April 7, 2022

April High Point Market 2022

Stump M&A Advisory Team at High Point Furniture Market

The High Point furniture market was in full swing this week and it felt like the first market with a semblance of “post COVID” normalcy. Energy and traffic were strong and major retailers were there starting as early as the Monday before the official start of market, on a mission to procure product and inventory for the coming season.

As the Stump team walked the halls and showrooms (now covering over 12 million square feet across a staggering 150+ buildings, housing over 2,000 exhibitors) we met with over 100 industry CEOs. Several trends emerged as hot topics of conversation.

Whole Home

We are increasingly seeing companies grow through expansion into new categories. In particular, we saw a push into the outdoor category with Flexsteel debuting an outdoor line right off the elevators in IHFC, Lee Industries setting up a charming outdoor display of upholstery and cushions, Hooker Furniture showcasing their new brand, Sunset West (read here), and more. And did you see the one-inch thick catalog from RH totally dedicated to outdoor furniture? We are also seeing wholesale furniture companies push deeper into lighting, accessories, and décor. This is likely to lead to strong companies making acquisitions as they continue to seek broader product depth and capabilities. We expect to see this trend continue as CEOs look to grow through selling a broader offering to their loyal customers.

Supply Chain Struggles & Re-Shoring

Container costs, shipping delays, and trucking shortages continue to plague the industry. All issues that most believed would be worked out by now are still as bad (if not worse) than last market. We heard container cost quotes as high as $22,000, as companies continue to weigh contracts at high rates with the volatility of the spot market. This is resulting in a continued push for many to explore re-shoring and near shoring opportunities. Demand for domestic and Mexico manufacturing capacity are now at record levels, both for OEM and acquisitions. If you are interested in near-shoring opportunities give us a call, we may have some ideas for you.

We also heard a great deal about new warehouses at key ports on the East Coast, new approaches to controlling trucking, and the increased importance of intermodal transportation. Winners in the next season will in large part be defined by those who can efficiently transport goods to their customers (this applies to manufacturers, retailers, and e-commerce businesses alike) while also absorbing higher and variable logistics costs. As one industry CEO reflected in regard to the supply chain, “We are in a moment of peak chaos.” And several large and rapidly expanding companies told us excitedly that “in the chaos is the opportunity.” We are watching this closely.

E-Commerce

This continues to be a high growth sector as consumers continue to purchase goods online. Growth is strong for both wholesale e-commerce (manufacturers and importers selling to the large e-commerce behemoths: Wayfair, Amazon, etc.) and direct-to-consumer (DTC) companies. We anticipate seeing continued omni-channel approaches to sales with retail and online forming a mutually reinforcing sales cycle. E-Commerce will continue to be a prominent point of sale for home furnishings for decades to come.

Post-Covid Normalization and Demand

There was a lot of discussion around the medium/long-term demand for home furnishings in a post-COVID world that is returning to travel, entertainment, and a (slow, gradual) return to the office. Some took a gloomy stance, citing softer demand in January, increasing interest rates, and the war in Ukraine. Feeding a belief in an imminent decline in demand, one client even went so far as to say they are going to stop buying inventory, sell through existing stock, and brace for a crash. However, most remain more bullish on demand, citing decent consumer confidence, generational trends continuing to fuel housing demand, and a general sense that COVID has increased the importance of a comfortable and well-furnished home.

M&A Forecast

The M&A market remains very strong with a compelling mix of buyers and sellers across product categories and sectors of the industry. Look for several exciting announcements in the coming months. And check out our new website, refreshed as we celebrate our 50th year anniversary: www.stumpandcompany.com

Quote of the market:

“We have had 9 ‘once in a lifetime’ events in the last 2 years.”

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