As 2004 brings an expected slowdown in last year’s torrid pace
of new home starts, industry leaders believe remodeling remodeling /re·mod·el·ing/ (re-mod´el-ing) reorganization or renovation of an old structure.
will pick up
most of the slack 1. (operating system) slack – Internal fragmentation. Space allocated to a disk file but not actually used to store useful information.
2. (jargon) slack to sustain a healthy U.S. cabinet demand.
“Remodeling is now over 70 percent of the business,” says
Dick Titus, executive vice president of the Kitchen Cabinet
Titus said the past eight years have been exceptional for KCMA KCMA Kitchen Cabinet Manufacturers Association members. “We’re fortunate that we recorded 93 consecutive
months of growth through December (2003). We’re expecting 2004 to
be similar to 2003–maybe a little lower.”
In 2003, cabinetmakers who took part in KCMA’s Trend of
Business Survey posted $6.1 billion in sales, up 13.1 percent from 2002.
The monthly sales growth rate for December 2003 increased by 22 percent
from December 2002.
According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the most recent U.S. Department of Commerce figures
available, about $12 billion worth of wooden kitchen cabinets and
countertops were shipped in 2002.
Titus says low interest rates, new home demand, and a strong
kitchen and bath remodeling market fueled growth over the past several
Job Growth More of a Factor Than Interest Rates
The National Association of Home Builders The National Association of Home Builders (NAHB) is one of the largest trade associations in the United States. Headquartered in Washington, DC, the association organizes one of the largest conventions in North America, The International Builders’ Show, which draws more than says it expects housing
starts will fall about 4.8 percent in 2004, and sales of existing homes
will decrease 5.3 percent. They would be the first declines since 2000.
The National Association of Realtors The National Association of Realtors (NAR) is made up of residential and commercial realtors who are brokers, salespeople, property managers, appraisers, and counselors, and others working in the real estate industry. said continued strength in the
housing market this year will depend more on improvements in the labor
market labor market A place where labor is exchanged for wages; an LM is defined by geography, education and technical expertise, occupation, licensure or certification requirements, and job experience than on interest rates.
“Fixed-rate loans Fixed-rate loan
A loan whose rate is fixed for the life of the loan. are currently around 5.7 percent, but we
project a gradual rise to 6.5 percent in the fourth quarter,” said
David Lereah David Lereah was chief economist for the National Association of Realtors (NAR). Lereah served as the association’s spokesman and cheerleader on economic forecasts, interest rates, home sales, mortgage rates, as well as other policy issues and trends affecting the United States , NAR’s chief economist The Chief Economist is a single position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of responsibility encompassing the . “As interest rates move
up, the strength of the housing market will depend largely on job
growth, which we expect to accelerate and drive demand for homes as the
In January, the nation’s unemployment rate fell to 5.6
percent, the lowest level in more than two years. Companies added
112,000 new U.S. jobs, denoting the fifth straight month of payroll
gains and the largest in three years, according to the Associated Press Associated Press: see news agency.
Associated Press (AP)
Cooperative news agency, the oldest and largest in the U.S. and long the largest in the world. .
Economists, however, had expected 38,000 more jobs would have been
added. Since President Bush took office, some 2.8 million manufacturing
jobs have been lost.
Still, analysts say the economy is expanding. Real gross domestic
product –the output of goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the “good” is a “bad”). It is often used when referring to a Goods and Services Tax. produced by labor and
property in the United States–rose 4.1 percent during the fourth
quarter of 2003, up front earlier estimates of 4 percent growth,
according to the Bureau of Economic Analysis.
In the third quarter, real GDP Real GDP
This inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as “constant-price”, “inflation-corrected” GDP or “constant dollar GDP”. increased 8.2 percent.
Popularity of Kitchen Remodeling
The National Association of the Remodeling Industry says more than
1 million homes will undergo major renovations or remodeling this year.
According to the NAHB NAHB National Association of Home Builders
NAHB National Academy of Health and Business (Canada) , the most common remodeling jobs in 2002 were
kitchen renovations. A survey of remodelors found 63 percent of their
jobs were kitchen makeovers, followed by bathroom remodeling, 61
percent, and room additions, 58 percent. About $6.6 million were spent
on kitchen remodeling.
“Remodeling has come on strong with our dealer base,”
says Angela O’Neill, director of marketing for Wellborn well·born
Of good lineage or stock.
Adj. 1. wellborn – of good or upper-class lineage; “a rich and wellborn husband”
upper-class – occupying the highest socioeconomic position in a society Cabinet
Inc. of Ashland, AL. Wellborn distributes through about 700 dealers. In
2003, it bought Cabinetry cab·i·net·ry
Cabinetwork: finely detailed cabinetry.
Noun 1. cabinetry – the craft of making furniture (especially furniture of high quality)
cabinetwork by Karman, a $20 million company in Salt Lake
Though O’Neill says 2003 sales were also strong in new
construction, she adds, “The indications we read are that
remodeling will come on stronger.”
Wellborn posted about $110 million in sales in 2003. O’Neill
anticipates a 10 percent to 15 percent sales increase this year.
American Woodmark American Woodmark is a fully integrated, stock and semi-custom, just-in-time cabinet manufacturer, headquartered in Winchester, Virginia. The company operates 15 manufacturing facilities, in Arizona, Georgia, Indiana, Kentucky, Maryland, Minnesota, Oklahoma, Tennessee, Virginia, Grows with Home Improvement Stores
American Woodmark Corp. of Winchester, VA, says 65 percent of its
2003 fiscal year sales were in the remodeling market, compared to 35
percent in new homes.
The company, which operates 13 manufacturing facilities and 10
service centers across the country, is coming off a strong year, and
anticipates further growth in 2004. It lays claim to being the third
largest kitchen cabinet manufacturer in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. .
