Report: Luxury Furniture Market Could Be ‘Better-than-feared’ in 2024

MILAN — Following the post-COVID-19 boom in sales, a slowdown was largely expected by top players of the luxury furnishings sector in 2023. Looking ahead to 2024, the sector is expecting “a better-than-feared” performance, according to the outcome of a conversation between five executives hosted by TD Cowen for a virtual panel on the high-end and luxury retail and manufacturing industry.

In a report revealing the results of the panel and released earlier this week, the investment bank maintained an “outperform” rating for U.S.-based listed companies Arhaus Inc., Williams-Sonoma Inc. and RH (formerly Restoration Hardware). The rating was based in part on the ability of all three of these companies to consistently usher in “newness” and the strength of its new product assortments.

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Pointing to 2024, TD Cowen said that overall the first half of 2024 could be stronger than the second half of the year. “[The] big picture: luxury consumers continue to want to spend on furniture and broadly remain in relatively good economic health,” noting that consumers are focusing on bigger-ticket purchases, the investment bank concluded in its note. Its analysts added that in the first half of this year, demand was down, before accelerating between April and July, which drove strong third quarter. Early fourth-quarter indications have been positive.

Companies executed price hikes this year, with increases between 15 and 25 percent on products, as a result of cost increases incurred during the pandemic. “Gross margins are flat to slightly down because [previous] price increases only covered the inflationary cost dynamic,” TD Cowen said. In 2024, however, panelists are planning on flat pricing for the coming year, which they are aware could hurt margins. “They are comfortable with that impact,” analysts concluded.

Overall, companies worldwide remain cautious on 2024, in large part due to the impact rising interest rates will have on consumers.

In August, Williams Sonoma revised its guidance down, saying it’s expected its full fiscal year net revenue growth to drop 5 to 10 percent. In September, RH raised its revenue outlook slightly for fiscal 2023 to a range of $3.04 billion to $3.1 billion (from $3 billion to $3.1 billion) and maintained its outlook for adjusted operating margin of a range of 14.5 to 15.5 percent.

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