Growth picture is mixed with challenges
Las Vegas — One speaker at the President’s Council Advisory Board meeting here during the International Builders’ Show explained that "we’re not in full panic mode," anymore. Another pointed to a 32% increased in single-family home starts for 2014.
But what are the challenges that might slow the industry’s growth trajectory?
Robert Dietz, VP tax and market analysis for the National Association of Home Builders, focused on that question during his presentation at the President’s Council event.
Home affordability — as expressed by the NAHB’s housing opportunity index — is in good shape, he said. "The percentage of households that can afford to buy a home is taking a dip but still high," he said.
Credit availability, however, is a possible growth inhibitor. So is labor availability. "We have the highest unfilled construction jobs opening rate in five years right now," he said.
That may seem like a disconnect given the nation’s high unemployment, but what’s happening is a "skills mismatch" between the type of work needed and the type of worker available.
Several policy issues also cloud the topic of growth. Dietz pointed to several during his presentation: housing finance reform, possible tax reform affecting the mortgage interest deduction, immigration reform, as well as fiscal and monetary policy unknowns.
Through all that though, the forecast for single-family starts shows a recovery in progress. From 621,000 in 2013, single-family starts are expected to hit 822,000 in 2014, according to the NAHB’s tally. That’s an increase of 32%. In 2015, the forecast is for 1.159 million single-family starts.
Central Garden & Pet sees Q1 progress
Central Garden & Pet is already starting to see results in the first quarter ended Dec. 28 from an operational strategy it put in place following a disappointing fourth quarter that yielded “unacceptable” financial results.
The marketer and producer of branded products for the lawn and garden and pet supplies markets reported net sales of $291 million, a 1% decrease from $292.5 million in the first quarter of the prior year. However, the company’s first quarter operating loss improved to $8.4 million compared with an operating loss of $13.1 million in the first quarter of 2013.
The company also narrowed its net loss for the quarter to $12.7 million, compared with a net loss of $15.3 million in the year-ago period.
Central Garden & Pet historically has reported a loss in its fiscal first quarter given the seasonal nature of the lawn and garden category.
“Our first quarter showed some improvement. I am pleased we are starting to see improved performance from the changes we are making,” said president and CEO John Ranelli. “Although we are encouraged by our progress, there is still much work to be done to get the business consistently operating as it should. I am optimistic about the company’s future and our ability to deliver improved returns to our shareholders and the highest level of service and innovative products to our customers.”
Net sales for the garden segment increased $8.6 million, or 9%, from the same period a year ago to $105.9 million, due primarily to higher seasonal decor, wild bird feed and professional fertilizer revenues. The garden segment’s branded product sales for the quarter were $92.8 million, and sales of other manufacturers’ products were $13.1 million. Historically, first-quarter revenues for the garden segment have been the lowest of any quarter of the year due to the seasonality of the lawn and garden market. In the first quarter, the garden segment’s operating margin improved 290 basis points. The garden segment’s operating loss in the quarter was $6.2 million, compared with an operating loss of $8.5 million in the first quarter of 2013.
First-quarter net sales for the pet segment declined $10.6 million, or 5%, from the same period a year ago to $184.6 million, due in part to lower sales of aquatics products. The pet segment’s branded product sales were $140.5 million, and sales of other manufacturers’ products were $44.1 million. The pet segment’s operating income was $14.4 million compared with $10.2 million in the prior-year period.
Remodeling on the up, with a focus on kitchen and bath
Las Vegas — Experts gave the national remodeling market a vote of confidence at a press conference hosted by The National Association of Home Builders (NAHB) Remodelers at the International Builders’ Show on Tuesday, citing an increased focus on kitchen and bath upgrades.
According to the speakers, residential remodeling is maintaining its steady trajectory toward a recovery, a sentiment that was backed up by NAHB calculations and the lived experiences of remodelers in attendance.
The NAHB expects residential remodeling spending on owner-occupied single-family homes to increase 2.5% in 2014, as well as an additional 1.8% in 2015.
"Remodelers are regaining confidence in the market as home owners continue to upgrade their homes and make repairs or replacements that were deferred during tough times," said 2014 NAHB Remodelers chairman Paul Sullivan. "NAHB Remodelers looks forward to working in a strengthened market as home sales rise."
Paul Emrath, VP survey and housing research, added that NAHB is predicting steady growth over the next two years based on positive findings from its recent Remodeling Market Index (RMI) survey.
The findings suggest that remodeling is rebounding as a whole as home equity levels increase, with a particular focus on kitchen and bath. Most customers who hired a remodeler cited the need to repair and replace old components and the desire to upgrade amenities.