Power Tools: Juiced for the holidays
The economics of home improvement gives power tools an advantage over other merchandise categories during house-market downturns.
“Power tools look to be one of the categories retailers can really leverage going into the holidays,” said Mark Delaney, NPD Group’s director of home improvement. “Sales are really not tied to the housing market.”
Those comments are based on the theory that when the average consumer isn’t actively building a home or adding a room—jobs for professionals—he is more likely to take on a project himself, lifting demand for power tools that help get the job done right. With fewer people taking out home equity loans, the larger home project tends to be put off for later. “The power tool category responds well to the smaller, DIY projects that this economy encourages,” Delaney said.
Store visits (43.9 percent) and the Internet (38.1 percent) were by far the leading methods of research for consumers shopping for power tools. Among consumers in the $150K income bracket, Internet research spiked to 60.9 percent.
The 18-34 age group leads all other age brackets in power tool purchases, at 36.5 percent. Consumers under the age of 45 account for about 62 percent of power tool sales.
NPD consumer research shows warehouse home centers lead all channels in sales of power tools (see fig. 1), and drills lead all other power tools in terms of sales, followed by combo-kits, electric saws and air powered tools (see fig. 2). Drills generated 29.9 percent of dollar share and 37.7 percent unit share and carried an average price of $51.53. Comparatively, the average price for power tools across the board was $65.06.
NPD research is based on monthly tracking of 30,000 opt-in respondents in 70 categories. The data above reflects the period from July 2006 to June 2007.
The pronoun “he” is the operative word for the power tools. Power tools are a male-dominated category (see fig. 4), with more than three quarters of buyers being male. But the role of females should not be overlooked—particularly during the heavy gifting holidays of Christmas and Father’s Day. Power tool purchases at department stores increase noticeably in the periods leading up to these holidays—for instance, channel share at department stores jumped to 15.3 percent in the quarter leading to Father’s Day. That jump is caused by the link between mall-based department stores and holiday shopping at the mall.
Third-quarter earnings up at 3M
St. Paul, Minn.-based 3M had record third-quarter sales and earnings, with earnings growth of 7.4 percent to $960 million compared with $894 million in the same period last year.
The company had net sales of $6.2 billion, up 5.8 percent from $5.86 billion last year.
George Buckley, 3M’s president, chairman and CEO, said the company saw gains across all its business segments. In consumer and office products, 3M saw sales grow 5.9 percent to $898 million compared with $848 million in the same period last year. The company’s safety and security products business saw sales rise 10.9 percent to $766 million from $691 million last year.
“The strength of the 3M portfolio was evident in the third quarter as we again generated record sales,” Buckley said. “Geographic diversity was also an important factor. We continue to accelerate investment in research and development, sales and marketing and in simplification of our supply chains.”
3M has business offices globally, with operations in other industries including industrial and transportation; health care; display and graphics; and electronics and communications.
Weyerhaeuser to shutter three iLevel plants
Federal Way, Wash.-based Weyerhaeuser will “indefinitely curtail” operations at three iLevel building products plants because of “slow customer demand.”
The curtailments include an oriented strand board (OSB) plant in Drayton Valley, Alberta; an OSB plant in Wawa, Ontario; and a laminated strand lumber plant in Deerwood, Minn. Work will halt at the plants before the end of the year, the company said.
“The decline in North American housing starts has reduced demand for wood products, requiring us to rationalize our supply of OSB and engineered wood,” said Steven Rogel, chairman, president and CEO of Weyerhaeuser. “We remain committed to these markets. This move enables our remaining plants to better execute our customer strategies.”
The Wawa and Drayton Valley plants are two of nine OSB mills in the Weyerhaeuser system. Wawa has an annual production capacity of 470 million square feet of OSB, while Drayton Valley has a capacity of 415 million square feet annually, the company said.
The Deerwood plant can produce six million cubic feet per year of engineered strand lumber and is one of three such plants owned by Weyerhaeuser.