Economic conditions often dictate the success or failure of retail establishments. Low interest rates are cherished by retailers as financing consumer goods becomes much more affordable when rates are on the low end.
Business gets tougher for retailers as interest rates increase and sometimes squeeze consumers out of the market. High inflation can also raise prices and discourage customers from buying products.
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For furniture retailers, high interest rates and inflation can be business killers. Not only do these economic factors directly affect furniture stores, but they affect tertiary industries, as well, such as the real estate market. Inflated prices and high interest rates discourage consumers from purchasing homes, and when people don’t buy homes, they also don’t buy new furniture to move into the new home.
The 30-year fixed-rate mortgage fell to a record low of 2.65% in January 2021 before rising. Inflation began rising in mid-2021 and would peak at 9.1% in June 2022. The Federal Reserve started raising interest rates in March 2022 to fight inflation and increased rates 11 times through July 2023.
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Rising interest rates pushed the average 30-year mortgage rate to 7.22% in November 2023, its highest rate in 20 years. The rate on July 2 is 7.07%, according to Bankrate.
Several furniture retail chains have felt the pain of inflation and high interest rates over the last few years. High-end furniture maker and retailer Mitchell Gold + Bob Williams, which had 27 stores in 14 states, in August 2023 closed all of its stores and filed for Chapter 11 bankruptcy on Sept. 6, 2023 after it was not able to obtain adequate financing to continue operating. It later filed Chapter 7 liquidation.
The parent company of upscale furniture and home decor retailer Z Gallerie, which operated 21 stores in nine states, on Oct. 16, 2023, filed for Chapter 11 bankruptcy protection as supply chain and import cost increases in 2021 and 2022 severely impacted its brand profitability and cash position.
Furniture showroom
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Conn’s HomePlus faces potential bankruptcy filing
And now, popular discount furniture retail chain Conn’s HomePlus is considering a Chapter 11 bankruptcy filing to reorganize its debts as it has struggled with sales declines and integrating home goods retailer W.S. Babcock into its company after purchasing the chain last year, people with knowledge of the matter told Bloomberg.
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Conn’s (CONN) hired financial adviser Houlihan Lokey and Berkeley Research Group for operational assistance as it reworks its debt load. A bankruptcy filing could come in a matter of weeks, but discussions are not final and plans could change, the source reportedly said.
The Woodlands, Texas-based home goods retail chain operates 170 stores in 15 states across the Southern U.S. and employs about 4,000 workers, its website said. The retailer sells furniture, appliances, and consumer electronics and offers next-day delivery and personalized payment options, including an in-house credit program.
Conn’s has recently faced economic problems, reporting losses in the last two years as its lower-income customer base has battled the effects of inflation.
The retail chain was founded over 130 years ago as a small plumbing and heating company in Beaumont, Texas, according to its website.
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