American Woodmark had a net sales Net Sales
The amount a seller receives from the buyer after costs associated with the sale are deducted.
This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight increase of 13 percent to $563.5
million in fiscal year 2003. “This marks the first year in our
history with over halt” a billion dollars in net sales,” says
James J. Gosa, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. .
American Woodmark says it foresees another 15 percent to 20 percent
rise in fourth quarter sales, for the period ending April 30, 2004.
Solid growth is expected in the new construction and remodeling sectors.
In January 2004, the company broke ground on a 250,000-square-loot
plant. Gosa says there are plans to double the plant’s size in the
next few years.
However, American Woodmark has a definite advantage over many
competitors in the cabinet industry. Its cabinets are sold in 1,515 Home
Depots The Home Depot (NYSE: HD) is an American retailer of home improvement and construction products and services.
Headquartered in Vinings, just outside Atlanta in unincorporated Cobb County, Georgia, Home Depot employs more than 355,000 people and operates 2,164 big-box and 952 Lowe’s across the country. A year ago, The Home
Depot Inc. had 1,370 stores in the States. Lowe’s had 854 in 44
When the home improvement giants grow, so do American
Woodmark’s sales opportunities. The company also puts its cabinets
in stores like Builders Square Builders Square was founded as a big-box home improvement retailer headquartered in San Antonio, Texas. A subsidiary of Kmart, its format was quite similar to Home Depot and Lowe’s with floor space of about 100,000 square feet. .
Masco Grows, Armstrong Declines
Masco Corp. of Taylor, MI, also had a great year. Net sales in its
cabinet about sector increased 9 percent, from $2.8 billion in 2002 to
$3.1 billion in 2003.
Fourth quarter net sales increased 13 percent, from $722 million in
2002 to $814 million in 2003.
Meanwhile, Armstrong’s cabinet sector showed decreased net
sales in 2003. Sales fell to $204.8 million, from $226.9 million the
year before. Armstrong said that was due primarily to reductions in
volume, and there was an operating loss operating loss
The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of about $11.1 million.
Guarding Against Imports
While Titus says economically, the cabinet industry has fared much
better than other manufacturing sectors, imports are a concern.
Wellborn’s O’Neill says cabinet imports do not affect her
company. American Woodmark reports the same. Yet, Titus says some KCMA
companies do import components from China and integrate them into
“One of the overriding concerns is noting what has happened
with furniture with manufacturing moving offshore,” Titus says.
“Cabinet manufacturers had taken steps to increase productivity
before China became a cause (for concern among furnituremakers).”
Over the years, most major cabinetmakers have invested in new
technology and machinery, Titus says. Cabinetmakers have ensured they
are making themselves competitively.
O’Neill says her company has heard dealers are bringing in
imports, but they are “very entry-level” cabinets, without
options. Such cabinets are not Wellborn’s niche, so the imports do
not affect the company.
“Anytime you think of imports, you think of what happened with
the furniture industry,” O’Neill says. “We want to make
sure we have a variety of products.”
Titus says the KCMA is drawing policy makers’ attention to the
state of U.S. manufacturing. “We’re encouraging our members to
make their representatives aware of their concerns,” he says.
The KCMA recently joined the Coalition for the Future of
Manufacturing. Launched by the National Association of Manufacturers,
the coalition seeks public and governmental support to help U.S.
manufacturers be more globally competitive.
Housing Start Fluctuations Over the Years
Year Single-Family Multi-Family Total
1980 852,000 440,000 1,292,000
1990 895,000 298,000 1,193,000
2000 1,231,000 338,000 1,569,000
2001 1,273,000 330,000 1,603,000
2002 1,364,000 347,000 1,711,000
2003 * 1,445,000 341,000 1,786,000
2004 ** 1,381,000 319,000 1,700,000
* National Association of Home Builders estimate ** NAHB forecast
Source: NAHB, U.S. Census Bureau
Average Number of Cabinets in New Homes
Single Family Multi-Family
Kitchen cabinets 15 11
Vanity cabinets 3 2
Other rooms 2 9
Source: National Association of Home Builder Research Center, 2001
Builder Practices Survey
The demand for cabinets is heavily impacted by new housing starts,
which fluctuate from year to year, depending upon the economy. Some
analysts say the economy is expanding, yet the number of housing
starts is expected to decline. Still, there will be a large demand for
cabinets–about 27.6 million will be needed in single-family homes that
are started and completed this year. About 7 million cabinets will be
needed in the kitchens, vanities and other rooms of new multi-family
Top Ten Most Common Remodeling Jobs in 2002
Kitchen remodeling 63%
Bathroom remodeling 61%
Room additions 58%
Windows/doors replacement(s) 44%
Whole house remodeling 38%
Bathroom addition 36%
Enclosed/added porch 31%
Handyman jobs 31%
Note: Table made from bar graph.
Source: National Association of Home Builders Quarterly
Survey of Remodelors
What’s hot for 2004?
Angela O’Neill, director of marketing for Wellborn Cabinet
Inc., of Ashland, AL, says she sees a trend in two-toned, painted
“It’s maybe a combination of midnight black, with white
or cream paint,” O’Neill says. She says the trend began a
couple of years ago, and is more prevalent today.
Wellborn’s black painted accent finish, Midnight, shown above,
has a low sheen sheen
1. Glistening brightness; luster: the sheen of old satin in candlelight.
2. Splendid attire.
3. A glossy surface given to textiles. to create a matte look. The finish is offered on two
maple door styles, and Wellborn says it pairs well with almost any color
Also hot are lots of detail, through accessories and mouldings,
from legs to turnings, O’Neill says.