The state of the industry with Alex Shuford of Rock House Designer Brands

Business of Home Podcast

Alex Shuford, CEO of Rockhouse Designer Brands, returns to the Business of Home podcast to discuss the current state of the home industry, s

Key takeaways

• The home industry is experiencing a K-shaped recovery, with luxury designers thriving while entry-level markets face challenges.
• AI played a pivotal role in launching Rockhouse's new brand, demonstrating tech's growing influence in design innovation.

Main topics

• State of the home industry post-tariff rulings
• Las Vegas Market as a strategic business platform

Notable quotes

"In two years, everyone will see a humanoid robot every day. Like in your daily life, there'll be some incident during the day."

Conclusion

Alex Shuford emphasizes that while challenges persist, the home industry remains resilient and

Transcript preview

Speaker 1 (0:03) This is Business of Home. I'm your host, Dennis Scully. Every week, I'll be speaking with leaders and innovators from all corners of the home industry. My guest this week is Alex Shuford, CEO of Rockhouse Designer Brands, a group of seven companies that includes Century, Hancock & Moore, and Hickory Chair. Alex is the ultimate furniture business insider. and a podcast regular every year he joins me on the show to share his take on the state of the design industry. This year, we talked about why young designers should take psychology courses, why Alex thinks prices will stabilize by next year, and how AI helped Rockhouse launch a new brand. Speaker 1 (0:56) This podcast is sponsored by Lalloy. Just introduced at Las Vegas Market, four new map-protected Lalloy rug collections, featuring 26 original designs to inspire beautiful spaces and new possibilities. Highlights include hand-woven stripes finished with contrast stitching, antique-inspired geometrics softened by sun-washed color, Traditional patterns with subtle shifts in tone and texture, and graphic chevrons in dimensional sumac weaves. The latest introductions join Lalloy's wide-ranging assortment of rugs, pillows, and wall art, giving interior designers and retailers even more ways to find the right product for every need. Explore the new collections and connect with your Lalloy sales representative at lalloyrugs.com. That's L-O-L-O-I rugs.com. Speaker 1 (1:53) This podcast is sponsored by Maiden Home. Maiden Home is a New York-based design house grounded in original form, fine materials, and meticulous craftsmanship. Founded by Nidhi Kapoor, Maiden Home was built on the belief that high-design, high-craft furniture should be approached with greater intention and clarity. If you've been listening to the business of home for a while, you've heard Maiden Home's story evolve alongside the industry itself. Today, the brand is a trusted partner to designers and architects through its growing trade program. Made in Home offers design professionals preferred pricing, exclusive materials, COM and COL, and a dedicated specialist to support your process. To learn more and to be the first to know about future launches, visit madeinhome.com slash boh. And now, on with the show. Okay, so Alex, the returning champion on the Business of Home podcast, great to have you back on the show. Speaker 2 (3:00) It's one of the things I look forward to every year is to get a chance to catch up, Dennis, and have you give me my dose of annual therapy. So I want to get it all out today. Get it all out. Speaker 1 (3:14) Good. I want you to get it all out, Alex, because I'm so eager to hear what you are making of this surprisingly complex environment. So here I was thinking, oh, at least we're not going to have to talk about tariffs, right? Because the Supreme Court struck those down. Yeah, that's right. So and suddenly here we are talking about that. But before we jump into tariffs and all of that, I know you're just back from Vegas market. And I want to hear both how your space there is doing. I feel like it's a year plus into you having a space there in Vegas, and I'm eager to hear how that's going and what you've learned and also sort of what the word on the street was in Vegas. Speaker 2 (3:55) Anecdotal, before I tell you how our showroom was doing. Please. I had been telling my staff that in two years, everyone will see a humanoid robot every day. Like in your daily life, there'll be some incident during the day, kind of like the early days of the Tesla where you saw one, you know, once a month and, you know, and you kind of rubbernecked it. And then now they're everywhere. And sure enough, in the courtyard of the Las Vegas market, there's a humanoid robot walking around. And a couple of my staff members in our marketing team, of course, got excited and ran out there to meet the humanoid robot. And it was one of those future shock moments of, all right, well, here's the beginning of the curve. Like in two years, it'll become commonplace. So here it comes. See, Speaker 1 (4:44) you've been projecting this. I tell you, teach them to Speaker 2 (4:47) sand and let's get them in the factory. But no, Vegas was good. You know, Sunday and Monday in particular were. were for us pretty high