While store traffic has struggled throughout the year, holiday sales events have remained an important driver of whatever traffic furniture stores have been able to capture. In general retailers have reported decent results for key holiday sales events thus far, although often it has been in comparison to slower-than-normal activity during non-holiday periods.
There are some emerging signs that conditions could improve heading into the last quarter of the year. The most recent jobs report, not encouraging in and of itself, created added incentive for the Fed to lower interest rates. Anything that can bolster home sales and spark new household formation activity is a welcome sign as are any developments that could ease consumers’ access to credit.
Coupled with that are recent signs that the travel boom, which re-routed discretionary dollars away from home spending the past two years, could be waning. During the most recent wave of travel industry earnings calls, the phrase “soft” and “softening” appeared with increased frequency. At the same time, leading travel booking sites have reported consumers are waiting longer to book travel. While not a definitive sign that consumer wanderlust is sated, it is the first indication that those dollars are finding their way back into consumers’ pocketbooks and from there — hopefully — back into the home.
According to a recent travel report from Deloitte Insights, the number of Americans planning to take leisure trips has dropped, with Americans planning 2.3 trips this summer down from 3.1 trips for the summer of 2023.
As with any study, changes are not uniform across all demographics. The luxury travel segment, according to reports, remains robust, with the declines hitting lower-end travelers harder than their more affluent counterparts. That, too, could be good news for the furniture business, where the promotional and lower-mid-segments of the business have been hit harder than the luxury segment.
Price sensitivity has become so pronounced many retailers say that consumers are trading themselves down, not just by a price point or two but into significantly lower brands and pricing tiers. As a result, manufacturers have found themselves challenged to support key price points with substantially upgraded value propositions. This challenge has been exacerbated by steadily rising costs, which have substantially pressured margins.
With Labor Day weekend approaching, industry players will be watching sales closely for clues to how the remainder of the year will play out. Often viewed as a harbinger of fourth quarter performance, this year’s key selling weekend will be even more important with so many basing their forecasts and strategies around a late 2024-early 2025 turnaround.
The next few weeks could offer important clues to whether companies can continue with their current forecasts and start planning for the turnaround. On the other hand, a soft Labor Day weekend could call those forecasts into question and, as has happened so many times over the past two years, see plans for the turnaround pushed back to the second quarter of 2025 or perhaps even later.
Stay tuned. The next few weeks will have a lot to say about what business will look like heading into 2025 and beyond.