May 7, 2018

Spring HD Vegas Furniture Market

HD Vegas Spring 2018

HD Vegas was upbeat and busy. We spoke with over 60 CEOs during our 48 hours in Vegas. The majority were optimistic, with most CEOs bullish about performance for at least the next 18-24 months, given the strength of their backlog and visibility into the new projects. We were again reminded that the ability to accurately forecast is a positive feature of the Hospitality Sector given the lead time necessary for installations and new construction. The hospitality industry also continues to outpace the growth of other furniture sectors, making it an attractive industry sub-segment.

Despite the overall positive tone of the market and industry report, there were grumbles among the exhibitors about Mandalay Bay as the convention location. The CEOs we spoke with noted high prices, cumbersome logistics, surly staff, and poor layout. Many noted their preference for BDNY. There was also a bit of what one industry veteran termed “Market Fatigue,” with this show falling just one week after BD West, two weeks after the Milan show, and three weeks after the High Point Furniture Market.

Quote of the Market #1: “Markets are indisputably valuable, but after four in as many weeks market fatigue sets in. It is exhausting for us and our P&L.”

As we walked the hall and spoke with industry CEOs, many discussed the following topics:

  • Reshoring and a need for shorter lead times – Companies with Mexico, Canada, or US locations are currently experiencing a favorable boost due to their ability to offer shorter lead times and more responsive customer service with samples, model rooms and repairs. Furthermore, as the labor costs between Mexico and China approach parity, Asian imports no longer have exclusivity as low-cost providers.
  • Blending of hospitality, residential, & office channels continuing – Product continues to blur between different segments of furnishings. Throughout the hall there were exhibitors as well as attendees from other sectors that are invested or interested in the space.
  • Sales volatility month over month – With backlog strong and optimism high, owners still bemoan the inevitable volatility of the Hospitality Industry month to month. There is rarely a straight month over month trend or the ability to analyze the company based on one month of performance given that a hotel, project, or production delay can dramatically skew monthly financials. It’s a lumpy business.

The mergers and acquisition market remains vibrant with a nice balance of buyers and sellers. Companies that demonstrate strong 5+ years of improving sales and margins are commanding a premium from Private Equity, Strategics and buyers in Adjacent Industries. We are in a period of consolidation, where there seems to be a preference for larger companies and ones that can offer case goods and upholstery to create one-stop-shopping for purchasers and hoteliers.  This is creating momentum for M&A activity.

Quote of the Market #2: “Companies are pairing off with strategic partners. Now is the time to be looking for a dance partner if you haven’t found one already.”

Stump & Company has had a very strong 12 months with four ‎transactions closed in the Hospitality Sector in 2017 and 2018. We look forward to several other announcements in the coming months.

We will be at Neocon in June. Call us if you would like to discuss opportunities in this active climate.

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