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Home Improvement Industry In 2013, overall sales in the home improvement 2013 industry are projected to grow by 5 percent. MARKET In 2013, the U.S. economy is projected MEASURE: 5to grow by 3 percent. THE INDUSTry’s ANNUAL REPORT n the introduction to last year’s Market Mea- democratic process, the leaders of our nation Unfortunately, that’s exactly what unfolded in Despite these self-inflicted economic wounds, sure report, we discussed how the close of could marshal their resources and concentrate late 2012 and throughout 2013. Businesses were however, the home improvement industry man- the volatile 2012 election cycle would surely on healing our bruised finances, putting people forced to curb expansion out of fear of how new aged to post solid growth during this period. Sales bring some stability back to the economy back to work and pushing the economy forward. mandates would affect their operations. Banks at home improvement outlets were on pace to Iand help springboard our nation into a sustained What we didn’t account for, however, was that remained skittish because of uncertainty over improve at a pace slightly above 5 percent in 2013. growth trajectory. the political divisions among our leaders had bond markets and institutional lending rates, and This growth rate outpaced the economy as a whole, We were confident that, with the last grown so deep that our own government would consumers kept a close eye on spending amid all 3which was growing at an annualized rate of about embers of political instability quenched by the emerge as THE major obstacle to economic growth. the chaos. 3 percent, according to the The Conference Board. 20 HARDWARE RETAILING | December 2013 December 2013 | HARDWARE RETAILING 21 MARKET MEASURE: 2013 THE INDUSTry’s AnnuAL REPORT Three Views of U.S. Home While these industry growth figures were strong, weather can all play a major role in these growth a fickle lot and react swiftly to govern- Improvement Sales in Billions we still didn’t see the large rebound the home models coming to fruition. ment gridlock or other headline-grab- improvement sector has been waiting for since the Let’s take a look at some of the factors that could bing catastrophes. CAG 2012-2017 = 5.1% industry hit the skids in late 2008. have both positive and negative impacts on the home Now, as we watch 2013 wind down and begin improvement retailing market over the short term. The Weather 400 CAG 2007-2012 = -0.5% prognosticating about what the future might While there are many challenges hold, we are yet again cautiously optimistic Housing Remains a Bright Spot facing the home improvement market $374.7 about what lies ahead for the home improvement With interest rates still at very attractive levels that we most certainly can control, the $358.9 retailing industry. We are predicting sustained, and banks showing a willingness to loan money weather is one area where we are left 350 $343.1 moderate growth for home improvement retailers again, consumers likely will be poised to begin at the mercy of Mother Nature. $324.9 in 2014 with sales expected to increase by about buying houses at a stronger pace in 2014. Any Changing weather patterns have $308.3 $300.3 $294.5 5.4 percent. positive movement in the housing market trans- made quarterly predictions for home 300 $292.8 This 5.4 percent will slightly outpace the lates to positive momentum for home improve- improvement sales very difficult over $278.3 $269.9 5.3-percent growth the industry experienced in ment retailers. the past couple of years. Early spring in $265.2 2013; we expect this growth cycle to peak in This stronger market for both existing and new some areas is offset by a late spring in 250 2015 before softening back into the 4-percent home projects is one of the biggest reasons we others. Two years ago, we faced one of growth range in 2016. are predicting stronger home improvement retail the worst droughts in decades, and this Of course, all this growth is predicated on eco- sales in the next two years. year will go down as one of the wettest. 200 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 nomic factors remaining similar to those we’ve Some headwinds to housing growth remain, After so much instability in the Source: NRHA/Hardware Retailing *Revised Downward seen over the past several years. The constant though. As millenials come of age, home own- weather, it’s difficult to imagine 2014 ping-ponging between manufactured government ership doesn’t hold the allure it once did, and will be any different, so our growth CAG 2012-2017 = 6.1% crises, general political instability abroad and the while aging baby boomers are staying in their prediction is based on that assump- 400 homes longer, this may not offset the slower tion. Should we experience favorable number of younger consumers entering