MILAN — The beginning of 2024 was marked by raging political conflict, a shipping crisis in the Suez Canal and high inflation and interest rates, but those weren’t enough to dampen the battle strategy for top furniture-makers. Firms around the world are forecasting brighter months ahead, banking on the fact that the worst may have passed.
Interest Rates
Last month, Roche Bobois management told WWD that interest rates in Europe and the U.S. are, or appear to be soon, heading down and expects that 2025 should be better than 2024.
“Inflation is coming down. The guidance is that interest rates should closely follow. And the lowering of interest rates is going to give a lot of oxygen to our business. The U.S. market is recovering and stabilizing and the European Union and France are slightly up,” Martin Gleize, the French firm’s international director, told WWD.
Both the Federal Reserve and the European Central Bank are expected to cut interest rates this fall.
Strong Guidance and Growth
Despite its first half revenue falling 7.8 percent, Roche Bobois, founded in Paris in 1960, is fortifying its position in the Chinese market in order to better tap into the growth potential of the world’s second-largest economy. As a single market, China teeters between Roche Bobois‘ third and fifth top markets. “The goal is for it to be top three,” Gleize said.
RH sang a similar tune as it presses on with the rapid development of its RH Galleries across Europe and the U.S., expanding sourcebook offerings as well as the Waterworks luxury bath and kitchen business it bought in 2016, and its residential business. In June, the California-based luxury furniture-maker’s numbers disappointed the markets as it reported a $3.6 million net loss, compared to $41.9 million in net income in the prior-year period.
Despite the lackluster report, RH chief executive officer Gary Friedman held steady on 2024 guidance of 8 to 10 percent revenue growth for the full year, despite operating in what he described as “the most challenging housing market in three decades.”
In response to analysts’ concerns about inflation he touted the longevity of the brand and its agility in overcoming crises. “We feel confident that the numbers we’re putting out there are achievable numbers. And if we get any kind of tailwind behind us if, for some reason, we see some interest rate cuts or other things…and the housing market picking up, that can be some tailwind. Can we have more headwind macro-wise? I don’t know,” he said.
Other companies were even more prudent.
With its second-quarter results released in August, fellow U.S. home firm Williams-Sonoma Inc. said that due to lower revenue trends it revised its full-year revenue forecast down to a decline of 4 to 1.5 percent from a March forecast range of down 3 percent to up 3 percent.
The Bondi collection by Harrison and Nicholas Condos for the RH Outdoor 2024 Sourcebook.
Courtesy of RH
Improvements Across the Global Supply Chain
In its most recent report, FederlegnoArredo, the Italian federation of woodworking and furniture industries, said in a statement that a sample of companies it polled saw revenues rising 1.5 percent in 2024, as exports rebound and domestic consumption stabilizes.
This current phase of “physiological normalization” is a positive sign and is “testament to the sector’s vitality and its ability to grow despite a complex situation,” FederlegnoArredo added.
In America, data for the furniture supply chain is also looking up. In July, furniture and home furnishings sales ticked up half a point to $11.11 billion from $11.05 billion in June, according to the Department of Commerce’s advance monthly estimates.
Inflation
The impact of the U.S. election and the monetary policy on inflation also remain a key concern.
Now in the throes of a national election, eyes have turned to the monetary policy of candidates Vice President Kamala Harris and former President Donald Trump. In his acceptance speech at the Republican National Convention, the latter pledged he was committed to reducing inflation and energy costs.
“I make this pledge to the great people of America, I will end the devastating inflation crisis immediately, bring down interest rates and lower the cost of energy.…We will drill, baby, drill,” Trump declared before an enthusiastic crowd at the Fiserv Forum in Milwaukee, Wis. Under the Biden administration, Harris was a supporter of the 2022 Inflation Reduction Act and a series of measures to make housing more affordable.
Inflation peaked at 9.1 percent in June 2022 during the Biden administration and is currently around 3 percent. In Europe, that figure peaked at 11.5 percent in October 2022.
In a recent ad, Harris highlighted her focus on tackling spending concerns. “Prices are still too high,” she said in an ad called “Everyday,” in which she pledged tax cuts and once again to make it more affordable to buy a home. “I will be laser-focused on creating opportunities for the middle class that advance their economic security, stability and dignity.”
Housing Data
Going forward, eyes will also turn to home sales worldwide.
Total existing-home sales in the U.S. inched up 1.3 percent in July from June, to a seasonally adjusted annual rate of 3.95 million, halting a four-month sales decline that began in March, the National Association of Realtors reported this month.
The median sales price for existing homes, however, continues to hover around an all-time high, and rose 4.2 percent to $422,600 from July 2023. It is the 13th consecutive month of year-over-year price gains.
“Despite the modest gain, home sales are still sluggish…but consumers are definitely seeing more choices, and affordability is improving due to lower interest rates,” said the association’s chief economist Lawrence Yun said.
Tablescape by Aerin for Williams Sonoma.
Courtesy of Williams Sonoma
