Fitch lowers outlook for home building industry
Poor buyer psychology, dramatic falls in pricing, excessive inventories and tight credit standards will continue to generate negative momentum in the home-building industry this year, according to a report just issued by Fitch Ratings, a New York-based rating agency for credit markets. Fitch’s forecast for the housing sector has become more bearish, with total housing starts predicted to be 29.4 percent lower than in 2006. Single family starts are expected to be down 35.2 percent compared to a year ago. Multi-family starts should improve 3.6 percent.
Home-building industry analyst Robert Curran gave two possible scenarios for 2009, neither very rosy. In the first scenario, total and single-family housing starts are projected to decline 1 percent and 2 percent, respectively. New home sales are forecast to rise about 5 percent, while existing-home sales improve 3 percent. Curran has assigned a 40 percent probability to this scenario, which assumes that residential investment will stabilize during the first half of the year.
Scenario two, which has a 60 percent probability, estimates total starts down 8.3 percent in 2009, as single-family starts fall 10.3 percent. New home sales are expected to decrease 7 percent, while existing-home sales are expected to decline 6 percent.
Given the revised forecast for 2008, builders will begin 2009 with considerable inventory overhang and financial pressure. Revenues for 2008 could drop 35 percent to 40 percent, on average, for public home builders, according to Fitch estimates. Pretax profits, before real estate charges, could fall 60 percent to 65 percent. While it’s possible that the 2009 spring selling season will be “mildly positive” and prove to be the turning point for builders, a more likely scenario is a bottoming out in demand (orders) for new homes in late 2009. Single- family starts would begin their own recovery three to four months later.
Fitch issued a negative outlook for most publicly held U.S. home builders, including Centex, D.R. Horton, Hovnanian, KB Home, Lennar, M/I Homes, MDC Holdings, Meritage Homes, Ryland, Standard Pacific, Pulte, Tousa Homes and Toll Brothers. The only exception was NVR, a Reston, Va., home builder and mortgage banker, which received a “stable” outlook. Fitch bases its ratings on a number of factors, including geographic and product diversification, projected credit metrics, inventory contraction, debt reduction, real estate write-downs and cash flow.
Sports marketing lifts Makita
Toolmaker Makita USA credited its off-the-beaten path marketing strategy as one reason for the company’s relative sales strength. Rather than invest in Nascar and NFL, the power tool manufacturer has chosen to spend marketing dollars in what it calls “highly targeted sports: dirt bike racing and soccer.”
“We looked for sports where we could enjoy a major presence and be meaningful to the passionate fans,” said Makita vp-marketing Ken Hefley.
The company said the marketing strategy is paying off. North American sales for Japan-based Makita increased 9.6 percent for the year, to 56.422 billion yen (US$493 million). Makita USA said it posted a double-digit increase in sales compared to the power tool category for the same year.
Targeting an audience of 18-to-35-year-old pro tradesmen, the company created Team Rockstar Makita Suzuki. At the same time, Makita views its relationship with Majo League Soccer as a bridge to the growing base of Hispanic contractors, an important demographic for the company.
In its most recent promotion, Makita is promoting the “Makita Building America’s Soccer Stadiums,” a program designed to make Makita the “tool brand of choice” for the construction of soccer-specific stadiums.
Ace realigns retail operations team
Ace Hardware has announced that Kane Calamari — an Ace employee from 1990-1998 — has rejoined the company as vp-retail operations. At the same time, Ken Nichols, who had been serving in that role, was promoted to senior vp-retail operations. Both Calamari and Nichols are based at Ace’s Oak Brook, Ill., headquarters.
In his new role, Calamari, 41, oversees the field operations team consisting of regional and district managers; the field new business team of market development managers; the paint field team and the Oak Brook-based operations administration staff.
Before rejoining Ace, Calamari was senior vp-sales for North America at Robert Bosch Tool. While at Ace, he held various positions, including retail marketing manager. Nichols, 59, originally joined Ace in 1978 and was named vp-retail operations in 2000.
“We are extremely excited to welcome Kane back to Ace and to promote Ken,” said Ace president and CEO Ray Griffith. “This new alignment of our retail operations team will further help us support our stores and continue to drive success at retail.”