Last Updated Nov 30, 2010 6:34 PM EST
Lately, Bed, Bath & Beyond, as well as Williams-Sonoma (WSM) and Pier 1 (PIR) have all posted strong financials in part because consumers are staying in their own homes and entertaining there. That provides an incentive to fix things up a bit.
In the larger sense, ironically, all that nesting presents a problem. Staying at home over the past couple of years has meant staying in the old home. Home furnishings retailers make their big sales when people are buying a new place and fixing it up. h With the housing market still weak, that's a problem.
Cost Plus has been able to survive because its business is supported on three legs: consumables, home dÃ©cor/gifts, and furniture. A global importer, the company provides novel products at relatively inexpensive prices.
In the fourth quarter, Cost Plus net sales decreased by 4.5 percent to $320 million as comparable store sales declined by two-and-a-half percent. That actually represents an improvement of sorts, as sales fell 8.5 percent and comps seven percent in fiscal 2009.
Cost Plus improved by shifting emphasis to consumables and relatively inexpensive home dÃ©cor while bringing in less costly furniture items and cutting back on slow-moving categories such as dining room sets. That strategy resulted in a lower average ticket -- how much is spent each visit -- but a higher customer count. The latter was steady for the year and up more than 2.5 percent in the fourth quarter.
Cost Plus managed to stabilize sales and cut expenses enough to improve profits. It is predicting positive comparable store sales of three to five percent in the first quarter of the current fiscal year and continued positive comps thereafter. Still, it cannot be said that it has regained momentum as it is counting on improved furniture sales later this year to drive gains.
Other home furnishings retailers are making adjustments as well. Williams-Sonoma is bringing in less expensive products. And Bed, Bath & Beyond is expanding its personal care operation in part by building more Harmon discount beauty supply locations.
Fundamentally, though, the sector will not return to robust health until the housing market does. Bed, Bath & Beyond, Cost Plus and the rest can't count on significant improvements in general consumer spending, either, not with that market ailing. And Walmart's (WMT) development of new home furnishings initiatives isn't going to help.
Give home furnishings retailers credit for adapting, but big gains in the sector must await real housing market improvement.