Cost inflation, longer lead times and labor/material shortages continued to be flags for the industry
The National Kitchen & Bath Association (NKBA) – the world’s leading non-profit trade association for the kitchen and bath industry providing tools, research, certification, and events to thousands of professionals – has released its final Kitchen & Bath Market Index (KBMI) for 2021. The quarterly report, which is aimed at measuring the health of the kitchen and bath industry, found that the industry ended the year on a positive note.
“We’re extremely encouraged by these results as they confirm that the industry remains optimistic about its future – with the sector remaining nimble and creative in order to continue to be successful in the face of continuing challenges,” said Bill Darcy, Chief Executive Officer, NKBA. “While we’re keeping our eye on a few things such as ongoing supply chain issues and pricing inflation, the fundamentals for the industry remain strong including continued consumer demand with strong home values and equity levels.”
The remodeling industry has been the beneficiary of a seller’s home market, with homeowners leveraging their home’s market value to renovate spaces within their home to both increase value as well as live-ability and flexibility. In Q4, all kitchen and bath segments reported double-digit sales growth YOY, as well as a solid quarter-over-quarter performance with an increase of 8.1% in total spending. While challenges persist, some of these may be helping the industry see long-term growth by spreading out projects into 2022. For example, the report found that 58% of designer respondents reported backlogs of over 3+ months, with a further 23% experiencing a backup of more than 6+ months. This has helped lead industry professionals to project 13.1% annual growth in 2022.
However, while there is a silver lining, the issues from 2021 continue to persist in the background. Once again, industry members rated supply chain disruption, material costs, labor availability and inflation as their top concerns. An overwhelming 96% of businesses in the kitchen and bath industry have reported supply chain issues affecting their bottom line, while 28% have given material shortages a maximum rating of 10. These ratings indicate a severe impact on their day-to-day business.
“Virtually every sector of the economy has been affected by the ongoing supply chain, material and labor issues, with the kitchen and bath industry being no exception. The report showed that the price of industry products has increased across the board by double-digits, underscoring the cost pressure our sector is under. However, the kitchen and bath industry continues to be resilient in the face of this adversity, setting themselves up for another year of growth.” continued Darcy.
Among the report’s key findings:
- Year Ends on a High Note: 2021 saw the industry continue to weather a series of challenges and capitalize on high consumer demand and home equity. In the Q4 KBMI, professionals rated the industry an 82.1 out of 100. This is the second-highest recorded score since the report’s inception, reflecting the industry’s positive sentiment due in part to the healthy growth it experienced throughout the quarter. The kitchen and bath industry also finished 2021 with a solid health rating of 7.9 out of 10, based in part on the continued high consumer demand for remodeling projects.
- Unrelenting Supply Chain and Material Shortages: As the global supply chain remains slow, consumers and businesses throughout the kitchen and bath industry continue to feel the effects. With industry members not expecting an easing of the challenges any time soon, businesses and consumers alike are becoming brand agnostic, turning to second or third choice brands in order to find product for their projects. As the crisis lingers, more are feeling the effects on their business, with 45% of respondents stating that the supply chain was having a significant or very significant negative impact on their sales. Supply chain issues have been compounded by material shortages, leaving 98% of retailers saying their price points have been raised by vendors. This creates an increase in expense for consumers and can potentially lead to a dampening of their appetite for renovations.
- Forecasted 2022 Growth: The Q4 KBMI found that industry professionals feel more confident about the new year compared to previous quarters, revising the 2022 projected growth to 9.4%, up .3%. While the survey found that kitchen and bath industry professionals are cautious about the future, giving the overall sector a 76.6 on a 100-point scale, members remain confident in Q1 2022 sales expectations. They project increased sales growth in the new year, with the main contributor being consumer flexibility with project materials and timelines remaining steady.
To learn more, visit here.