotional. Its sales fell 2.4 percent for the quarter, but those results bested analyst forecasts. And the off-price world of TJX, Burlington and Ross Stores all said that even as overall retail inventory levels have moderated, they have access to pretty much anything they want and at attractive prices.

So, that was the quarter that was. As important as the fall season is for retailers—with back-to-school, back-to-work and Halloween promotions—it’s the current one that will truly separate the winners from the losers. ’Tis the season.

Homepage image: ©Joni/Adobe Stock

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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.