2 Furniture Stocks in Focus Despite Challenging Industry Landscape

The Zacks Furniture industry is facing significant headwinds, with stubborn inflation continuing to weaken household purchasing power and dampen demand for discretionary items. Consumers are showing caution toward big-ticket purchases, leaving furniture sales under pressure even as overall retail activity shows modest growth. Rising labor, occupancy and marketing expenses, coupled with intense price competition and ongoing supply-chain inefficiencies, are straining profitability.

Despite these challenges, the industry is leaning on digital transformation, including e-commerce expansion, augmented reality (AR)/virtual reality (VR) integration, AI-driven personalization and multifunctional product innovation. Demand for multifunctional furniture is rising, especially among millennials and Gen Z. Strategic acquisitions and opportunities in the public sector also provide potential pathways for stability and growth. Companies like Flexsteel Industries, Inc. FLXS and Bassett Furniture Industries, Incorporated BSET are focusing on innovation, digital marketing and partnerships to expand their product portfolios and market reach.

Industry Description

The Zacks Furniture industry comprises manufacturers, designers and marketers of residential and commercial furnishing solutions. Some companies provide kitchen and bath cabinets as well as various engineered components and products in the United States, along with international markets. A few industry players also offer specialty rental services, such as modular and portable storage solutions, as well as modular space and portable storage solutions. They are involved in designing and producing a wide variety of engineered components and products for homes, offices and automobiles. The industry players cater to different sectors, namely construction, energy, healthcare, security, government, retail, commercial, education and transportation.

4 Trends Shaping the Furniture Industry's Future

Economic Uncertainties: The U.S. furniture industry remains under pressure despite the Federal Reserve’s latest 25-basis-point rate cut and plans for two more in 2025. Furniture demand is highly sensitive to economic cycles, and current conditions offer little relief. Inflation remains stubborn, with the Consumer Price Index up 2.9% year over year in August and core inflation stuck at 3.1%, a level the Fed expects to persist through 2025. Elevated prices continue to weaken household purchasing power, making consumers reluctant to spend on discretionary big-ticket items. While overall retail sales rose 0.6% in August, furniture sales lagged, slipping 0.3% from July. At the same time, fears of stagflation are mounting. The Fed projects unemployment rising to 4.5% in 2025, up from 4.3% in August, while GDP growth is forecast at just 1.6% this year before modestly improving in later years. With slowing growth, sticky inflation and labor costs still high, incremental rate cuts alone are unlikely to revive furniture demand. Structural headwinds, including supply-chain inefficiencies and intense price competition, continue to weigh on industry profitability.

Higher Expenses: The industry players are engaged in active competition to enlarge their market share. In pursuit of this goal, industry players are intensifying their digital presence and refining shipping capabilities, leading to heightened investments. Also, the furniture industry is highly competitive, with home furnishing retailers, department stores and antique dealers having a hard time. The companies need to make incremental investments to address an expanding omnichannel environment, as shoppers tend to look for online options. Growth in online sales may continue to dent traditional furniture retailers’ market share as brands such as Etsy, Things Remembered, Costco and Amazon are finding their way into the market. Alongside these challenges, rising SG&A rates, increased labor and occupancy costs, and elevated expenses related to marketing and stores could place a strain on profit margins. The labor market has struggled with the limited availability of labor, which is pushing up labor costs.

Growth in E-commerce and Digital Transformation: The furniture sector is increasingly embracing digital platforms, with significant investments in e-commerce and technology to enhance customer experiences. Companies are integrating AR and virtual reality (VR) to allow customers to visualize furniture in their spaces before purchasing. Additionally, AI is being utilized for personalized recommendations and inventory management, streamlining operations and improving customer satisfaction. Moreover, as urban living spaces become more compact, there is a growing demand for multifunctional furniture that maximizes utility without compromising on style. Products like convertible sofas, foldable tables and storage-integrated seating are gaining popularity, especially among millennials and Gen Z consumers.

Innovation, Digital Marketing, Acquisitions & Focus on Public Sector: Product innovation plays a decisive factor in gaining market share in this industry. Players are investing in new products to improve the product mix in a competitive landscape and drive top-line growth. Also, millennials represent the largest consumer cohort in the furniture market. More money in the hands of this largest and most active generation of homebuyers should keep demand elevated. Customer experience is getting enhanced by innovative marketing techniques, emphasizing digital marketing, better merchandising, store remodeling and loyalty programs. These companies are utilizing advanced technology to enhance the overall customer experience, optimize their operations and provide innovative solutions. Companies that make strategic investments in digital innovation are poised to navigate challenges successfully and emerge as industry leaders.

