While we have all grown somewhat hardened to hearing terms such as “uncertainty” and “unprecedented” over the past two years, as we close the books on 2022, we are still left trying to accurately define what the home improvement market is going through and how to measure its path. Considering in decades-high inflation, fluctuations in sales through the pro versus consumer markets, and a supply chain that is still struggling to recover there remain a number of questions as we wrap up last year and head into 2023.
When we look back to the beginning of year 2022, home improvement retailers were coming off of two of the strongest years the North American Hardware and Paint Association (NHPA) has ever recorded. Due to the block down caused by Covid-19, the two-year period of 2020-2021 saw consumers embrace investment in their homes and home improvement projects like never before. This pandemic-fueled spending propelled the U.S. home improvement industry to a two-year stacked increase of 30% at least. In the 2022 Market Measure Report, NHPA estimated that the size of the U.S. home improvement retailing market hit nearly $527 billion in 2021.
Those consumer-led investments contributed to the remarkable growth in the industry, which not only gave the independent channel an increase in its overall market share, but also saw independent retailers posting record-setting profits. According to the 2022 Cost of Doing Business Study, independent home improvement retailers’ net profits reached as much as three times what we would see in a typical year in 2021. For example, in 2021, the average hardware store saw net operating profits of approximately 9.1% of sales—this is much higher than a typical average of about 3%.
Despite posting strong sales and profitability numbers, however, as 2021 wound down, most home improvement retailers were not optimistic about the prospects of additional growth in 2022.
Much of this conservative outlook was being driven by the major uncertainties the industry was facing in the supply chain and the economy situation, along with a pressing pessimism that there was no way the pace of the previous 24 months could persist.
Entering 2022, additional external factors gave rise to even more concerns about how the industry would perform. From rising gas prices, decades-high inflation, interest rate hikes, war in Eastern Europe between Russia and Ukraine and the continuing specter of COVID-19, it felt like everyone was bracing for a crash not seen since the Great Recession.
Post time: May-16-2023