Key Takeaways
- Retailers report fewer in-store customers are making a purchase.
- Consumers are pulling back on discretionary spending.
- Inflation and fear of recession are thwarting expectations.
By Dianne M. Pogoda
Skittish consumers are tempering retailers’ view of current K&B conditions as well as expectations for full-year results, according to the Q3 NKBA/John Burns Kitchen & Bath Market Index (KBMI). All four industry segments captured by the Q3 survey — retailers, manufacturers, designers and builders — showed a decline in the ratings index, a composite of current conditions, health of the industry and future expectations.
Retailers rate the overall industry at 61.8 on a scale of zero to 100 — slightly under the Q3 overall KBMI of 63.2 and a steep drop from 69.4 in Q2. In addition, retailers’ view of current conditions dropped to 63.4 in Q3 from 71.7 in Q2. They report that the quality of in-store traffic is shifting, with 26 percent saying most customers who came into the showroom made a purchase in Q3, compared to 40 percent in Q2. Further, average foot traffic in kitchen and bath stores decreased 4 percent in Q3 compared to Q2.
Consumers are cutting spending on discretionary items, retailers reported, as inflation skews overall product preferences — 41 percent of retailers said price points shifted higher. The average ticket price increased in Q3, mostly due to higher prices, not consumer upgrades.
Retailers said costs increased by double-digits on all product categories in Q3 on a year-over-year basis, with the biggest increases in cabinets, up 14 percent, and vanities and refrigerators, each up 13 percent. The smallest increases were in shower units, faucets, dishwashers, countertops and hardware — all at about 11 percent,
The news isn’t all glum, however. Retailers said that some high-income clients have cash on hand and are willing to pay a premium for high-end products. In fact, retailers reported a slight bump in year-over-year sales growth to 6.5 percent in Q3 from 5.9 percent in Q2, compared to their respective quarters in 2021. This was the first uptick since Q4 2021.
Looking ahead, retailers rate future conditions at 53.7, down from 59.3 in Q2, and slightly lower than the overall rating of 55.4. K&B retailers forecast 2 percent growth for full-year 2022, down from Q2 when they projected full-year growth of 8.4 percent and Q1 when they predicted 14.5 percent. Retailers are slightly more optimistic than the combined four segments’ expectation of 1.3 percent full-year growth. All segments said they were pulling back on future sales expectations as the likelihood of a 2023 recession increases.