the home- weather conditions throughout the CAG 2007-2012 = -1.4% $367.7 buying market. year, growth could be even stronger 350 $351.8 The silver lining to the home ownership para- than anticipated. Unfortunately, the Industry Sales Methodology $334.9 digm shift lies in the opportunities each sector opposite is also true. offers home improvement retailers. For more $312.9 300 $293.0 NRHA and Hardware Retailing take a large number of factors into account details into the activity within the housing sec- Retail Outlook $293.1 when determining overall sales estimates for the industry. tor, turn to Page 38. Throughout the recession, hardware $279.0 $273.9 stores fared generally better than both $253.1 We use a formula that incorporates information from NRHA’s Annual Cost Consumer Confidence home centers and lumber dealers. 250 $253.0 of Doing Business study, direct retailer research, the U.S. Department of Most consumers emerged from the recent Because much of hardware store sales $231.1 1 Commerce NAICS 444 sales reports and information from other research recession with a decidedly different view about are tied to smaller projects and non- 1 2007 2008 2009 2010 20 2012 outlets as the basis for our calculations. how they spend their hard-earned cash on home discretionary item sales, these retail- 200 2013 2014 2015 2016 2017 improvement projects. Gone are the days of ers weathered the market’s challenges Source: Home Improvement Research Institute (HIRI)/IHS Global Insights We then weigh this information against company reports from the industry’s pumping money into a home simply to drive its better than the other two store types, publicly traded corporations, wholesaler sales figures and additional data resale value. Today’s post-recessionary consumer which are more closely tied to big- 400 CAG 2007-2012 = -1.7% from retail and industry partners. All of this data is combined to calculate is more likely to invest in home improvement ticket projects. our industry sales estimates and forecasts. projects of a smaller, more personal scale with an However, as the housing market eye toward increasing comfort more than equity. begins to rebound, we see stronger 350 NRHA and Hardware Retailing’s industry estimates consider sales That being said, home improvement was one growth opportunities ahead for home from all retailers whose primary business is selling home improvement of the few bright spots in 2013 when it came to centers and lumber dealers. Hard- $320.8 products. We do not include sales from operations that do not utilize a discretionary spending. While consumers were ware stores will continue to see solid 300 $303.4 $294.4 retail sales model or service only other companies. reluctant to open their wallets for purchases growth over the short term, as most $278.9 $267.4 at department stores and discounters, home consumers still are shying away from $266.7 Our estimates include sales through the industry’s hardware stores, improvement stores fared much better. larger projects; however, we look for 250 home centers, big-box outlets and retail lumberyards. We look for consumer confidence to continue home centers and lumber dealers to to gain momentum in 2014 and help drive home both be buoyed by the improvements 2007 2008 2009 2010 2011 improvement purchases. However, consumers are in the housing market. 200 2012 Source: U.S. Census Bureau, NAICS 444, seasonally adjusted 22 HARDWARE RETAILING | December 2013 www.hardwareretailing.com www.hardwareretailing.com December 2013 | HARDWARE RETAILING 23 MARKET CHAIN RESULTS MEASURE: 2013 THE INDUSTry’s AnnuAL REPORT CHAIN RESULTS Market Share Profile 2013 2012-2017 2012-2017 Top Chains Industry Share Top Chains Combined Performance DIY Sales By Month Sales By Type of Store Outlets Sales No. of Stores Net Sales (as % of total (as % of total No. of Stores Sales in Billions Sales in Billions (in billions) industry) industry) Hardware Stores $37.10 Hardware Stores 19,920 January $25.32 2008 48.3% 13.7% 2008 $142.1 5,532 Home Centers $184.50 Home Centers 9,720 February $25.44 2012 Lumberyards $71.20 2012 Lumberyards 9,750 2009 48.2% 13.4% 2009 $130.7 5,318 TOTAL 39,390 March $25.24 TOTAL $292.8 2010 47.2% 14.4% 2010 $131.3 5,725 April $26.04 Hardware Stores $38.30 Hardware Stores 19,900 2011 49.1% 13.8% 2011 $136.7 5,441 Home Centers $194.20 Home Centers 9,710 May $26.33 2012 50.0% 14.7% 2012 $146.4 5,780 2013 Lumberyards $75.80 2013 Lumberyards 9,725 June $26.01 TOTAL $308.3 TOTAL 39,335 2008-2012 2008-2012 1.7% 1% Compound Annual 0.75% 1.1% Percentage Point Change July $26.47 Growth Rate Hardware Stores $40.90 Hardware Stores 19,850 August $26.40 Home Centers $203.40 Home Centers 9,720 Top Chains Individual Performance September (p) $26.42 2014 Lumberyards $80.60 2014 Lumberyards 9,725 TOTAL 39,295 2012 Sales Source: U.S.
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