Home-Related Consumer Demand Is Pressured, but the Higher-End Is Holding Up

Furniture and home-related demand was uneven in 1Q26. January and February were disrupted by winter storms, which weighed on traffic, caused store closures, and disrupted deliveries and replenishment across both home improvement and furniture retailers. Then the war in Iran began, uncertainty increased, gas prices became a more visible pressure point for consumers, and demand softened again in March. We heard that in our conversations at the High Point furniture show, and it showed up in earnings commentary from retailers and suppliers. However, this is not the same as saying the category simply collapsed. Many furniture and mattress retailers pointed to some improvement or stabilization into April or May, while Home Depot and Lowe's saw better engagement as spring weather normalized. The right conclusion is that demand remains pressured and volatile, but the cadence has been choppy rather than uniformly worse.

Higher gas prices are a double hit. The first hit is to demand, especially for lower-income consumers who feel gas inflation more immediately and have less room to absorb it. In addition, the tax refunds have been skewed toward more affluent consumers this year. That is why the pressure we picked up at High Point was more acute at lower price points and smaller brick-and-mortar retailers, while e-commerce and higher-end demand were more resilient. The second hit is to company costs. Furniture, mattresses and home improvement all have meaningful exposure to fuel, freight and oil-linked inputs, including foam, polyol, plastics, solvents and resins. Suppliers at High Point were preparing price increases, and many retailers called out fuel surcharges and price increases for petroleum-derived inputs. The consumer sees the gas price first, but the P&L feels it too.

The demand pressure is most visible in big-ticket discretionary projects, while smaller-ticket, seasonal, repair and replacement categories are holding up better. Home Depot and Lowe's said larger discretionary projects remained under pressure even as many departments, including seasonal categories, and Pro, comped positive. Floor & Decor is the cleanest example of the other side of that divide. Flooring is one of the most discretionary big-ticket project categories, and Floor & Decor's 1Q26 comp declined 3.7%, driven by a 5.5% drop in transactions.

Furniture is also both big-ticket and discretionary. However, that does not mean every furniture retailer is feeling the impact equally. Demand is bifurcating by price point. In our conversations at High Point, we gathered that premium and luxury demand was more resilient while lower price points and entry-level segments were more pressured. Williams-Sonoma was the strongest public-market example, with a 4.8% comp, positive furniture trends, positive volume contribution and strength across retail and e-commerce. Somnigroup pointed to higher-end mattress customers showing up even as traffic remained down. The category is weak, but the higher-income customer is more resilient.

An offset to the higher oil-based cost pressure could come from tariff refunds. All large retailers that import product directly from overseas have filed for refunds and view them as significant potential offsets to higher fuel and input costs. These refunds could help larger, more sophisticated retailers absorb freight, fuel and oil-derived product inflation, reducing the need to pass through meaningful additional pricing, which would support margins and protect value for customers. That would not eliminate the demand risk from higher gas prices, but it could soften the price-cost shock and create another advantage for scaled retailers over smaller competitors that have less ability to recover refunds, negotiate with vendors or hold prices steady. This would only accelerate the market share gains already evident in the results for the larger, better-operated retailers.