As the Q2 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the home furnishing and improvement retail industry, including Lowe's (NYSE:LOW) and its peers.
Home furnishing and improvement retailers understand that ‘home is where the heart is’ but that a home is only right when it’s in livable condition and furnished just right. These stores therefore focus on providing what is needed for both the upkeep of a house as well as what is desired for the aesthetics of a home. Decades ago, it was thought that furniture and home improvement would resist e-commerce because of the logistical challenges of shipping a sofa or lawn mower, but now you can buy both online; so just like other retailers, these stores need to adapt to new realities and consumer behaviors.
The 7 home furnishing and improvement retail stocks we track reported a mixed Q2. As a group, revenues missed analysts’ consensus estimates by 0.9% while next quarter’s revenue guidance was 7.2% below.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
Luckily, home furnishing and improvement retail stocks have performed well with share prices up 17.6% on average since the latest earnings results.
Lowe's (NYSE:LOW) Founded in North Carolina as Lowe's North Wilkesboro Hardware, the company is a home improvement retailer that sells everything from paint to tools to building materials.
Lowe's reported revenues of $23.59 billion, down 5.5% year on year. This print fell short of analysts’ expectations by 1.6%. Overall, it was a slower quarter for the company with underwhelming earnings guidance for the full year.
"The company delivered strong operating performance and improved customer service despite a challenging macroeconomic backdrop, especially for the homeowner. At the same time, we continue to build momentum with our Total Home strategy reflected by our mid-single-digit positive comps with the Pro customer this quarter," said Marvin R. Ellison, Lowe's chairman, president and CEO.
Lowe's achieved the highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 7.1% since reporting and currently trades at $260.40.
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Best Q2: Sleep Number (NASDAQ:SNBR) Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ:SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.
Sleep Number reported revenues of $408.4 million, down 11% year on year, falling short of analysts’ expectations by 1.9%. However, the business still had a strong quarter with an impressive beat of analysts’ earnings estimates and a solid beat of analysts’ gross margin estimates.
The market seems happy with the results as the stock is up 43.7% since reporting. It currently trades at $17.
Weakest Q2: Arhaus (NASDAQ:ARHS) With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ:ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.
Arhaus reported revenues of $309.8 million, flat year on year, falling short of analysts’ expectations by 1.4%. It was a softer quarter as it posted revenue guidance for next quarter missing analysts’ expectations.
Arhaus delivered the weakest full-year guidance update in the group. As expected, the stock is down 5.1% since the results and currently trades at $13.14.
Williams-Sonoma (NYSE:WSM) Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE:WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.
Williams-Sonoma reported revenues of $1.79 billion, down 4% year on year. This number missed analysts’ expectations by 1.2%. More broadly, it was actually a satisfactory quarter as it recorded an impressive beat of analysts’ gross margin estimates and a decent beat of analysts’ earnings estimates.
The stock is up 3.4% since reporting and currently trades at $148.81.
RH (NYSE:RH) Formerly known as Restoration Hardware, NYSE:RH (NYSE:RH) is a specialty retailer that exclusively sells its own brand of of high-end furniture and home decor.
RH reported revenues of $829.7 million, up 3.6% year on year. This print met analysts’ expectations. It was a strong quarter as it also recorded a decent beat of analysts’ gross margin and earnings estimates.
RH delivered the fastest revenue growth among its peers. The stock is up 34.3% since reporting and currently trades at $344.75.
This content was originally published on Stock Story