The industry players are pursuing acquisitions to broaden their product portfolios and expand their geographic footprint and market share. They are also prioritizing the diversification of their business portfolios, expanding their global footprint and strengthening their positions in resilient sectors such as healthcare and the public sector. The companies are expected to benefit from strong global trends in infrastructure modernization. Focusing on public sector infrastructure modernization initiatives across educational, healthcare, and administrative environments will provide stability and long-term growth opportunities for furniture manufacturers, positioning them favorably in an evolving market landscape.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Furniture industry is an eight-stock group within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #201, which places it in the bottom 18% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a lower earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since June 2025, the industry’s earnings estimates for 2025 have decreased to $1.27 per share from $1.42.

Despite the industry’s blurred near-term view, we will present a few stocks that one may consider adding to their portfolio. Before that, it’s worth taking a look at the industry’s shareholder returns and current valuation.

Industry Lags Sector & S&P 500

The Zacks Furniture industry has underperformed the broader Zacks Consumer Discretionary sector and the Zacks S&P 500 Composite over the past year.

Over this period, the industry has declined 30.8% against the broader sector’s 22.2% jump. The Zacks S&P 500 Composite has risen 17.8% over this period.

One-Year Price Performance

Furniture Industry's Current Valuation

On the basis of the forward 12-month price-to-earnings (P/E), which is commonly used for valuing furniture stocks, the industry is currently trading at 10.69X compared with the S&P 500’s 23.36X and the sector’s 19.99X.

Over the past five years, the industry has traded as high as 15.03X and as low as 8.14X, with the median being 10.64X, as the chart below shows.

Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500

Industry’s P/E Ratio (Forward 12-Month) Versus Sector

2 Furniture Stocks to Keep an Eye On

We have selected two stocks from the Zacks universe of furniture stocks that have impressive growth prospects amid volatility.

Flexsteel: Based in Dubuque, IA, Flexsteel designs, manufactures, imports and markets residential furniture across the United States. Flexsteel has been benefiting from a blend of strategic execution, product innovation and market expansion. In its core markets, the company is strengthening relationships with strategic accounts through deeper customer segmentation and delivering a more differentiated customer experience, which is enabling meaningful share gains. At the same time, Flexsteel is ramping up new product innovation, leveraging consumer insights and standardized product platforms to accelerate speed to market while expanding marketing investments to boost brand awareness and demand generation. Growth in new and expanded categories is also notable, led by the success of the Zecliner line in the health and wellness segment, with plans to broaden offerings beyond sleep solutions, and by the expansion of case goods supported by a more efficient supply chain and targeted marketing. Distribution growth adds another layer, with stronger partnerships at Wayfair and Costco and new collaborations with Macy’s and other national retailers enhancing visibility and reach. Combined with nine consecutive quarters of margin improvement, robust free cash flow and disciplined cost management, Flexsteel is positioning itself to sustain growth and profitability despite tariff headwinds and soft consumer demand.

Flexsteel — a Zacks Rank #2 (Buy) stock — has gained 5.1% in the past year. Estimates for FLXS’ 2025 earnings have increased to $3.85 from $3.65 per share over the past 30 days, depicting analysts’ optimism about the company’s prospects. Also, FLXS’ earnings topped the consensus mark in each of the last four quarters, with the average surprise being 35.7%. The company’s three-five year expected EPS growth rate is 12%. It has a favorable VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: FLXS

Bassett: Headquartered in Bassett, VA, Bassett designs, manufactures, markets and retails home furnishings across the United States. The company has been gaining from product innovation, operational efficiency and selective channel expansion. A restructuring program initiated a year ago has streamlined costs, improved efficiency and strengthened the product pipeline. Growth is being fueled by custom upholstery, including leather and motion seating, along with renewed wood offerings such as the Copenhagen line and the forthcoming Newbury and Andorra collections. These moves reinforce Bassett’s reputation for customizable, quality home furnishings. The company’s omnichannel strategy is also paying off, with e-commerce sales rising more than 30% in the second quarter of 2025, driven by higher conversion rates and broader reach beyond physical store markets. The expansion of Bassett Custom Studios, now more than 50, and growing ties with the interior design trade are creating new revenue streams. At the same time, disciplined SG&A reductions, tighter inventory management and reliance on U.S.-based production for nearly 80% of shipments are supporting margins and ensuring supply-chain stability. New store openings in Cincinnati and Orlando, coupled with remodels, highlight a measured but steady retail growth strategy that complements Bassett’s digital and design-driven initiatives.

Bassett — a Zacks Rank #3 (Hold) stock — has gained 8.6% in the past year. Earnings estimates for 2025 have remained unchanged at 83 cents over the past 60 days. The Zacks Consensus Estimate for the 2025 bottom line indicates an improvement from the year-ago level of a loss of 48 cents per share. Also, Bassett’s earnings topped the consensus mark in two of the last four quarters, with the average surprise being 314.6%. The company’s three-five year expected EPS growth rate is 16%. It also has a favorable VGM Score of A.

Price and Consensus: BSET

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Flexsteel Industries, Inc. (FLXS): Free Stock Analysis Report
 
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