2 Furniture Stocks to Watch Defying the Industry Downturn

Industry Overview - The Zacks Furniture industry includes manufacturers, designers, and marketers of residential and commercial furnishing solutions, with involvement in various sectors such as construction, healthcare, and retail [2] - The industry is currently facing challenges due to economic uncertainty, declining consumer confidence, and reduced home-related spending influenced by high mortgage rates [1][3] Economic Challenges - U.S. consumer confidence dropped to 92.9 in March 2025, the lowest level in over a decade, reflecting concerns over tariffs and inflation [3] - High mortgage rates, around 6.64% as of early April 2025, are straining housing affordability and reducing expenditures on home furnishings [4] - The reduced activity in the housing market is directly impacting furniture sales growth, as fewer new homeowners are furnishing their spaces [5] Competitive Landscape - The industry is highly competitive, with companies investing in digital presence and shipping capabilities to capture market share [6] - Rising expenses related to labor, marketing, and occupancy are putting pressure on profit margins [6] - Companies are focusing on product innovation and digital marketing to enhance customer experience and drive growth [7][8] Strategic Initiatives - Companies like Flexsteel Industries and Bassett Furniture are strategically investing in technological advancements, product innovation, and cost efficiency to navigate current challenges [1] - Acquisitions are being pursued to broaden product portfolios and expand geographic footprints, particularly in resilient sectors like healthcare [9] Industry Performance - The Zacks Furniture industry ranks 186, placing it in the bottom 24% of over 250 Zacks industries, indicating bleak near-term prospects [10][11] - The industry's earnings estimates for 2025 have decreased from $1.73 to$1.52 per share, reflecting a lower earnings outlook [12] Recent Returns - Over the past year, the industry has declined by 33.2%, underperforming the broader Zacks Consumer Discretionary sector, which saw a 0.1% dip, and the S&P 500, which rose by 9.5% [14] Valuation Metrics - The industry is currently trading at a forward P/E of 9.97X, significantly lower than the S&P 500's 20.73X and the sector's 17.71X [17] Company Highlights - Flexsteel Industries: Focused on product development and innovation, with operating margins improving to 10.7% for the fiscal second quarter of 2025. Despite industry challenges, earnings estimates for fiscal 2025 increased to $3.53, indicating a 67.3% year-over-year growth [19][20] - Bassett Furniture: Concentrating on cost reductions and product innovation, with a Zacks Consensus Estimate for 2025 EPS at 70 cents, recovering from a loss of 48 cents per share in the previous year [23][24]