Trouble on the Home Front

The two-week period from April 24 to May 5, 2023, was particularly brutal for retailers specializing in home goods, with three 50-year-old brands declaring bankruptcy and two of them shutting down completely:

• Bed Bath & Beyond, the original “category killer” in the home space, declared bankruptcy and liquidated its 360 stores, along with the 120 locations in its BuyBuy Baby unit. The company had long been struggling to attract shoppers, generate sales, and keep shelves full of products. It had also regularly been closing stores for the past few years, from a high of 1,560 locations in 2017.

• Tuesday Morning, a discount specialist that sold closeouts, factory overruns, and department store cancelations, went out of business and is in the process of shuttering all of its approximately 200 stores in 25 states (down from 700 in 2019). It had announced in February that it was declaring Chapter 11 bankruptcy and restructuring due to what it termed “exceedingly burdensome” debt. It had previously declared bankruptcy in May 2020.

• Christmas Tree Shops (CTB) filed for Chapter 11 bankruptcy protection to reduce its debt, satisfy its obligations to vendors, employees, and customers, and better position itself to withstand slowing consumer demand. It also announced the closure of 10 of its 82 stores in 20 states. The chain, which specializes in seasonal and holiday décor, as well as year-round home goods—it has been emphasizing the latter in its branding and marketing of late—expects to come out of Chapter 11 by August. Handil Holdings acquired the company in 2020.

While each of these chains has a distinct business model, positioning, and challenges, all operate in the home goods space, which has been facing difficult circumstances overall in 2022 and 2023. Some of the complications include the inevitable slowing of sales after the outsized growth in the category during the previous two years of the pandemic, when sales of home goods skyrocketed; the uncertain current consumer and retail landscape in general; and more competition in the home goods space, with retailers of all kinds expanding their assortments.

Other retail chains, both specialist and generalist, have reported softness in the home category in their fiscal 2022 results announced this spring. Target noted that consumers were focused on essentials such as food, while moving away from discretionary purchases including home goods, apparel, and electronics. Home goods specialist Kirkland’s Home said its net sales were down 10.6%—with store count down 4.2%—while comparable sales were down 9.0% for the year.

At TJX, comparable store sales at its HomeGoods and Homesense chains were down 7% for fiscal year 2023, compared to a sales increase of 7% for its T.J. Maxx, Marshalls, and Sierra units. Canada’s largest home retailer Leon’s Furniture Limited (LFL), meanwhile, saw essentially flat year-over-year system sales, although sales levels remained 11.9% higher than the last pre-pandemic year of 2019.

Of course there are exceptions to every rule. Williams-Sonoma reported record revenues in fiscal 2022, with net revenues up 5.2% and Pottery Barn leading the way with revenue growth of 14.9%. Sales of goods at Ikea were up 7.7% over fiscal 2021, although operating income was down.

Despite the struggles in the category overall, home retailers continue to be attractive partners for licensing and collaboration deals. Some recent agreements in the space include cookbook author and influencer Molly Baz’s 58-piece line of multi-purpose kitchen tools and servingware with Otto Group-owned Crate & Barrel; Marimekko’s 26-piece self-care themed Bastua collection of glassware, textiles, furniture, and more with Ikea; and restaurateur and food influencer Ayesha Curry’s Sweet July brand’s summer celebration-inspired collaboration with Pottery Barn, which includes items for the table, bar, bedroom, and bath. In addition, Target is expanding its home goods collections with its roster of collaborators including Hearth & Hand with Magnolia, Threshold with Studio McGee, and Opalhouse Designed with Jungalow.

The Licensing Topic of the Month in Raugust Communications’ monthly e-newsletter, coming out tomorrow, May 16, will take a look at what can be learned from fashion and lifestyle companies’ transition of a substantial amount of their business from wholesale to direct-to-consumer models. The Datapoint research spotlight, meanwhile, will examine museum licensing deals. If you do not yet receive this free publication, please subscribe here.