Historical Economic Trends
In January 2021, the 30-year fixed-rate mortgage fell to a record low of 2.65%. However, inflation began to rise mid-year, peaking at 9.1% in June 2022.
Source: Markus Spiske/Unsplash
To combat this, the Federal Reserve raised interest rates 11 times from March 2022 through July 2023.
Recent Mortgage Rates
The increase in interest rates pushed the average 30-year mortgage rate to 7.22% in November 2023, the highest in 20 years.
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As of July 2, 2024, the rate slightly decreased to 7.07%, according to Bankrate. These rates have made financing large purchases like homes and furniture more difficult.
Impact on High-End Retailers
High-end furniture retailer Mitchell Gold + Bob Williams, which operated 27 stores in 14 states, closed all its stores in August 2023.
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The company filed for Chapter 11 bankruptcy on September 6, 2023, unable to secure necessary financing, and subsequently filed for Chapter 7 liquidation.
Z Gallerie's Financial Troubles
Upscale furniture and home decor retailer Z Gallerie filed for Chapter 11 bankruptcy protection on October 16, 2023.
Source: Freepik
The company faced severe profitability and cash flow issues due to supply chain and import cost increases in 2021 and 2022, leading to financial instability.
Conn's HomePlus Considers Chapter 11
Now, Conn’s HomePlus, a discount furniture retail chain, is considering filing for Chapter 11 bankruptcy to reorganize its debts.
Source: Freepik
Struggling with sales declines and challenges in integrating home goods retailer W.S. Babcock, Conn’s has hired financial advisers Houlihan Lokey and Berkeley Research Group for assistance.
Operational Challenges at Conn's HomePlus
Founded over 130 years ago in Beaumont, Texas, Conn’s HomePlus operates 170 stores in 15 Southern U.S. states and employs about 4,000 workers.
Source: Conn's Inc./Wikimedia Commons
The retailer offers furniture, appliances, consumer electronics, next-day delivery, and personalized payment options, including an in-house credit program.
Economic Pressures on Conn's
Conn’s has faced economic difficulties over the last two years, reporting losses as its lower-income customer base struggles with inflation.
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The company’s financial woes highlight the broader challenges facing furniture retailers in the current economic climate.
Mitchell Gold + Bob Williams' Bankruptcy
Mitchell Gold + Bob Williams’ inability to secure financing and subsequent bankruptcy paints an uneasy picture of the difficulties high-end furniture retailers face in a high-interest rate environment.
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The closure of its 27 stores in August 2023 marked a significant blow to the industry.
Z Gallerie's Struggles with Import Costs
Z Gallerie’s financial troubles were exacerbated by supply chain disruptions and increased import costs, leading to its Chapter 11 bankruptcy filing in October 2023.
Source: Wikimedia
These challenges reflect the broader supply chain issues affecting many retailers.
Conn's HomePlus and the Housing Market
The challenges faced by Conn’s HomePlus are partly due to the sluggish housing market.
Source: Pexels
With high interest rates discouraging home purchases, fewer consumers are in the market for new furniture, directly impacting sales for retailers like Conn’s.
Future Outlook for Furniture Retailers
The future for furniture retailers remains uncertain as they navigate high interest rates and inflation.
Source: Freepik
Companies like Conn’s HomePlus may need to adapt their business strategies to survive, potentially through restructuring efforts under Chapter 11 bankruptcy protection.