CHICAGO — 2023 is shaping up to be far more of a bumpy, unsettled ride than that of 2022, with kitchen and bath design firms being forced to navigate a plethora of challenges, including an anticipated housing and remodeling slowdown, higher costs for products and raw materials, lingering supply chain disruptions, labor availability issues and widespread consumer uncertainty.
That’s the consensus of a nationwide survey of nearly 400 kitchen and bath dealers, remodelers and designers in businesses across the U.S. Results of the online survey, conducted in December by Kitchen & Bath Design News, mirrored those of similar industry polls, as well as trade-association forecasts for new construction, home sales and residential remodeling.
Asked how concerned they are that current market conditions will impact business operations and profits in 2023, roughly 61% of surveyed firms told KBDN that they’re either “extremely concerned” (27%) or “very concerned” (34%). Another 34% reported that they’re “somewhat concerned.” In contrast, less than 5% said that they’re either “not very concerned” or “not at all concerned.”
This widespread feeling of uncertainty and concern is reflected in 2023 revenue projections. For example, while only 29% of those surveyed said they expect their company’s revenue to increase in 2023 compared to 2022, a significant percentage (30.2%) said they expect 2023 revenue to decline, while the majority (40.7%) anticipate that 2023 revenue will remain no better than about the same this year as in 2022.
Revenue gains are anticipated for both new and remodeled kitchens and baths, although dealers and designers are far more bullish about revenue growth from kitchens (62.9%) than they are from baths (25.6%). Interestingly, roughly 11.5% see 2023 growth deriving from other-room projects such as home offices, wine bars and laundry areas – no surprise given the impact of COVID-19 on remote work and other living arrangements.
But while revenue may increase for some firms in 2023, the rate of growth has reportedly tapered off and is expected to cool even more in the months ahead, as inflation scythes through the economy, housing affordability remains at historically low levels, and product/labor availability continues to hamstring design and remodeling firms.
Specifically, among those firms expecting 2023 revenue growth, roughly 66% believe the anticipated increase will be at a slower pace than it was in 2022. By comparison, only about 34% believe the anticipated revenue increase this year will be at the same pace as in 2022.
Design firms are evenly split over the projected impact of 2023 business conditions on profit margins, with 25.7% reporting they expect 2023 margins to increase, the same number anticipating a decline, and the balance (49%) saying they expect margins to remain about the same this year as in 2022.
Dealers and designers also report a modest decline in sales leads and project requests compared to the same time a year ago. Specifically, about 41% of survey participants report that their current sales leads are either “somewhat lower” or “much lower” than they were at the same time a year ago, while roughly 34% report that current sales leads are either “somewhat higher” or “much higher,” and about 25% say their leads are about the same as a year ago, when a confluence of COVID-related demand, growth in savings, equity appreciation and larger, more-multi-functional homes were a focus of consumer spending.