Assessing Growth Potential in the U.S. Furniture Market: TAM, Scalability, and Next-Step Catalysts

The U.S. furniture market presents a classic setup for a growth investor: a large, stable total addressable market (TAM) that is highly dependent on global trade, creating both opportunity and vulnerability. The U.S. is the world's largest furniture importer, accounting for about one quarter of global imports. This massive scale provides a solid foundation for any company aiming to capture share. Yet the market's structure is a double-edged sword. It is highly fragmented, with no single player dominating, meaning established brands with scalable models have a clear path to expansion without facing a monolithic incumbent.

The primary driver of this market is not domestic production, but global trade. This import dependency creates a competitive moat for companies that can efficiently source and distribute goods. However, it also introduces a critical vulnerability: trade policy uncertainty. The ongoing tensions between the U.S. and China are a prime example, as they are likely to lead to substantial trade diversion. This shift is already prompting countries to diversify their export markets, which could increase competition from other Asian exporters. For a growth story, this means the competitive landscape is fluid and policy-driven, not just demand-driven.

The bottom line for investors is that the TAM is secure, but the path to capturing it is being reshaped. Companies with strong brands and vertically integrated or agile distribution models are best positioned to navigate this shifting trade map and convert the market's sheer size into durable share gains. The risk is that sudden policy changes could disrupt established supply chains and pricing power, making the import-driven model a source of both growth and volatility.

Company Scalability and Growth Metrics: A Comparative Analysis

When assessing scalability in the furniture sector, the recent performance of these three players reveals starkly different growth trajectories and financial health. La-Z-Boy is demonstrating a clear, cash-generating expansion, while MillerKnoll shows resilience in margins despite top-line pressure, and Bassett remains a small, niche operator.

La-Z-Boy's model is built on aggressive retail footprint growth. Its retail segment delivered sales increased 8% last quarter, a standout figure in a flat market. This growth is directly fueled by its company-owned network, which now represents 55% of the total network. That control allows for consistent execution and brand building. Financially, the company is scaling efficiently, generating $62 million in operating cash flow for the quarter, a 17% increase. This robust cash conversion provides the fuel for its store expansion and shareholder returns, including a recent dividend hike. Its larger market cap and consistent growth signal a scalable, capital-light model.

MillerKnoll presents a more complex picture. Its second-quarter sales declined 1.6% year-over-year, but the story is in the bottom line. The company improved its adjusted operating margin to 5.9%, a sign of cost discipline and operational leverage. More importantly, its adjusted earnings per share grew 36.2% year-to-date. This divergence between top-line stagnation and bottom-line acceleration suggests MillerKnoll is successfully navigating a challenging environment through pricing power and expense management. Its financial resilience, with a solid cash position and manageable debt, supports its strategic priorities.

Bassett, by contrast, operates on a fundamentally different scale. With a market capitalization of roughly $142 million, it is a small-cap niche player. This size inherently limits its ability to capture broad market share or achieve the same economies of scale as its larger peers. For a growth investor, Bassett represents a micro-cap story with limited scalability within the current TAM framework.

The bottom line is one of scalability models. La-Z-Boy is scaling its retail network and converting that growth into strong cash flow. MillerKnoll is scaling its margins and profitability despite a sales headwind, indicating a resilient, brand-driven model. Bassett, while a legitimate company, lacks the scale to be a primary growth catalyst in this analysis. For investors focused on capturing market share and sustaining high growth rates, La-Z-Boy's cash-generating expansion and MillerKnoll's margin resilience are the more compelling setups.

Forward-Looking Growth Metrics and Valuation Implications

The recent performance of these furniture players sets up clear forward-looking tests for their growth models. For investors, the key is translating past results into expectations for scalability and assessing whether current valuations offer a margin of safety.

La-Z-Boy presents a compelling valuation setup. Its stock trades at $37.91, which is about 27% below its 52-week high. That pullback, following a strong 2023 and 2024, could offer a margin of safety for a growth investor. The company's scalable retail model is the catalyst here. Its retail segment delivered sales increased 8% last quarter, a powerful growth signal. The forward-looking question is whether this retail expansion can be sustained and scaled. The company's cash generation supports this-its $62 million in operating cash flow for the quarter provides the fuel for store openings and shareholder returns. If the retail growth trajectory holds, the current valuation may not fully reflect the cash flow potential from its expanding company-owned network.

MillerKnoll's story is one of profitability scaling as sales stabilize. Its second-quarter results showed a decline in net sales of 1.6%, but the real story is the bottom line. The company improved its adjusted operating margin to 5.9%, a sign of cost discipline and operational leverage. More importantly, its adjusted earnings per share grew 36.2% year-to-date. This divergence suggests MillerKnoll is successfully navigating a challenging environment. The key watchpoint is whether this margin resilience can eventually reverse the sales decline. If the company can stabilize and then grow its top line while maintaining these improved margins, it would validate its brand-driven, scalable model.

The bottom line is that scalability is the ultimate growth metric. La-Z-Boy's path depends on its ability to convert retail footprint growth into sustained cash flow. MillerKnoll's path hinges on reversing its sales trend while protecting its improved profitability. For a growth investor, the current valuations provide a starting point, but the real investment thesis rests on these forward-looking execution tests.

Catalysts, Risks, and What to Watch

The growth thesis for U.S. furniture makers now hinges on a few key catalysts and a persistent structural risk. For investors, the near-term calendar is the testing ground for scalability and resilience.

The most direct catalyst for La-Z-Boy is its own execution. The company's scalable retail model is the engine, and the next major test is its full-year guidance and store expansion plans. The recent quarter showed the model working, with the retail segment delivering an 8% sales increase and the company-owned network growing to 55% of the total. The forward-looking question is whether this pace can be maintained. Watch for the company to outline its store-opening targets for the coming year. A commitment to a similar or accelerated expansion, backed by its $62 million in operating cash flow for the quarter, would signal strong confidence in the model's scalability and provide a clear growth vector for the stock.

For MillerKnoll, the catalyst is stabilization. The company's second-quarter results showed a 1.6% decline in net sales, but its adjusted operating margin improved to 5.9%. The key watchpoint is the third-quarter outlook. Investors need to see signs that the company's brand strength and cost discipline can begin to reverse the sales trend. Any guidance suggesting a stabilization or a sequential improvement in order growth would be a positive signal that its margin resilience can eventually translate into top-line momentum. Conversely, any indication of margin pressure from rising costs or competitive pricing would undermine the growth narrative.

The overarching risk for all players is the same: trade policy. The U.S. is the world's largest furniture importer, accounting for about one quarter of global imports. This makes the entire sector vulnerable to shifts in international trade flows. The ongoing uncertainty, particularly around U.S.-China relations, is already prompting trade diversion and could lead to increased competition from other exporters. For a growth investor, this is a material headwind that could disrupt established supply chains, compress margins, and ultimately limit the pricing power and profitability that underpin scalable models. It's a reminder that the TAM's stability is contingent on a favorable trade environment.

The bottom line is that scalability is not guaranteed. It requires disciplined execution on store expansion for La-Z-Boy and a successful turnaround in sales for MillerKnoll. Both are being played out against a backdrop of policy risk that could derail the growth story for the entire industry. The coming quarters will separate those with durable, execution-driven models from those exposed to external volatility.