traffic days. We saw a lot of, you know, we count. And so then I always take a third of the traffic and remove it because it's, you know, suppliers or wannabe suppliers or, you know, competitors or people we can't sell anything to. But two thirds of that traffic was pretty high value, I'd say, you know, pretty high quality traffic. And the traffic was significantly better than we thought it would be. So pleased with the show. we did a couple of things out there uh we launched um kind of a preview of our new windsor smith collection our collaboration um with windsor uh of course uh you know kind of really well known um and quite talented designer out of the los angeles area uh very sexy collection um and we we really want to start using las vegas for that uh you know to give people know kind of an extra reason for being present like see this before you're going to see the complete unveil in in high point and if you can't make high point at least you've gotten the the sort of ethos or the atmosphere of the collection you've seen a number of the core pieces and and really use it not just as a place to show again but actually use vegas as a place to show first sometimes so that was great our showroom To your point, we've been there now over a year. Our goal in the beginning was to break even or make a little bit of money as a trade showroom in the 10 months of the year where there's not a show happening. And then during those show months, the corporate… parent will cover the expenses because we're disrupting them so much. And we achieved that goal, I'm happy to say, in the second quarter of this year. Yep, they are now running at a break-even or slightly better annualized rate for the 10 months of the year that are not show impacted. And I think that speaks to, look, there's a lot of interest in in california in you know arizona and utah in a corporate location where they can see a good display that's within an easy flight you know within a sub a hundred dollar quick hour-long flight and you know and so not only we are we activating that las vegas crowd which you know every time i'm there i'm i'm amazed it's sort of the the best kept large city secret in America, like outside of the strip, there's actually an entire city. There are people with normal lives. Um, but, uh, but outside of that, we're, you know, we're getting a nice bit of inbound, um, uh, designer flow from the surrounding area. And that's what we wanted. We, you know, we don't operate showrooms in California anymore. And, uh, that's a whole nother episode one day we can talk about. The People's Republic of California has difficult to navigate business policies for a national brand like ours. But Las Vegas gives us a way to activate that customer. And in some cases, they buy directly from us. And in many, many more cases, they go back and buy from our agent showroom partners in California, which is great. We want to provide a halo for them. So yeah, positive show. Speaker 2 (8:16) For me, it's an interesting one. In High Point, I don't get as much of an opportunity to kind of get out and run into friends and business competitors as I do in Vegas. Because it's not quite as intense. And we have Speaker 1 (8:32) 10 Speaker 2 (8:32) ,000, 12,000 square feet. And we also bring five times more management than we need for 10 or... 12,000 square feet. So we have a lot of density of people to cover the inbound traffic. That lets me get out into the hallways and run into friends and competitors and have some, you know, kind of behind the scenes business conversations about, you know, so we can lie to each other about how our business is. Oh, it's going so great. Oh, Speaker 1 (9:00) we're booming. Speaker 1 (9:03) And so you got some time in the hallways and you got to walk around. And what was the mood? I mean, how are people feeling and what are they talking about? Speaker 2 (9:13) Two different moods, as I think has been famously overanalyzed, the K-shaped economy. And I think in our industry, that's absolutely the case, right? That if you're keyed into the luxury consumer that's being serviced or administered to by designer boutique retail. then you're feeling pretty good. Your business for the year is up. You're just having a different experience than if you are catering to a first home buyer, a more, I would say, entry to middle price point customer and the outlets through which they shop. And that economy is a struggle. And so I think that's very prevalent in the hallways. Speaker 2 (10:00) you know across the board no one's going to go shout it from the mountaintops but you know we're all having a decent year the wealth effect of this um equities market is palatable like it is unbelievable you know back of the envelope you know the u.s equities market has added somewhere between 10 and 12 trillion dollars of new wealth in the last 12 months. I mean, like you think about the scale of that, like, you know, it's 2x the GDP of the UK. Like we have added in wealth in 12 months through the rise in stock market valuations, et cetera, both, you know, and probably also arguably private company valuation increases two times the GDP of France. You know, and... And it flows through the economy. Of course. It's just unbelievable. And it's concentrated in the upper end. And that's the real story. 