Key Takeaways:
- Sales expectations for Q3 are considerably lower than Q2;
- Homeowners who aren’t postponing are scaling back project scopes;
- Only 25 percent of designers report backlogs of 5+ months in Q2, vs. 34 percent in Q1 as supply chain issues begin to resolve.
By Robert Isler
Designers are currently facing obstacles that were practically non-existent for much of the past year. Ratings by K+B professionals in the recently released second quarter NKBA/John Burns Kitchen & Bath Index (KBMI) study reveal their concerns. Although the overall index of 68.6 remains comfortably within expansion territory, it is decidedly below the 75.4 assigned by designers in Q1. The gap is even wider for near-term sales expectations, 62.1 vs. the previous 78.0.
Among the biggest concerns are shrinking project sizes and price-points. Both had been on the upswing for quite some time. Coming out of the Covid shutdown, homeowners had more savings, were anxious to remodel due to greater time spent working from home, and with interest rates hovering near record lows while home values vaulted upwards, it seemed the ideal time for a significant remodel. In fact, in the Spring and Fall updates of last year’s NKBA Kitchen & Bath Market Outlook, high-spend projects led all other price ranges with growth expectations well above 20 percent. That was then. Now, with inflation and interest rates climbing, homeowners who aren’t postponing are often scaling back. Only 35 percent of designers report size and scope of current projects higher than a year ago, a sharp drop from the 55 percent the previous quarter. Meanwhile, twice as many in Q2 as Q1 say the typical price point of materials and finishes requested is lower year-over-year.
Only 35 percent of designers report size and scope of current projects higher than a year ago, vs. 55 percent the previous quarter.
Previously, among the most pressing challenges for designers was how to tackle projects in a timely manner, as the flow of orders easily exceeded the ability to fill them. As supply chain issues work themselves through and demand begins to soften, backlogs are coming down. Only 25 percent of designers report backlogs of five or more months in Q2, vs. 34 percent the previous quarter. As designers face higher pricing from suppliers, they must continuously grapple with how much to pass along to clients without losing them. In fact, the Q2 KBMI report indicates that prospects are increasingly exploring in-store and/or online options rather than going directly through their designer.
Again and again, respondents spoke of the challenges of high material costs, a falling stock market, and uncertain economic conditions. So how are designers dealing with these issues? One said “We are value-engineering our existing projects to help keep clients on budget and prevent postponements.” Others were more specific, offering “I am looking at ‘non name brand’ solutions that are more cost effective and available,” or, “We are changing wood species, simplifying finishes, and reselecting countertop materials that give the same look at a more reasonable price.” Still another echoed what many must be thinking, “I’m trying to sew up existing projects as quickly as possible before budgets completely run out.”