Where to Invest in Home Goods

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

The home goods sector's performance is a reflection of the bumpy housing market recovery. Investors should pick and choose their spots, but home furnishing retailers will perform better if and when a solid housing market recovery takes hold.

The housing market at a glance
The long anticipated housing market recovery has come in fits and starts for most of the last two years. Green shoots of optimism have been followed by cooling off periods. There are a number of factors at play here starting with the Federal Reserve's easy money policy.

Three rounds of quantitative easing were designed to prop up consumer and housing finance lending. But Federal Reserve Chairman Ben Bernanke noted in his recent press conference the 1% rise in mortgage interest rates during the summer cooled off the housing sector.

But the latest housing data shows an uptick. The Commerce Department announced sales of new single-family houses in August 2013 were at a seasonally adjusted annual rate of 421,000. This is 7.9% above the revised July rate of 390,000 and more than 12% above August 2012 sales of 374,000 units.

Since the housing market recovery has been hit or miss, investors should proceed with caution. But there are gains to be found in some of the home goods outlets.

Take a browse at these home goods stores
This sector includes shops which distribute home furniture and household accessories. One of the lead retailers here is Bed, Bath & Beyond  (NASDAQ: BBBY  ) .

Last week, the company reported earnings for its fiscal second quarter. Bed Bath & Beyond's sales grew nearly 9% to $2.82 billion. Same-store sales grew by 3.7%, while earnings per share were $1.16-18% higher than the same period in 2012 and a bit above the analyst consensus-$0.01.

The stock currently trades near its 52-week high, but a more solid housing recovery should help Bed Bath & Beyond to continue growing its brand in the long run. Moreover, the outfit's stock price has a predictable history of growth and this is a plus for investors.

Another place for investors to shop is Williams-Sonoma (NYSE: WSM  ) -one of Bed, Bath & Beyond's lead competitors. The home furnishing outlets focuses on living rooms and kitchen goods. Its exclusive products will continue to sell as the housing market recovery gets its sea legs.

In the third-quarter home furnishing sales were up 4.8% compared to the similar period in 2012, and 4.3% from the second quarter of 2013. These gains are due in part to Williams-Sonoma's exclusive products. Further, these products are being brought to the market more expediently as the company's new plant in North Carolina has ramped up production and delivery.

The stock is currently flirting with $56 per share, about $5 less than the 52 week high. Finally, the company's earnings per share in 2013 will benefit from the stock repurchases that began in March and continued through the summer. 

Is Pier 1 a dry dock?
Home goods chain Pier 1 Imports (NYSE: PIR  ) surprised a number of analysts with its last financial report. Second-quarter earnings fell by 32% as weakening margins and falling foot traffic combined to push Pier1's shares down last week.

Moreover, the company revised its 2013 guidance. Previously the outfit anticipated full year earnings to come in at $1.27 to $1.32 per share. Pier expects earnings per share in the range of $1.23 to $1.29, however. The company attributes the poor sales figures to a flawed marketing strategy.

Now, the questions for long-term investors are whether this is a temporary setback and have traders oversold the stock. And that depends on how successful Pier 1 will be in shifting its focus to web marketing in a highly competitive global village.

The final clearance
In the long run, the next stage of the housing recovery will be a boon to homes goods sellers. These household furnishing shops are poised to cash in if and when the recovery takes hold. The housing market could take another dip in 2013 and consumers may retreat if the economy and job growth continues to be sluggish, however. So investors should proceed with caution.

3 stocks you won't want to miss
Every good investor wants to build that perfect portfolio that they can set and forget forever. Fortunately, it's easier than anyone ever knew. We've uncovered the pillars of such a portfolio today and we're willing to share The Motley Fool's 3 Stocks to Own Forever. Simply stated, we think they're the best stocks for true long-term investors to know about, and you can uncover them for free today, instantly; just click here now.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2666749, ~/Articles/ArticleHandler.aspx, 9/27/2016 1:58:58 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:00 PM
BBBY $42.21 Down -1.29 -2.97%
Bed Bath and Beyon… CAPS Rating: ***
PIR $4.11 Down -0.25 -5.73%
Pier 1 Imports CAPS Rating: *
WSM $49.78 Down -0.51 -1.01%
Williams-Sonoma CAPS Rating: ***