Do It Best Hardware
Home improvement engine still hot: decor, do-it-for-me could each see banner years in '04 - Hardware - trendsDebbie Howell
Strength of the home improvement market has been one of the bright spots in retailing this past year as other segments floundered through a tough economy. This pattern of success should continue next year as well, aided by favorable factors that include a strong housing market and rising interest in home-based activities.
Even with last year's slow-to-rebound economy, the housing market stayed strong, boosted by record-low interest rates. And with mortgage rates expected to only rise slightly in 2004, this positive trend should persist.
A report by the Home Improvement Research Institute and Global Insight forecasts sales of home improvement products will grow 4% to $220.4 billion next year. This figure includes professional and consumer sales in hardware and lawn & garden categories minus appliances, home furnishings, carpeting and indoor plants. That's a slight decline from the 6.8% gain projected this year, but healthy nevertheless.
Performance of the two largest specialists--The Home Depot and Lowe's--provides the best barometer of this market. While comparable-store sales were flat for Depot in 2002, comps at Lowe's grew 5.6% that year. Through the first three quarters of this year, comps have grown, up 6.5% for Lowe's and 4.2% at Depot.
Both chains have reported strong sales across the board in most merchandise categories, with Lowe's calling attention to appliances, cabinets, flooring, home organization, outdoor power equipment, paint, rough plumbing and walls and windows as some of the biggest sales gainers in its annual report for 2002.
The cocooning phenomena that took place following the terrorist attacks of 2001 is still impacting shopper behavior, with investment in the home a priority. Products that make the home into a comfortable refuge are popular, including decor-related items, such as paint, wall coverings and upscale spa-type bathrooms.
Outdoor living is another category that's thriving. Homeowners should continue to ramp up spending on decor-related items, such as yard art, outdoor lighting and water garden features next year. In a related category, sales of products for outdoor entertaining, such as grills, patio furniture, hot tubs, pools and outdoor heaters or fire pits are also expected to surge, trending increasingly more upscale in design.
Driving many of these purchasing decisions is the female homeowner, ignored in years past but finally getting recognized. Both Lowe's and The Home Depot are adding more decor-related categories and improving their merchandising to appeal to women, a group that makes up about half of their shopper base. This means categories such as decor paint, wall coverings, rugs, accent furniture, cleaning products and storage should be strong sellers in 2004 and beyond.
Meanwhile, products targeting serious DIYers of both sexes have become a focus. These new weekend warriors have become more discriminating and demanding in the tools they use, fueling a strong market for workshop organization systems and high-tech tools, such as circular saws with laser cutting guides.
Recognizing that not everyone is willing to tackle a project, however, Lowe's and Depot are expanding installed services. Both have reported strong revenue gains.
One potential weak spot in the home improvement market might be the upscale segment. Expo Design Center and The Great Indoors didn't fare well in profitability during the recent recession, but that could change if spending rebounds in 2004. Sears shuttered three Great Indoors units earlier this year and converted a fourth to an outlet format while remaining loyal to the concept's viability.
Broadline retailers such as Kmart and Sears have scaled back some hardware categories. Wal-Mart, however, remains firmly committed to the categories of hardware and lawn & garden with a strong competitive advantage based on store count and low prices.
Despite these changes in the retail landscape, home improvement remains one of the few standout hard-lines categories destined to repeat its booming sales history.
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