Key Takeaways:
- K+B sales for 2022 have twice been revised downward;
- Sales growth is decelerating across all four industry segments;
- Unit volume and project size/scope are showing signs of easing.
By Robert Isler
Although 2022 industry sales are expected to increase by 9.4 percent vs. last year – healthy by most standards – it is the second downward revision for the year and well below the initial call for a 19 percent gain. This was among the many K+B sales trend findings in the recently released second quarter NKBA/John Burns Kitchen & Bath Index (KBMI) study. Supporting those findings, respondents assigned an index of 61.8 for sales in the upcoming quarter, a sharp drop from the 78.6 in Q1.
While a sales decline is unlikely this year, every industry segment is experiencing a deceleration. Design and Retail have each had two consecutive quarters of year-over-year deceleration in sales growth, while for Construction and Manufacturing, the pattern has been in place every quarter over the past year. In some instances the differences have been substantial. For instance, in Q4 of 2021, Retail reported 13.4 percent sales growth over the same period of the previous year. In Q2 2022, the YOY growth has been cut to 5.9 percent. Masked behind the poorer sales growth figures, which would likely be more pronounced if not propped by inflation, is a concern about unit volume. The latest forecast calls for a 3.6 percent decline in 2022. While backlog has remained relatively healthy, new project demand is showing signs of easing.
Respondents assigned an index of 61.8 for sales in the upcoming quarter, a sharp drop from the 78.6 in Q1.
Along with an anticipated drop in full year unit volume is a reevaluation by homeowners of the size and scope of their remodels. Economic conditions, specifically higher interest rates and product costs, are the likely contributing factors. This is quite evident within design. Last quarter, 55 percent reported an increase in project size/scope over the previous year, with a mere 7 percent indicating they were lower. In the current quarter only 35 percent indicate an increase, while those reporting a decline from Q2 2021 is 16 percent.
When asked about their sales outlook for 2023, 32 percent of industry professionals expect revenues to remain flat, while, at 28 percent, as many believe sales will fall as rise. The remainder are unsure. By segment, Manufacturing along with Building and Construction are the most optimistic for the upcoming year, Retail Sales the least. In fact, only 19 percent of respondents in Retail Sales expect 2023 revenues to exceed those of this year.
Despite these unfavorable findings, perspective is in order. First, all comparisons are being made to a period of unusually strong growth. All of last year through the first quarter of 2022, both housing and remodeling were reaching growth levels never before attained. It isn’t sustainable. Second, some economists are noting that conditions appear to be stabilizing. For instance, while mortgage rates appeared to be rising unabated earlier this year, at one point nearing 7 percent, they have since pulled back to five percent. Inflation, and the need for the government to aggressively fight it, also appear to be better under control. That, and a host of other favorable factors, such as an aging housing market ripe for remodel suggest that though challenges remain, the unfavorable trend is unlikely to last very long.