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CUSHY GROWTH

Americans are running out of high-end furniture to buy

A woman wearing a grey t-shirt and black sweatpants jumps on a blue L-shaped couch with a young boy wearing a paper cone birthday hat. His hands are holding hers and they are both jumping in the air facing a large window. A wooden shed and grill is visible in the yard.
REUTERS/Caitlin Ochs
Big jump in fancy couch sales too.
  • Karen Ho
By Karen Ho

Global finance and economics reporter

Restoration Hardware’s sales are way up, but the company estimates supply chain issues are preventing millions in unfilled orders for its luxury home furnishings.

“We are running the highest back orders in the history of the company since I have been here 20 years now,” Gary Friedman, the company’s chairman and CEO, told analysts during the company’s earnings conference call on Dec 9. Though Friedman says many customers are willing to wait because there is little direct competition for Restoration Hardware’s products.

The company’s third quarter sales were up 24%, boosted to $842 million by a wave of people buying homes and moving to larger spaces in the US. Stay-at-home measures have prompted many Americans to redecorate current living spaces, causing home furnishing sales to grow during the pandemic.

By comparison, retail sales at IKEA’s 445 stores and online shrank 4% in the fiscal year ending Aug. 31 to €39.6 billion ($46.7 billion). By October, Ingka Group’s CEO Jesper Brodin told Reuters the company’s sales were up 7% to 8% year-on-year.

Restoration Hardware’s backlog due to this additional demand—combined with manufacturing and supply chain delays—is long enough that the company expects unfilled orders will provide $80 to $100 million of revenue growth in its 2021 fiscal year.

“If you have bought a new house or moved into a new house and it triggers a lot of spending on the home and it’s not an easy job,” Friedman said. “It takes a long time. So we think that the tail from just the housing market move looks pretty good.”

It’s an issue at competitors too: During the earnings call of furniture manufacturer La-Z-Boy last month, CEO Kurt Darrow said shortages of raw materials are causing his company to experience a “record backlog and extended lead times”. Darrow said the shortage caused a 2% reduction in sales in the quarter ending Oct. 24, and said a similar hit could recur in the following quarter.

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