Top Takeaways:
- Members rate overall industry metrics, current and future conditions at near record levels;
- 2021 closes with growth in both number and scope of homeowner projects, with expectations of a continuation into the first half of 2022;
- Continuing industry challenges and new macro developments could temper homeowner enthusiasm down the road.
By Robert Isler
The latest NKBA/John Burns Kitchen & Bath Market Index (KBMI) report, which closed 2021 and provided members with a glimpse into 2022 is highly encouraging. After shattering records in the second quarter of 2021, it appeared that robust business conditions enjoyed by the kitchen & bath industry had peaked, as traditional study indicators showed a pullback in Q3. However, fourth quarter results tell a different story. Over 850 members across industry segments responded – an all-time record – and based on their feedback, business continues to boom.
Specifically, the overall rating was an 82.1 (50+ is considered industry expansion), easily topping the 78.7 from Q3, and just a shade below the record 82.3 from the second quarter. Current business activity showed similar results, as the 85.4 was well ahead of last quarter’s 80.9, and nearly matched the record 85.7 from Q2. Most encouraging was the indicator which measures future activity. At 76.6, it was six full points ahead of Q3’s 70.6, and topped the Q2 number as well. One would need to go back to the first quarter of 2021 to find a more positive future assessment.
KBMI indicators bounce back to near record levels, but storm clouds may be brewing.
The drivers are numerous. Among them, a continued growth in project backlogs throughout 2021 due to major sourcing or supply chain issues, or to customer postponements. For instance, 54 percent of designers reported they had project delays, and in some cases cancellations, in the final quarter of 2021. But the story is strong even when these delays aren’t taken into account. When asked about new project expectations for the first half of 2022, 56 percent of designers said they expect demand to increase vs. a minimal 7 percent believing it will falter, with the remainder not expecting change.
Along with a prediction of growth in the number of kitchen and bath projects in the first half of 2022 are indications that the scope of those projects will increase as well. Sixty percent of designers said their project sizes grew in the final quarter of 2022, with just 4 percent noting a decrease. Based on what retailers taking the survey shared, that trend is not letting up, at least for the near term. One explained “If consumers have to wait, they want the best they can afford.” The theme of both spending more time at home and wanting to design for the longer haul was a constant refrain. One retailer summed it up by noting “Plans for staying in the same home long-term drives desire for high quality products that will last.”
While the picture appears rosy, there are many factors on the horizon that can severely temper the current enthusiasm. Along with the challenges that each of our industry segments has been facing for over a year,,such as supply chain disruptions, skilled labor shortages and constant pricing pressures that lead to difficult decisions about how much to pass along, are a new set that are cropping up. Retailers report that more and more potential customers are shopping online to get products more quickly and at lower price-points. Then there are the macro factors, such as the steep rise of inflation, mortgage rates that have begun to move up, an unsettled stock market and geo-political developments that are all cause for concern and can lead to homeowner reconsideration about whether they are in the mood for a major remodeling commitment.