Out of the automobile, into the store
With gas prices continuing to soar and consumer confidence at a 16-year low, retailers are concerned for the Amercian consumer. However, hardware stores are hoping for a silver lining. Specifically, as their customers travel less, they may be more likely to engage in the small projects and repairs that pop up around the house.
“People are putting off the major purchases and projects to do more repair and maintenance, making sure they’re taking care of the homes,” said Jane Bailey, director of information and insights for True Value. “They’re also tending to repair things rather than replace them.”
Bailey said that gas prices—which account for at least 10 percent of each household’s disposable income in some rural communities—are pushing people to shop locally, which can also benefit the hardware store. “The big thing about gas is that people are trying to make fewer trips, trying to trade off and look for a better value, which is helping us as well,” she said.
Paul Harwood, owner of West End Ace Hardware and Adamsville Ace Hardware, said rising gas prices are helping both of his stores, which are located within the Atlanta city limits. Because people have become very conscious of the price of driving, they will purchase needed supplies from the closest source instead of driving to a big box, even if that big box might have a greater selection, he said.
Additionally, Harwood believes hardware stores are benefiting from the weaker economy in that people perceive them as having more of a “fix up” or “repair” selection than the big box, which has “morphed into more of a home remodeling center.”
Jeff McCarty, vp-operations for Klinker’s Lumber & Builder’s Supply in Waverly, Ohio, who also serves as president of the Building Industry Association of South Central Ohio, agrees that people are much less likely drive great distances in search of lower prices.
“The closest big box is about 15 miles away from us. With the gas prices increasing, I do think people are buying more locally,” he said. “We have seen a slight increase in sales, comparing to the previous quarter, with the stimulus rebate that came out. We have definitely seen a decrease in new home starts, and most customers are doing small projects: painting, storm doors, shutters and landscaping.”
McCarty added that the outdoor living/lawn and garden category has done well so far this season, including push mowers, mulch, wooden rockers and hammocks. Regarding the trade part of his business, he added, “The contractors that deal with us have been keeping busy, but most of it seems like small projects, so I think people are still hiring out small jobs. But we still have the weekend warriors that are tackling some projects.”
Alan Talman, owner of Karp’s Hardware, a Do it Best store in East Northport, N.Y., stops short of saying that the economic downturn is “benefiting” hardware stores. He prefers the word “mitigate.”
“On one hand, the economic pinch has put a stop to major construction and landscape projects, which hurts all of us. That portion of the loss can’t be offset by anything,” he said. “[Yet] business is not terrible. We are seeing plenty of sales from people fixing up around the house and the yard, where they might have hired a service to do the work for them in the past.”
Dave Patrick, senior vp/chief marketing officer for Lenexa, Kan.-based Westlake Ace Hardware, said that he has yet to see Westlake’s 85 stores benefit from rising gas prices or the sagging economy, though he takes an optimistic view.
“We do anticipate that our customers will be focused more on weekend projects versus major remodels, and we will benefit from that,” he said.
Honda lawn mowers recalled
American Honda Motor Corp. is recalling about 20,500 Honda Lawn Mowers, according to the Consumer Products Safety Commission.
Arear shield attached to the lawnmower can break off and be thrown at the operator, posing a laceration risk. The company has received one report of this incident, but no injuries have been reported.
The recall includes HRX walk-behind lawn mowers, and the items were sold from Oct. 27, 2007, through June 2008.
Fannie Mae, Freddie Mac woes could lead to Fed takeover
Following a slew of funding problems for government-sponsored mortgage finance companies Fannie Mae and Freddie Mac, the federal government is considering taking over the two organizations, according to a report by the New York Times.
The two mortgage companies, which are government-sponsored entities (GSEs), have had difficulty raising funds in the face of the housing market downturn.
According to the report, a plan is under consideration by the Fed to place Fannie Mae and Freddie Mac into conservatorship, which means losses on home loans under their names would be paid by taxpayers. The newspaper cited individuals briefed with the government’s plan, although the sources also said no action is imminent.
Congress created Fannie Mae during the Great Depression and created Freddie Mac in the 1970s. Later, legislators eased some restrictions on the two organizations to help spur growth, allowing them to cash in on the slew of jumbo mortgages that eventually entered the market. Like many other mortgage companies, the two groups were deeply hurt by fallout in the housing market. But unlike other mortgage companies, Fannie Mae and Freddie Mac collectively hold huge relative chunk of the outstanding mortgages in the United States.
Shares of Fannie Mae and Freddie Mac are expected to slide further today, after plunging throughout the week. If the government were to take over the companies, their stock would be worth “little or nothing,” according to the New York Times.