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Major appliances: Turning on the sales

BY HBSDEALER Staff

There are two kinds of appliance buyers, according to Mark Delaney, NPD Group’s director of home improvement: the buyer driven by product failure and the buyer remodeling a home or kitchen. “The factors affecting the actual purchase therefore can be quite different,” he said. In the case of a breakdown, those factors include availability, delivery and installation. In the case of the remodel, there’s more of a focus on pricing and product options.

Either way, consumers spent $26.63 billion on major appliances in the year ended June 30, 2007, up from $26.47 billion in the previous year, according to data from the NPD Group. The top selling category is refrigerators, a $6.49 billion segment (see chart 1). Warehouse home centers continue to grow their market share in major appliances, accounting for a quarter of the volume in most categories—even though these retailers weren’t in the category 10 years ago (see chart 2).

2007 Total: $26.63 Billion

Taste in product options continues to shift (see chart 3). Gainers include front load washing machines, gas cook tops and room air conditioners with remote controls—nearly three-quarters of air conditioners are being sold with remotes.

Major appliances are closely connected in terms of consumer awareness to the issue of eco-friendliness. As many appliances operate 24 hours a day, the impact on the environment and the pocketbook is magnified. For instance, Energy Star-qualified refrigerators have grown in unit share from 33.6 percent in 2005 to 35.7 percent in 2006, to 40.2 percent in 2007.

Color is another big story in the appliance spectrum, with stainless steel rising in some segments and falling in others (see chart 4.) Retailers have put substantial merchandising effort behind color, and in general the options continue to expand. “It’s not uncommon for consumers to special order refrigerator doors to match their cabinetry these days,” said Delaney. “That was nearly impossible years ago—except at the super luxury end of the market.”

In addition to the steady replacement business in major appliances, the category enjoys another built-in advantage in the current economic climate. “If the economy has prevented a remodel or a move to a new home,” said Delaney, “an appliance facelift can do wonders to change the appearance of a kitchen without requiring the help of skilled contractors.”

OTHER FINDINGS:

Hardware and home centers lead all other channels in refrigerator sales with 31.2 percent in 2007, up from a 29.5 percent share in 2006.

In the room air conditioner category, electronics stores are stealing market share from hardware/home centers, national chains and mass retailers. Electronics stores grabbed 28.0 percent of this category in 2007, up from 20.4 percent in 2006.

Methodolgy

NPD research is based on monthly tracking of 30,000 opt-in respondents in 70 categories. The 2007 data above reflects the 12-month period ended June 2007.

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Lumber Liquidators closes IPO

BY HBSDEALER Staff

Toano, Va.-based specialty hardwood flooring retailer Lumber Liquidators has closed its initial public offering.

The company offered 10 million shares of common stock at a price of $11 per share, including 3.8 million shares offered by the company and 6.2 million shares offered by selling stockholders.

The company intends to use the net proceeds of approximately $36.4 million from the offering to repay outstanding debt and support the growth of the business, which includes plans for 25 stores in 2007, followed by 30 to 40 new stores per year until 2011.

Goldman Sachs and Merrill Lynch acted as joint book-running managers with Lehman Brothers, Banc of America Securities and Piper Jaffray serving as co-managers for the offering.

Lumber Liquidators has seen same-store sales growth of 8.5 percent to 9 percent each quarter this year. According to the company’s S-1 filing with the Securities and Exchange Commission, in 2006 Lumber Liquidators had sales of $332 million, up 35 percent from sales of $245 million in 2005.

The retailer currently operates 111 small-format stores in the United States. The company is traded on the New York Stock Exchange under the symbol “LL.”

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NKT Holdings withdraws initial public offering

BY HBSDEALER Staff

Providence, R.I.-based HVAC company NTK Holdings has canceled its initial public offering according to a Securities and Exchange Commission filing this week.

The company said that the application was withdrawn “due to the unsettled market conditions.” The company had planned to use the IPO proceeds to repay debt.

The announcement was part of Nortek’s third-quarter earnings statement. Nortek, which reported a 4 percent increase in sales, is a subsidiary of NKT.

The company reported net earnings of $37.6 million for the period ended Sept. 29, down 44.9 percent from last year’s earnings of $67.7 million in the same period last year. Nortek also reported net sales of $602 million, up 4 percent from $579 million last year.

NTK Holdings manufactures air conditioning, heating ventilation and home environmental control technology products.

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