IHS Global/HIRI industry forecast holds steady
The September 2012 IHS Global Insight/HIRI Home Improvement Products Market Forecast for total home improvement product sales for 2012 is little changed — pointing to an increase of 4.9% to $274 billion, compared with the March 2012 forecast of 5.0% growth to $283 billion.
Consumer Market sales are expected to increase by 5.3% and Professional Market sales by 3.9%, according to the data.
As employment growth accelerates and housing markets improve in 2014, IHS/HIRI expects stronger growth of home improvement sales averaging 5.9% in 2014-2015 with a slight deceleration in the following two years as the housing market cycle runs its course.
The national economic situation will certainly have a say in the matter.
Most recent economic reports point to continued growth, albeit at a modest pace. The IHS/HIRI forecast of 2.1% growth of real GDP this year is unchanged from the March 2012 report on the home improvement products market.
Uncertainty over the deepening recession in the Eurozone will weigh on the U.S. economy. So will uncertainty over federal spending and tax imbalances, according to the forecast, which now expects GDP growth in 2013 of 1.8%, down 0.5% from the March forecast.
On the other hand is housing: “Some of the most upbeat news is coming from housing, with prices now beginning to turn up, and home sales and housing starts trending higher,” according to the IHS/HIRI news release. “We expect existing-home sales to increase 6.2% this year and 8.1% in 2013. Housing starts are trending higher than we expected, but we do not expect a sharp acceleration next year from the 24% increase projected this year.”
The Home Improvement Research Institute (HIRI), headquartered in Tampa, Fla., is an independent, not-for-profit organization comprised of about 80 manufacturers, retailers, wholesalers and allied organizations in the home improvement industry. The group’s 2012 fall conference in Chicago, to be held Oct. 17, is called “Retailing in Home Improvement: 2013 and Beyond.”
For information, visit hiri.org.
The tax on lumber
“Against a loud voice from the lumber industry, the governor just signed legislation to enact an additional 1% sales tax on lumber sold in California at retail starting Jan. 1. Without California going strong, the rest of the nation will never recover. Don’t forget we’ve also got cap and trade, the low carbon fuel standard, a vehicle mileage tax called smart growth, storm water runoff regulations and a new paint recycling fee starting Oct. 19 yet to contend with.
“FYI, the California legislature passed and the governor signed public employee pension reform legislation recently. It was obviously watered down, very weak and is nothing more than lip service because if it was truly monumental, there would have been public employee union outcry the likes of which we saw in Wisconsin last year. We didn’t even hear a whimper. It is currently estimated that between unfunded public employee pension liabilities and state bonds we owe approximately $750 billion!”
— Augie Venezia
Fairfax Lumber & Hardware
Job facts versus job fiction
Several readers responded to an article that appeared on homechannelnews.com under the headline: “Unemployment rate declines to 8.1%.”
“The unemployment rate improved because more people stopped looking for work. It’s a misleading and misguided statistic.”
— Jimmy Bolton
Coastal Building Sales
“Your article states that unemployment improved in August, when in fact 96,000 jobs were added and 368,000 people stopped looking for work or their unemployment benefits expired. Seems if you are going to report numbers you would give both sides of the story. This is misleading when [only]part of the facts are presented.”
— Dillard Jones
“While the unemployment rate appears to have gone down, the country saw 360,000 people drop out of the labor force, which affects the unemployment calculation and why it looks like it went down. The actual percentage of people now considered part of the labor force compared with the total population is at its lowest level in a generation. Additionally, with only 96,000 jobs created last month, it is nothing to write home about and way below what is needed to significantly impact the economy via disposable/discretionary income that drives retail sales (excluding food and fuel).”
— Pkrupa on Homechannelnews.com
The Fed responds
“It’s wonderful that the Fed thinks it can fix housing and then the economy. It can’t. All it has done is ensure a new housing bubble that will once again pin the losses on the taxpayer.”
— Jim Taft
“Why should my tax money help the people who bought houses that they could not afford? Being in the building industry myself, I have had to change my lifestyle. I have seen many material supply houses close their doors and have not seen government help them out. If government wants to boost the economy, why not give the money to taxpayers who are paying their bills and taxes? These people would in return buy products and services, which would put people back to work. We can give companies all kinds of money to bail them out, but if the general public does not have money to buy goods and services, then there is no reason for companies to make products. It is simple economics: When people have money, they will support the economy.”
Mortgage interest tax deductions and the housing recovery
“Eliminating the mortgage tax deduction is just another way of implementing a tax ‘increase’ that would impact the middle class. The tax deduction gives additional incentive to owning a home. High-income taxpayers who invest in commercial real estate would just find ways to fund their home purchase by borrowing additional funds on a commercial mortgage to still get the deduction. It is time our policy makers looked at throwing out the tax code and go to a graduated flat tax so that ‘everybody’ pays a fair share.”
— Lonnie Reichstein
Central Valley Builders Supply
“If this deduction were phased out now, you would put housing in another tailspin! The value of your property would also take another downward correction. Ninety billion is nothing compared with the waste spent by the government.”
— Duane Kuzak
Making history, learning from it
On page 134 In the Aug. 13, 1984, issue of National Home Center News, Duncan Building Material Warehouse in New Tazewell, Tenn., is shown in all its rugged glory.
It might not look like much. But the photo is attached to an article in which the store’s owner describes the enterprise as the home center industry’s very first warehouse store. It was opened in 1974, beating Home Depot to the punch by a full five years.
Here’s a question: Doesn’t this groundbreaking story deserve a more prominent placement than page 134?
One would think so. But the amazing thing is that the 1980s were so full of groundbreaking stories that editors had little problem filling 133 pages with copy that sings to this day.
It was the Golden Age of home center retailing. It was also a high-stakes battle for sales, traffic, profit and business survival.
What forces shaped the landscape and determine the winners and losers? And what are the lessons learned for today’s home improvement business?
These are questions that will be addressed during an upcoming presentation at the Home Improvement Research Institute’s (HIRI’s) Fall Conference in Chicago Oct. 17. One of the day’s presentations, “Lesson’s Learned from the Revolution,” will be delivered by an actual editor of Home Channel News.
Let’s face it. Duncan never had a chance to grow into a dominant player. But many others could have. In fact, they fully expected to. Builders Square was backed by big money from Kmart Corp. Wickes once had not one, but two separate business units in the top 10 list — at the same time (Wickes and Wickes Lumber). At the top of the scoreboard during much of the Golden Age was Payless Cashways, a fierce competitor and a highly respected operator.
And then there’s Scotty’s. In a 1985 article, CEO James Sweet candidly described the impact of the revolution.
“When we were hit with the competition from the warehouse stores, we really didn’t know what to do,” he said. “At first, we were going around putting out fires. It took us a couple of years before we decided what to do.”
Scotty’s came up with a plan — including their version of what was an industry-wide mania: build a “store of the future.” For a while, Scotty’s was racing with the big boys. It even had its own racecar in the late 1980s, car No. 16. But in 2005, the company fell apart.
Home Channel News asked executives who lived through the period why some succeeded and others failed. The answers are as different as the companies themselves, but they include: passion, focus, execution, timing and, of course, bankroll.
One can add to that list: a little bit of luck.
The HIRI Fall Conference will be loaded with powerhouse presentations with observations from Wall Street to Main Street and a lineup of six research-oriented presenters. Visit HIRI.org for more information. And if you have a lesson from the Golden Age of retailing, by all means, let us know.