Use access key #2 to skip to page content.

TMFSarahGen (99.81)

Sector on Fire - and you're missing it!

Recs

9

January 28, 2008 – Comments (11) | RELATED TICKERS: STLY , ETH

Weird market, lots of the serious movers of last year are punished this year, lots of things unclear.  Is there any clear cut hands down great sectors? Yes! 

 

Furniture.  Seriously.  Furniture.  

 

You might have heard that retail does well with Fed rate cuts, but even with some huge moves in general retail, I haven't seen anything as clear cut as what is happening in furniture.  And it's being backed up with good earnings, and great forecasts of future growth.  These aren't moves just based on short squeezes.

 

A few days ago we heard from Ethan Allen (ETH).  Ethan Allen reported great earnings that exceeded estimates.  And we heard from the CEO that the Fed's rate cuts were going to help.

Ethan Allen CEO sees U.S. rate cut aiding consumers

"Two important things are taking place," Farooq Kathwari said of the central bank and government moves in an interview.

Kathwari, who is also chairman of the furniture maker and retailer, said the 75-basis-point cut in the federal funds rate announced on Tuesday, which was bigger than many expected, "has impacted consumer confidence positively."

Ethan Allen reported better-than-expected quarterly profit on Wednesday, boosting its shares by about 15 percent. "Our consumers are still coming in," Kathwari told Reuters.

It's a big 2 page article. 

 

And then tonight we heard from STLY.  Already up 17% in after hours.  The STLY CEO said that the economy was challenging, but went on to give estimates of .40 to .60 earnings per share for the next year (current analyst estimates for 2008 average only 0.38!).  Check out the earnings release here.

Happy shopping all!   I don't own any furniture stocks - yet.  But I'll be working on my list to watch.  Wtih the volatility in the markets lately, guaranteed we'll get plenty of chances to buy into companies, even those with great earnings.

Sarah 

11 Comments – Post Your Own

#1) On January 28, 2008 at 10:44 PM, AnomaLee (29.29) wrote:

I'd assume that furniture should do well. Homes, cars... furniture. Sure, it's another big ticket item, and I think the furniture sector is something people are going to continue to strongly especially in a wekaker market. 

Rising unemployment easily correlates with a higher number of  people relocating. Besides, most will blow money to furnish their living rooms no matter what.

Report this comment
#2) On January 28, 2008 at 10:58 PM, LeanieBean (56.48) wrote:

I think you are definitely onto something Sarah :)!.

Been pondering new bedroom furniture myself...but the debate continues -- buy a Vespa, or furniture? Vespa? more stock? Vespa? Furniture? :)   

Report this comment
#3) On January 28, 2008 at 11:14 PM, TMFSarahGen (99.81) wrote:

Well, I was debating writing about the recent statements from the International Monetary Fund (IMF), but I thought - nooo, too boring.

And the huge rise in STLY the other day (was up 30% the day ETH reported) made me track down what on earth was happening.  I was surprised to see the CEO of Ethan Allen say it so plainly, "lower rates = more furniture sales."

And who on earth thinks about furniture?

And MaverickAtWork, you better buy that Vespa!  Too cool!!

Report this comment
#4) On January 29, 2008 at 1:57 AM, SemperGumby77 (78.32) wrote:

Call me a pessimist here, but this is an environment quite different from other rate-cutting periods. Hard for me to believe that people are going to continue buying furniture when they don't have a house to put it in. Foreclosures will only rise in 2008, which means more people will be selling their furniture at house sales, than buying it retail.

Institutions can't rid themselves of this stock fast enough. Buy it at your own risk. 

Report this comment
#5) On January 29, 2008 at 11:46 AM, Gtrinvestor (99.92) wrote:

I would be leary to buy into this sector... I think the pop you saw was potentially short covering. I have friends in the furniture business that say things are not going so well.  If they supply furniture overseas maybe, but the US, not so much.

Report this comment
#6) On January 29, 2008 at 12:21 PM, TMFSarahGen (99.81) wrote:

It does seem awfully weird.  But STLY and ETH both reported numbers above estimates.  I wouldn't run out and buy SCSS or TPX, but it does seem to bear watching at least.  That's why I wrote about it.

How boring to write about all my top holding being healthcare - one of the safest areas right now.

