After a first quarter where optimism and market outlook were significantly impacted by the early stages of the coronavirus (COVID-19) pandemic, the Q2 2020 Kitchen & Bath Market Index (KBMI) shows more positive market outlooks for industry professionals amid declining revenues and sales. The National Kitchen & Bath Association (NKBA) KBMI revealed kitchen and bath professionals rated the current health of the industry as 5.9 out of 10, up significantly from the 4.1 rating for the first quarter.
According to the KBMI, demand and revenues declined for industry professionals during the second quarter. The kitchen and bath industry contracted in the second quarter, with the KBMI reporting a 44.2 out of 100, with 50 representing flat sales growth. The second quarter KBMI is more than 30% lower than last year's rating of 65.4 but is 10% higher than the first quarter rating of 41.0. The industry rates economic uncertainty, a U.S. economic recession, fear of a second wave of COVID-19, lack of consumer confidence, and stock market volatility as major underlying market challenges.
“Our members are feeling more optimistic about their business and the state of the kitchen and bath industry than they were last quarter,” Bill Darcy, CEO of the NKBA, said in a news release. “While there is an expected revenue decline for 2020, the industry is still valued at $130.8 billion, and as homeowners feel more comfortable returning to showrooms and resuming work in their homes, we’re well-positioned for a steady recovery and eventual rebound in the long run.”
While the impact of COVID-19 and the corresponding economic fallout on the industry remain obvious, NKBA members cite a pent-up demand for home improvement work. The industry now expects full-year's sales to decline by just 4.4% in 2020, after projections in the first quarter that sales would drop by 13.7%. According to the KBMI, the industry is considerably more positive on future market conditions (61.9 index reading out of 100) than current market conditions (31.3 index reading out of 100).
All segments of the industry reported COVID-19 had less of an impact on their business in the second quarter of 2020 compared with the first quarter. Businesses rated COVID-19's impact as 6.4 out of 10 in the second quarter, down significantly from 8.1 in the first quarter. Designers reported being most impacted by the virus, while retailers were least impacted, likely due to the surge in DIY projects benefiting big-box retailers.
More than a quarter of designers said demand was significantly lower than before the pandemic, although nearly one-third of design firms said clients are requesting more proposals for future projects as a result of sheltering-in-place. Manufacturers in the kitchen and bath industry reported the impact of furloughs was less severe in the second quarter than the first quarter and, on average, manufacturers reported running at 72% capacity. More than half of building and construction firms reported more than 80% of their active projects are on schedule, more than a 300% improvement from the first quarter. While project delays remain a concern, 80% of postponed projects for building and construction firms are expected to resume by the end of the calendar year.
Nearly half of the responding companies reported a major change in the type of products and services requested by clients. Nearly all reported an increased in DIY project assistance as homeowners look to complete projects themselves to save money, turning to small-scale projects.
Nearly 60% of NKBA members reported experiencing supply chain disruptions, including longer lead times, slowing production, and shipping delays. Businesses in the flooring, appliance, and cabinet sectors were most impacted by these disruptions.
More than three-quarters of respondents noted customer demand for lower prices as consumers face their own economic uncertainty as a result of the pandemic. The average homeowner is also looking for more budget-friendly options and lowering the price point of projects of all sizes, according to the KBMI. The report said this shift may be partially attributed to older customers delaying projects due to COVID-19 concerns and more millennials with smaller budgets completing renovation projects.
NKBA members reported a shift in demands from clients in the second quarter towards wellness products in response to COVID-19. No-touch appliances, anti-microbial materials, and outdoor kitchens are gaining popularity as homeowners are thinking long-term about using their kitchens and bathrooms with health and sanitation top of mind.
