After Weathering Persistent Challenges, K&B Industry Pros Express Confidence About the Year Ahead and Plan for Increased Demand
By NKBA Editorial Staff
The kitchen and bath industry continued to demonstrate remarkable resilience during the final quarter of 2023, according to the Q4 2023 NKBA/John Burns Kitchen & Bath Market Index (KBMI) report. The overall stability of the market, combined with some key indicators of early growth, suggest there is reason for considerable optimism, especially about the potential for significant growth in Q3 and Q4 this year.
The survey of more than 470 K&B industry professionals nationwide suggests that many are already planning for increased demand later in the year, including boosting their investments in marketing efforts and initiatives that will help them recruit skilled labor.
Among the key insights emerging from the Q4 2023 KBMI:
Stability at the Close of 2023, with Signs of Growth
The KBMI Index, a key indicator of the K&B market, rated 53 on a 100-point scale, nearly unchanged from the previous quarter. Business conditions remained resilient. Manufacturing segment sales – often a harbinger of growth in other K&B categories – increased, as did retail segment sales.
Indications of an Inflection Point
Kitchen and bath professionals in all four surveyed categories – design, building and construction, retail sales and manufacturing – said they expect conditions to improve early in 2024, signaling that the industry is at or nearing an inflection point. In the near term, higher end, “quality first” projects with larger scopes are expected to be an important driver of growth. High end/luxury project lead growth improved in Q4 2023.
Positive Signs Across Sectors
The retail sales and manufacturing sectors experienced sales growth during Q4 and expect similarly positive revenue growth in 2024. Meanwhile, design and building and construction firms are optimistic about opportunities for growth and reaping the benefits of recent drawdowns. Design firms expect an average 5.9 percent increase in sales in 2024; building and construction firms report healthy anticipated 2024 growth of 8.2 percent. Many (44 percent) firms say they will increase marketing budgets to get ahead of this forecasted rise in demand.
The Continued Power of Pricing
As the cost of goods has declined, markups from suppliers have started to align more closely with broad measures of inflation. Price increases are approximately half of what they were a year ago. Overall, K&B firms expect to increase prices by an average of 3.2 percent in 2024. Building and construction firms expect their pricing to increase more than their counterparts in retail and manufacturing. Stabilizing material prices are key to improved margins for K&B firms across the board.
Navigating Ongoing Challenges
In addition to contending with macroeconomic challenges, industry professionals highlighted several practical challenges they are working to overcome.
- Labor Shortages – Labor constraints have delayed projects — most notably in the Midwestern U.S. — and are moderating expansion of activity into the new year. To address this, 43 percent of surveyed NKBA firms said they are actively investing in solutions to secure skilled labor, including networking and training programs and new partnerships.
- Cost Inflation – Fears of additional cost inflation remained a major source of concern.
- Interest Rates – Persistently high interest rates continued to hamper borrowing and spending, though they are expected to decrease in 2024.
- Competition and Consolidation – Nearly half of surveyed firms say they are experiencing increasing competitive pressures, especially manufacturers and suppliers. More than a quarter say they are seeing increased consolidation pressures in their sector.
- Presidential Election Year – Political uncertainty has always been a risk factor for growth in the K&B industry. It will be even more important to keep a close eye on incremental market shifts throughout this election year.
“The kitchen and bath industry has been confronted with enormous economic hurdles over the past two years, a particularly challenging period dominated by rising interest rates, inflated costs and an incredibly tight labor market,” said Bill Darcy, Global President & CEO of NKBA | KBIS. “The stable end to 2023 and promising signs of growth in key areas — as well as the expected easing of interest rates in 2024 — inspire real optimism that we are at or near an inflection point.”
“With high-end renovations serving as an important early driver, we expect to see revenue growth ramp up as the year progresses,” added Darcy. “The professionals we surveyed indicate that they are working hard to overcome lingering obstacles and position themselves to take advantage of opportunities as conditions increasingly become more favorable.”
Download and read the full Q4 2023 NKBA Kitchen & Bath Market Index (KBMI) report here.
