The Index is at its lowest since the 2020’s COVID-led recession, but the K&B industry continues to be fundamentally strong.
By Elisa Fernández-Arias
NKBA released its Q2 2023 Kitchen & Bath Market Index (KBMI), a quarterly report that examines current/future kitchen and bath industry demand as well as issues and challenges facing industry professionals. In the face of unpredictable economic conditions, this report is a valuable resource that provides historical context and insights that can help businesses make future decisions.
Key takeaways from NKBA’s recent KBMI report include:
- The kitchen and bath industry slowed in Q2 2023 as higher interest rates and product/ material prices deterred many homeowners from spending money on their home. The KBMI Index rating is now 56 out of 100, down from 62 reported in Q1 and at the lowest level since the COVID-led recession in 2020. A rating above 50 still indicates industry growth, however, the growth that the industry experienced in Q2 was driven by price only.
- All four segments are impacted by softening demand, but not to the same degree. Kitchen and bath activity slowed in Q2, especially among retailers and manufacturers, while designers and remodelers fared better due in part to backlogs. The ratings for each segment’s current market conditions are: Manufacturing, 44.7; Retail Sales, 44.8; Building and Construction, 50.9; and Design, 51.5.
- K&B pros expect 4.9 percent full-year sales growth for 2023, based on their expectation of raising prices by about 7 percent. This indicates that any growth will be nominal—from price increases alone—while project/order volumes will be flat or negative for 2023. Once again, the sentiment for this measure varies widely by segment. K&B builders/remodelers are most optimistic, reporting high single-digit revenue expectations for 2023 (9.6 percent), while retailers are expecting flat-to-negative growth of -0.4 percent.
- The K&B industry remains fundamentally strong despite the cooldown in demand. Solid industry fundamentals are evidenced by the fact that pros rate their segment as “strong” (65.2 out of 100) and, perhaps more importantly, they continue to pass off rising costs to maintain margins. The majority of KBMI respondents (86 percent) cite flat or higher margins, up from 83 percent in Q1.
- The 2023 outlook is still positive, fueled by pent-up consumer demand for remodeling. Fortunately, current market conditions have not dampened optimism for 2024. Half of all K&B pros are expecting higher revenues next year. Manufacturers are the most optimistic, with 60 percent predicting increased revenue. Retailers, in contrast, remain more concerned, with only 38 percent expecting revenues to rise next year.
- Worries about a recession are fading as inflation recedes, but the industry is now focusing on a structural problem that is more concerning: labor scarcity. The availability and cost of skilled labor is now the top concern of K&B firms, especially when it comes to meeting the approaching boom in demand. Firms have reported addressing this issue by maintaining staffing.
The Q2 2023 KBMI report includes more data by industry segment – design, manufacturing, retail sales and building/construction – than ever before. To download the full report, click here.