More is More for Expanding Home Stores

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Don’t believe everything you read about the home furnishings business having fallen off the cliff and can’t climb back up. Plenty of big retailing companies believe otherwise…and they’re putting their money where their mouth is. Such as At Home, HomeGoods and Floor & Décor, which are all building out their physical store networks believing the home furnishings business is set for sustained growth over the next decade. They are joined by the dynamic duo of home improvement – Home Depot and Lowe’s – who remain optimistic about the prospects for Americans spending on their homes.

On the Other Hand…

Of course, this optimism comes as other retail giants, in and out of home, are facing some serious challenges with too much inventory and not enough business, particularly in hard goods categories like furniture, consumer electronics and appliances. Walmart and Target have been joined by Best Buy, which has dialed back its previously buoyant forecast for this year. And then there’s upscale RH, saying it’s not sure what the immediate future holds for the home business. Industry stalwart Williams Sonoma – and its multiple nameplates including Pottery Barn and West Elm—is still feeling good about things but says it will reduce its store count by as many as 50 locations over the near-term as it does an increasingly larger percentage of its business online. And then there’s Bed Bath & Beyond, which seems to be in freefall and may end up filing for bankruptcy if it can’t right itself. The bigger they are, the harder they fall.

Grow, Baby, Grow

Yet the enthusiasm for the home furnishings business – furniture, decorative accessories, floor coverings and accents like wall hangings and lighting – is not some isolated occurrence, endorsed by an outlier or two. Recent store opening plans identified by Placer.ai (a Robin Report Innovator that monitors in-store traffic) specifically pointed to three expanding chains growing their recent businesses. “For all three retailers, the growth in visits is largely due to store fleet expansion,” Placer recently reported. “As hybrid and remote work arrangements become permanent, the home goods category may well see a long-term boost in consumer interest – and these brands will be ready to meet the heightened demand with their expanded store fleets.” Here’s a deeper look:

  • Floor & Décor, with about 165 full-line warehouse stores and a handful of smaller design studios, has seen foot traffic up by 51.1 percent, 45.5 percent, 29.2 percent, and 39.4 percent, respectively, for the first four months of the year, according to Placer. The Atlanta-based company said it plans to open 32 new warehouse stores in 2022 and over the next eight to ten years it expects to reach as many as 500 new locations according to published reports.
  • At Home, which went private last year, has been on its own tear more recently. In the absence of revenue numbers now no longer available, Placer said its in-store traffic was up 3.5 percent in the most recent month tracked, April, and that’s compared to pre-pandemic numbers in 2019. The retailer, which features giant – as much as 150,000-square-foot locations with a broad selection of home merchandise – opened 19 new locations last year and recently opened its 250th “We’re a high-growth company,” is how CEO Lee Bird recently put it, suggesting that he sees At Home ultimately topping out at some 600 locations across the country. Right now, it is 40 states.
  • HomeGoods, part of the TJX universe of off-price brands, has been the fastest growing nameplate in the group. After sitting at around 500 locations several years ago, the parent company has been aggressively expanding the chain and there are now about 860 locations. Placer marks its April in-store traffic up 3.9 percent over 2019 and in public statements the information-shy TJX has consistently pointed to HomeGoods as one of its top performers. TJX has said it expects to reach 1,000 stores by mid-decade and that doesn’t account for its newest brand, Home Sense, which is similar to HomeGoods with more emphasis on furniture. There are now just 40 of those stores in the U.S. but one has to assume TJX has big expansion plans for the brand as it starts to top out on its HomeGoods expansion.

Contrarian? Not Exactly

With the recent flattening out of the overall home products business as Americans began traveling and spending more money on out-of-home activities like restaurants, entertainment, and vacations, one could ask what gives with these aggressive expansion plans? Most prominently it’s simple demographics. The huge millennial generation is now deep into its house buying period and combined with the work-from-home movement that has allowed Americans to venture further out from urban areas and into larger suburban and rural homes, there is just going to be more demand for the products people put into those homes. It’s simple math.

The expanding chains may also see weaknesses in some of the traditional retailers in the home space like Bed Bath & Beyond, JCPenney and – at least historically when you look at the past five or so years, Sears. Their declines certainly open up market share opportunities for others in the sector.

And finally, while ecommerce will continue to grow as a percentage of the overall marketplace it’s become clear that it’s not going to blow out physical stores in the way some so-called experts predicted. Wayfair’s ongoing profitability issues and the acceptance of previously direct-to-consumer-only brands such as Casper and Parachute that they need to have physical presences reinforce the strength of the in-person shopping model.

Listen, the home business is going through a really ugly little dip right now and no one is quite sure when it will level off. But the fact of the matter is virtually every retailer – and most of the vendors who supply them – are still beating their pre-pandemic 2019 numbers. That’s important to help explain what’s going on in the overall home sector.

Until someone figures out a better system, we’re all going to continue to live in homes…and we’re all going to continue to need to furnish them. It’s really not any more complicated than that.

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