housewar

Home Goods & Housewares

Industry Insight

Date August 2015

By The Numbers

Synopsis

Current trends

  • As of August 21, 2015 shares of industry leader Bed, Bath & Beyond were down more than 20% year-to-date.

Key statistics

  • Industry revenues: $33 billion (U.S. home furnishing stores)
  • Major product categories: Window coverings (21.1%); decorative accessories (18%); kitchen and cookware (23.7%); textile products (15.7%); furniture (7.4%)
  • Significant companies: Bed Bath & Beyond, Pier 1 Imports, Restoration Hardware, Williams-Sonoma, Crate & Barrel, Pottery Barn, HomeGoods
  • Market share of top: The three largest companies, Bed, Bath & Beyond, HomeGoods, and Williams-Sonoma, account for 56% of the market share
  • Recent sales trends: U.S. retail sales for furniture and home furnishings stores increased 5.6% in the first seven months of 2015 compared to the same period in 2014

Prominent industry bankruptcies mark a changing landscape: In April 2015, EveryWhere Global, Inc., the parent company of Anchor Hocking LLC, filed for Chapter 11 bankruptcy protection. The 1,557-employee company manufactures and sells kitchen glassware, baking dishes and cutlery under brands including Anchor Hocking, Fire-King, Oneida, Buffalo, Delco and Sant’ Andrea. The company’s customers include Wal-Mart Stores Inc., Target Corp., Crate and Barrel, Darden Restaurants Inc. and Royal Caribbean Cruise Lines. The company remained open and conducted “business as usual” with its customers throughout the restructuring. As of June 2nd, the company had successfully completed its financial restructuring and emerged from Chapter 11 with significantly reduced debt and a stronger balance sheet.
 

In a separate filing, 191 year-old luxury silverware and giftware maker Reed & Barton was sold to a prominent competitor in April. Lenox Corporation purchased the operating assets and certain liabilities at auction for $22.2 million. Facing declining sales and rising pension costs, Reed & Barton filed for Chapter 11 bankruptcy protection in February. The deal leaves Lenox with more than half of the fine flatware market according to the company.
 

These prominent filings in recent months signify how the landscape is changing in the home goods and housewares industry as consolidation plans are tested.
 

Exclusive brands can add value: To differentiate themselves from the competition and attract new customers, many home furnishings retailers develop exclusive product offerings. Some create their own private-label brands, while others work with manufacturers to license and develop celebrity brands on an exclusive basis. Many home furnishings retailers sell these products directly to consumers via brick and mortar stores, online and catalog sales. Williams-Sonoma, for example, currently conducts approximately half of its sales directly to consumers. Well-known brands typically generate higher gross recovery values than non-branded products, as alternative customers in Tier II would be more inclined to purchase branded products in a liquidation.
 

Home sales and disposable income levels impact sales: Sales of existing homes in the U.S., a key demand indicator for home furnishings stores, grew approximately 9.6% in June 2015 compared to the same month in 2014. June's existing home sales grew 3.2% compared to May 2015, according to the National Association of Realtors (“NAR”). Sales of existing homes are now the highest they have been since February 2007. Additionally, per capita disposable income grew 3.0% from 2014 to 2015, reaching above pre-recession rates. It is forecasted to have a compound growth of 2.4% from 2015 to 2020, representing another positive indicator that sales in this segment will continue to improve. Home goods are usually discretionary purchases, so an increase in disposable income is a boost to the industry. IBISWorld notes that high-end retailers, such as Williams-Sonoma, experienced a greater rise in sales, as consumers indicated a willingness to spend more on discretionary purchases. Consequently, Williams-Sonoma’s revenue is expected to increase at an annualized rate of 4.2%, to $2.5 billion in 2016. These positive retail indicators bode well for maintaining gross recovery values for both distributors and retailers going forward.