As concerns start to creep up for the housing market, it is beginning to have some knock-on effects for the tangentially-related sectors. One such market is the furniture world, as this area tends to do well when consumers are buying more homes and thus need to furnish them with new products. However, as questions start to pop up over the health of the housing market, concerns are starting to build in the furniture world too.
That is part of the reason why the segment currently has a bottom 10% industry rank, and why there isn’t a single stock in the group that has a ‘buy’ rank. One stock in this group that should be especially concerning to investors right now though, is La-Z-Boy (LZB – Snapshot Report) , as this company is arguably one of the worst positioned for today’s market environment.
Why You May Want to Avoid LZB
LZB is obviously best known for its recliners, but the company makes a variety of other furnishings as well. And while the company has definitely participated in the recovery over the past few years, cracks are starting to appear in the story.
This is best evidenced by a nearly 25% slump in LZB stock over the past three months, and a double digit percentage slide in the past month alone. Clearly, investors are concerned about LZB’s health in the current environment, and there are worries over the long-haul too. This can be seen if we look to recent earnings estimates for LZB stock, which have all been decidedly negative.
In fact, in just the past week, we have seen two earnings estimates go lower for both the current year and the current quarter, while the company is now expected to see an earnings decline for both time periods when compared to the year ago time frame. Additionally, the Earnings ESP for both of these time periods is negative, suggesting that the consensus estimate is likely to trend lower in the weeks ahead.
If that wasn’t enough for investors, you should also consider LZB’s most recent earnings report, as the company posted an earnings miss for the first time since February 2015. No wonder LZB currently has a Zacks Rank #5 (Strong Sell) and why we are looking for more sluggishness from the company in the weeks ahead.
While you may want to avoid LZB, where should you look instead? Well, one option is to look more towards the diversified/miscellaneous retail world, as this space has a top 30% industry rank. There are actually several ‘buy’ ranked stocks in this group right now, but a focus on the sporting good space seems ideal.
That is because Big 5 Sporting (BGFV –Analyst Report) , Dick’s Sporting Goods ( (DKS – Analyst Report) , and Hibbett Sports (HIBB – Analyst Report) all have a Zacks Rank #2 (Buy) or better, and all three saw a positive earnings surprise last quarter as well. So, if you are looking for a different consumer-focused play, consider any of the three above instead of the still sluggish and likely-to-be-volatile LZB in the near term.
More Stocks to Sell. Now.
Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, you should consider removing them immediately. Many appear to be sound investments, but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.