Report this comment
#7) On January 29, 2008 at 2:01 PM, abitare (99.70) wrote:

I would not doubt furniture, housing, retail etc. would bounce in the near term, as people believe the gov can save them.

I wanted to post the SNL video of Steve Martin dealing with credit card debt. Bring some humor to your over optimism?

But instead let me bring some gloom/doom to your blog post: 

Similarities Between 2008 and 1929

In the 20's, there was a massive overexpansion of manufacturing capacity. Today there is a massive overexpansion of productive capacity in China and a massive overexpansion of retail stores in the US.

In the late 1920s, bank credit propelled a massive real estate boom in New York City, in Florida, and throughout the country. We now have the biggest housing bubble in history.

In late 20’s credit was expanding at a rapid pace but there was no need for additional productive capacity. Today GDP is rapidly falling but credit is still rising (for now).

In 1929 there was no pent up demand for manufactured goods, especially autos. Today there is no pent up demand for homes, restaurants, retail stores, strip malls, autos, trucks, or anything else.

In 2008 as in 1929, the ability and willingness of consumers to borrow and banks to lend is under attack not only in the US but Europe as well. For more on the latter please see Financial Crisis Poised To Hit Europe.

http://globaleconomicanalysis.blogspot.com/

Report this comment
#8) On January 29, 2008 at 2:23 PM, abitare (99.70) wrote:

I would not doubt furniture, housing, retail etc. would bounce in the near term, as people believe the gov can save them.

I wanted to post the SNL video of Steve Martin dealing with credit card debt. Bring some humor to your over optimism?

But instead let me bring some gloom/doom to your blog post: 

Similarities Between 2008 and 1929

In the 20's, there was a massive overexpansion of manufacturing capacity. Today there is a massive overexpansion of productive capacity in China and a massive overexpansion of retail stores in the US.

In the late 1920s, bank credit propelled a massive real estate boom in New York City, in Florida, and throughout the country. We now have the biggest housing bubble in history.

In late 20’s credit was expanding at a rapid pace but there was no need for additional productive capacity. Today GDP is rapidly falling but credit is still rising (for now).

In 1929 there was no pent up demand for manufactured goods, especially autos. Today there is no pent up demand for homes, restaurants, retail stores, strip malls, autos, trucks, or anything else.

In 2008 as in 1929, the ability and willingness of consumers to borrow and banks to lend is under attack not only in the US but Europe as well. For more on the latter please see Financial Crisis Poised To Hit Europe.

http://globaleconomicanalysis.blogspot.com/

Report this comment
#9) On January 29, 2008 at 4:52 PM, ncfool2 (< 20) wrote:

What? My furniture's on fire, you say?

 But seriously, as a long time holder of perhaps the single best-run U.S. furniture  company, Ethan Allen, I've been delighted to see the recent buoyancy in the furniture stocks. 

However, I would quickly caution that these are NOT buy and hold stocks... never have been, never will be. But you might get some decent near-to-intermediate-term gains out of some of them. Just keep in mind that most are still in well-entrenched downtrends, with lots of 'overhead supply" (i.e., people just itching to hit the silk on any significant gains in stock prices). 

So, as much as I'd like to think that we've seen the 'bottom' for these stocks , long personal experience with the group tells me to keep my trigger finger fliexible and ready. And having said that, let me just add, "Go Farooq!!!!"

Report this comment
#10) On February 04, 2008 at 3:26 PM, CoffeeInBed101 (98.68) wrote:

Kathwari, who is also chairman of the furniture maker and retailer, said the 75-basis-point cut in the federal funds rate announced on Tuesday, which was bigger than many expected, "has impacted consumer confidence positively."

Right...firemen up the volume of water on the fire only after the worst has passed.  Let me find that bridge I had laying around because I think I've found a buyer.

Report this comment
#11) On February 07, 2008 at 2:34 PM, LordZ wrote:

Hmmm instead of buying a roof  and a place people will simply move to where it doesnt rain much and will purchase sofa beds to sleep in the great outdoors... Brilliant, maybe there will be an used furniture niche.... wtf.... Stocks involved in sleeping bags should soar, as thats what will be in demand. Or maybe people can sneak back into the homes they were evicted from. A whole new job category of home baby sitter will be created as the housing markets re adjust for 10 years of pain just like in Japan.

 Damn I need to pour me a stiff drink...

Report this comment

Featured Broker Partners


Advertisement