February 26, 2021
Renovating a home can be as simple as updating sink fixtures or as large as a complete renovation or adding another floor to the house. In 2019, Americans spent approximately $407 billion on home improvement projects, according to Statista. This sum increased significantly on a strong housing market, rising home valuations and work-at-home consumers with a bit more time on their hands.
Porch.com, a Seattle-based home improvement website, reported that its 2020 survey found the average homeowner spent $17,140 on improvements during the pandemic. Some 76% of U.S. homeowners reported doing at least one home improvement project since the start of the COVID pandemic, and 78% said they plan to start a home improvement project in the next 12 months.
While consumers remain focused on improving their homes (which now often doubles full-time as a workplace, recreation and education facility), plenty of publicly traded companies are experiencing higher demand for their products and services. This demand goes beyond such usual suspects as The Home Depot, Inc. (Tii:HD) and Lowe’s Companies, Inc. (Tii:LOW) – the retail giants in this space. Let’s take a look at a few of the other players riding the home improvement wave.
Painting sits at the top of the priority list for homeowners looking to spruce up their domicile, according to a 2020 survey by HouseMethod.com, a homeownership-focused news site. A fresh coat of paint (13.4% of respondents) narrowly edged out flooring (13.3%) as the highest priority among those surveyed. This trend benefits paint suppliers like PPG Industries, Inc. (Tii:PPG), whose shares have increased nearly 32% over the last 12 months. PPG will soon expand its offerings, having recently acquired VersaFlex, a manufacturer of polyurea, epoxy and polyurethane coatings for water and wastewater infrastructure, flooring, transportation infrastructure, and industrial applications that generated roughly $70 million last year.
With flooring projects coming in at a close second as the highest-priority home improvement project, it’s no surprise that Floor & Decor Holdings, Inc. (Tii:FND) continues to report strong sales. Net sales increased 31.4% from the company’s third quarter of fiscal 2019 to $684.8 million on an 18.4% rise in comparable-store sales. To get ahead of that demand, the flooring provider opened three new warehouse stores and a design center during the quarter and plans to open a total of 13 new warehouse stores in fiscal 2021.
One of the nation’s leading specialty retailers of hard-surface flooring with more than 400 stores across the country, LL Flooring (Tii:LL) has also benefited from the home improvement wave. Its share price climbed approximately 160% over the last 12 months as a result and third-quarter sales increased 12.1% to $296 million. Shareholders will learn whether this upward trend continues when the flooring provider reports fourth quarter and full-year 2020 financial results on March 2.
Kitchen cabinetry is also a popular home improvement project. Digital marketplace HomeAdvisor estimates a typical 10-by-10-foot kitchen could run anywhere from $2,000-$24,000. As a result, MasterBrands Cabinets, a brand under the Fortune Brands Home & Security, Inc. (Tii:FBHS) umbrella, experienced a bump in demand last quarter. The home fixtures and hardware manufacturer reported an 11% increase in fourth-quarter cabinetry sales, which totaled $655.5 million. The company attributed the strong results to growth across products at all price points.
Shares of Masco Corporation (Tii:MAS) are up 31% for the last 12 months as robust demand in the home improvement market contributed to a 13% increase in fourth-quarter net sales for the home improvement and construction products manufacturer. In anticipation of continued demand and to fuel its product pipeline, the company recently announced it launched a $50 million venture capital fund. This fund will invest in startups strategically relevant to Masco’s brands – Behr paint, Delta and Hansgrohe faucets and fixtures, and Hot Spring spas.
The Joint Center for Housing Studies of Harvard University projects an uptick in year-over-year growth of home renovation and repair expenditure from 3.5% at the close of 2020 to 3.8% by year-end 2021. This suggests that a healthy housing market, a rise in home equity and other factors would ensure robust demand for home improvement projects throughout the year – creating potential opportunities for those looking to invest in this trend.
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