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With apparel struggling to generate sales, a number of retailers are putting greater emphasis on home goods and furnishings.
Urban Outfitters Inc. URBN, -1.35% which reported first-quarter earnings on Wednesday that beat estimates, said its home merchandise was part of the reason. Urban Outfitters brands include its namesake chain plus Anthropologie, Free People, the bridal brand BHLDN, the home brand Terrain and the restaurant group Vetri Family, acquired late last year.
“Strong, double-digit growth in the expanded categories like home, beauty, intimates, Terrain and BHLDN helped to drive these results and were partially offset by declines in certain apparel categories,” said David McCreight, president of Urban Outfitters, in his remarks during the company conference call, according to a FactSet transcript.
‘And we certainly recognize that within overall categories, today’s consumer, our guests, [are] reinvesting in their homes. They’re spending money on home improvement.’
He went on to say that home is “one of the largest contributors” to the company’s growth plans.
Urban Outfitters shares were up 2.1% in midday trade Friday and have soared 26% this year.
Both Home Depot Inc. HD, -0.85% and Lowe’s Co. Inc. LOW, -0.27% also reported earnings that exceeded expectations this week — rare bright spots among largely dismal retail reports.
See also: On sale at Home Depot and Lowe’s: the companies’ shares
Target Corp. TGT, -0.17% which reported its first-quarter results on Wednesday, also said home goods were a highlight, with same-store sales for the category up 4%. Same-store sales for apparel were up between 2% and 3%.
See also: Target is the latest retailer to feel the ‘Amazon effect’
“And we certainly recognize that within overall categories, today’s consumer, our guests, [are] reinvesting in their homes,” said Chief Executive Brian Cornell during the Target earnings call. “They’re spending money on home improvement.”
Other retailers investing in their home-goods offerings are Sears Holdings Corp. SHLD, -0.30% which opened its first appliance-focused store this week, and J.C. Penney Co. Inc. JCP, -0.89% , which said last week that it is expanding its new appliance showroom to nearly 500 stores and making those lines available on the company website.
“[M]ore than ever, customers are spending their money to update and beautify their homes, and we believe J.C. Penney is in a unique position to offer a compelling assortment within major appliances, window treatments, furniture and flooring,” said Chief Executive Marvin Ellison on an earnings call last Friday.
See also: J.C. Penney upgraded on turnaround strategy that steers away from apparel
The results have provided further evidence of a shift in consumer spending habits, with shoppers using their money to spruce up their homes rather than just their closets. Richard Hayne, chief executive of Urban Outfitters, said he believes the real retail problem is supply, particularly in apparel.
“Simply put, America is overstored and overstocked,” Hayne said during the company’s earnings call. “We have approximately 10 times more retail space per capita than our European counterparts and more direct-to-consumer choices, too. Rather than trying to differentiate their products and experiences, many retailers try to drive demand by offering constant and ever-larger price promotions that erode not just the bottom line, but brand equity as well.”
And when that doesn’t work, Hayne said, retailers close stores “in an attempt to right-size their fleets.”
See also: Gap to shutter Old Navy stores in Japan in streamlining effort
Urban Outfitters said it has been building categories and brands by adding to its online selection, and it has opened the first two of its “expanded-footprint locations,” tacking on square footage to existing stores.
See also: These retailers are profiting off the ‘Amazon effect’
