People are buying more homewares – and these stocks could benefit
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Weak consumer spending has seen some retailers fall on their swords in past years — but the most recent numbers from the Bureau of Statistics mark household goods as a sector with life in it.
While trend estimates for spending on clothing, food and through department stores fell in April, household goods were up 0.7 per cent and spending on furniture, flooring and homewares was up 0.6 per cent in seasonally adjusted terms.
Online retailers seem to be the biggest beneficiaries.
Australia’s biggest online furniture and homewares store Temple & Webster (ASX:TPW) reported a 23 per cent increase in revenue for March quarter compared to the same period a year ago.
Chief Mark Coulter said Temple was operating in “a growing market”. Its work on cost-cutting has helped establish it as one of the best performing-small cap stocks on the ASX over the past year, with a 426 per cent jump to 79c.
Kogan.com (ASX: KGN) — which started as an electronics retailer but now offers almost 10,000 homewares products — reported 46 per cent revenue growth acrosss all categories last quarter.
The stock — which is now moving into white goods — is up 357 per cent over past 12 months.
Home goods and bedding retailer Adairs (ASX:ADH) upgraded its FY18 earnings guidance a second time in April.
Adairs CEO Mark Ronan said: “This further upgrade to our FY18 earnings guidance reflects both the continued higher sales performance observed over the last two months, and our confidence in the momentum we carry into the remainder of this financial year.”
Adairs has been hard at work on a turnaround strategy, building its stock from 58c one year ago to $2.17 this week.
Meanwhile, bricks and mortar Nick Scali (ASX:NCK) is sitting at $6.90, up 11 per cent from a year ago.
Here is the 12-month share price performance of key ASX-listed homewares and furniture retailers:
|ASX code||Company||One-year price change||Price Jun 13||Market Cap|
|TPW||TEMPLE & WEBSTER||4.26666666667||0.79||84.8M|
IBISWorld senior analyst Kim Do told Stockhead the multi-billion-dollar homewares space was set to beat the retail blues over the next five years.
“The Consumer Goods Retailing industry is expected to increase at an annualised 0.7% over the five years through 2017-18, to total $168.7 billion.
“In comparison, the Furniture Retailing industry is expected to post annualised growth of 1.0% over the same period, to reach $7.4 billion,” Do said.
One reason for this was fallout from Australia’s building boom. “A rise in residential property construction and renovations to existing dwellings has increased demand for furniture,” Do said.
Consumers get picky
However, Do warned slow wages growth were resulting in “subdued spending on consumer goods, including furniture”.
The challenge of capturing new shoppers have led some brands, like Temple & Webster, into the world of personalised content to capture more shoppers.
When unveiling the company’s half year results last year, Temple & Webster’s Coulter highlighted the importance of “inspirational content” to draw shoppers into designing their dream spaces and then shopping with the company to complete the look.
Here are eight companies operating in the home goods and furniture space, and how they’ve been tracking over the past 12 months:
The bedding and homewares retailer upgraded its full year earnings guidance last month, now expecting to pull in $310-15 million in sales after two strong months of sales performance.
Having rolled out new-look large format stores over the past year, the company boosted its profit in the first half by more than 60%, to $13.9 million for the half.
Nick Scali has been a bricks-and-mortar retail stalwart for more than 50 years and is still refining its store network, opening six new shopfronts in the first half of the year. It posted a profit up 15% compared to the first half of 2017, hitting $23.5 million.
Myer has had plenty of battles over the past couple of years, but new chief executive John King is facing sliding sales across the board. A third quarter sales update doesn’t mention furniture and home goods in particular, but does say weather conditions didn’t help move clothing items.
Myer sales were down 2.7% for the March quarter to $635.3 million.
Kogan offers almost 10,000 homewares products and is now targeting whitegoods which founder Ruslan Kogan told investors earlier this month lacks “competitive tension”.
The retailer’s decision to move into the big appliances market builds on the company’s blueprint to diversify its offer. It’s now in everything from kitchens to insurance, with revenue increasing 46% for the quarter.
The lighting retailer produced a record sales result in the first half of this year, up 12% to hit $122.4 million. Profit was also up close by to 20%, hitting $11.3 million for the half.
Retail veteran Gerry Harvey has long promised to crush the likes of Amazon Australia with Harvey Norman’s commitment to top service and fast shipping on white goods and furniture. Its share price has been affected by factors other than selling of couches this year, after its joint venture dairy project collapsed into receivership.
Kresta Holdings (ASX: KRS)
Shutters and blinds business Kresta has posted less good news, with shares at 4c down from 11c a year ago. The company’s 2017 financial report highlights in the year to December 31, 2017, the business posted a loss of $10 million.
The outdoor furniture maker’s shares are at the same point they were this time last year, but the company has looked to further its reach globally during that time. In 2017 it bought Spanish furniture designer and importer ie3i for $2.5 million, building on its focus on the premium European furniture market.