80 plus percent of it or more is concentrated within the luxury segment because they're the early investors in SpaceX and OpenAI and Anthropic. Those are the headline companies. And of course, the ones that are more likely to be indexed into Caterpillar and Corning and all the other. companies that are being lifted by this somewhat incredible, hopefully not bubble economy that we found ourselves in. Speaker 1 (11:30) Well, it's a fascinating time, as you say. And the market is being powered by what have turned out to be staggering earnings coming out from these companies. We're about 70 % of the way through the S &P reporting earnings. And some of these numbers are like... once in a lifetime numbers that we may never see again. So, I mean, it is real from that perspective. I mean, yes, there certainly probably is a bubble around a lot of this, but at the moment, the business demand is there and it's really quite remarkable. The Speaker 2 (12:00) way I think about it is, I think the initial lift was kind of a bubble mindset, like, you know, a company that... It was pre-revenue or just sort of immediately post-revenue, beginning to generate earnings, gets a valuation in the hundreds of billions of dollars. But they then go borrow money against that valuation, and they spend it in the real physical world. They're buying. you know, network cabling and switches. They're buying power generation equipment. They are buying physical locations and contracting with, you know, builders that like, and so if you think about it, you know, and I think some of the bankers and economists have alluded to this, there's a ton of leverage that has gotten created where people have said, hey, we've got these outsized valuations and we're going to use those to go borrow enormous amounts of money. We're not just going to take that money and sit on it or dividend it out. We're actually going to deploy it back into real world purchase and infrastructure build out. And then the thousands of companies that are connected to those build out projects are all lifted. Right. And then presumably in a virtuous cycle, maybe they start consuming AI services, you know, right. That justifies. And that's your point about the earnings recently is, you know, not just the earnings of, you know, companies like Caterpillar and Corning and. you know, and carrier and people that are the, you know, the shovels and picks of the gold rush, but anthropic and, you know, and people like that are actually generating outsized real earnings that can hopefully justify the outsized real valuations that support the real leverage, you know. And then the part that for me has turned it from fear of bubble to maybe a bubble that's sustainable long enough to naturally sort of allow the market to catch up with it is when the Googles and the Microsofts and the Amazons actually use their balance sheet and borrowing capability to also lean into this build out and purchase environment because they actually have the earnings to support that leverage. Like the leverage isn't an existential crisis for Google or for Amazon, right? They can go out and borrow 50, 100, 200 billion dollars and deploy it. Now, can they do it every year ongoing? No, right? So, and then what carries the economy forward from there, right? Because if I'm Caterpillar, you know, I need you to be buying more and more earth-moving equipment and, you know, and I think we've seen that a little bit recently with the SpaceX scenario where, you know, it goes public and... spikes up and then very quickly turns around and people start saying, hang on, how much revenue do they really have? And, you Speaker 1 (14:54) know, Speaker 2 (14:54) and we'll Speaker 1 (14:57) see. Speaker 2 (14:58) Like, look, is the valuation they carry today justifiable in a 10-year horizon? Probably. Five-year horizon? Speaker 1 (15:05) Maybe. Speaker 2 (15:06) Two-year horizon? Probably not. You know, so what's your hold period? You know, are you trying to make a quick buck? Are you trying to invest? in spacex for your kids or your grandkids um you know is it going into a generation skipping trust well great yeah it's probably a great investment you know and and like your your wee two-year-old grandchild will thank you a lot when they're 25. um you know but if you're using it as an investment strategy to get you to retirement in two years well that's pretty speculative um But yeah, as a furniture company, we live on that, right? We live on the overall economy being lifted. Speaker 1 (15:43) Well, exactly. And what I'm curious about with the humanoid robot is that it's fascinating to see in the country the level of negative sentiment around all of this. Speaker 2 (15:56) Incredible pushback based on, I think, fear of the unknown. You know, like it's always, what will I lose as these things become? adopted technologies like you know so AI what will we lose within the white collar workforce environment you know like how will it impact our kids ability to learn and be educated and you know in any reasonable way and you know in in