The home furnishing market comprises players that develop, design, manufacture and/or retail a wide range of large- and small-scale furniture products. Herein, we specifically focused on the market for indoor furnishings and excluded kitchen and sanitary pure-players. We segmented the European market by activity: (i) manufacturing, (ii) design & distribution and (iii) retail. 

The European home furnishing market is highly fragmented. The landscape is dominated by a handful of European furniture retail giants, while the manufacturing and design & distribution segments do not house any clear market leaders. However, the retail segment has been characterised by ongoing consolidation, mainly driven by retail giants' lust to acquire smaller peers reeling under financial pressure. As a result, the manufacturing segment is likely to follow due to their weaker bargaining position versus retailers. 

Sponsor-led interest has been mediocre, with ~45% of identified assets being backed by financial sponsors (May 2023). Herein, the design & distribution segment sees the most PE-led interest, with ~65% of assets being investor-owned. We expect the segment's limited CAPEX requirements and relatively high flexibility (i.e. via an outsourced manufacturing model), as well as the attractiveness of premium players to be the key reasons. However, due to the current economic climate and forecasted volume decreases, we expect investor-led interest to be significantly lower in the near future.

ESG topics in the home furnishing market primarily relate to environmental and social topics. With a significant amount of furniture being manufactured in Asia, shipping has a significant impact on the environment. Incumbents limit their footprint by using recycled and biodegradable materials as well as by reusing frames (e.g. for sofas). From a social perspective, we see that topics primarily concern working conditions throughout the supply chain. Working conditions in Asia tend to be below par compared to the EU. To eliminate unethical sourcing throughout the supply chain, the largest incumbents engage in mandatory audits for their suppliers.