Hearth & Home February 2017

2016 December Business Climate


December Sales

In early January, Hearth & Home faxed a survey to 2,500 specialty retailers of hearth, barbecue and patio products, asking them to compare December 2016 sales to December 2015. The accompanying charts and selected comments are from the 197 useable returns.


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Weather Report

Consumer Confidence

Stock Watch


RETAILER SALES – U.S. AND CANADA
December 2016 vs. December 2015

In December, 43% of Hearth dealers were up, followed by 38% of Spa dealers. Only 12% of Patio dealers were up, and 22% of Barbecue dealers.


13 MONTH YEAR-OVER-YEAR RETAILER SALES
December 2015 Through December 2016

December certainly wasn’t a great month: Patio products were down 5% from the previous year’s sales; Barbecue and Spa sales were both down 2%, and Hearth products were up a less-than-stellar 1%.


Retailer Comments

Northeast

Maine: (Hearth, Patio, BBQ) “December product sales were down slightly over last year. Income from our service department was up 60%; it’s sometimes a challenge to manage but something to count on. All hearth products need service!”

New York: (Hearth, Patio, BBQ, Spas) “Surprisingly good quality traffic.”

New York: (Hearth) “We always see a little dip around the holidays.”

New York: (Hearth, Patio, BBQ) “UGGGGHHHH!”

Pennsylvania: (Hearth, BBQ) “Traffic has increased and pricing is more competitive. Total sales are down from last year.”

Pennsylvania: (Hearth) “For the calendar year 2016 hearth was down 10%. Only wood stoves and gas fireplaces increased.”

Pennsylvania: (Hearth, Patio, Spas) “Very slow. We are in Christmas and will be setting up for Patio for March 1.”

Pennsylvania: (Hearth, Patio, BBQ) “Finally have some cold weather. Service has been very strong for people that waited until the last minute. A lot of traffic in store for gas, pellet and wood stoves.”

Pennsylvania: (Hearth, Spas) “Waiting for the Trump plan to help the economy. We were going to close if the other candidate won.”

Vermont: (Hearth, BBQ) “The sales were up mostly because of the Vermont Woodstove Recycle Program. It really created a lot of interest the last three weeks of the year, and should make for a good first quarter of 2017.”


Weather Report

For the following weather charts, the numbers for each state reflect the temperature ranking for the period since records began in 1895.

For the month of December, temperatures from the Pacific Northwest to portions of the Midwest ranged from Normal to Record Coldest (Oregon), while states from Arizona, across the South and up to New England experienced Above Normal to Much Above Normal (Florida).

With but two exceptions (Oregon and Washington), the entire country experienced Above Normal to Much Above Normal temperatures for the three-month period October – December, with New Mexico and Texas setting records for the Record Warmest temperature since 1895.

The year 2016 was the second warmest year since record-keeping began, with every state posting Much Above Normal temperatures, and Georgia setting a Record Warmest mark.

For most of the states, December precipitation was at Below Normal, Near Normal or Above Normal levels. However, five states did post Much Above Normal precipitation – Nevada, Wyoming, South Dakota, North Dakota and Minnesota.

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South

Arkansas: (Hearth) “December was not a bad retail month, but too late to make 2016 a good year.”

Florida: (Patio) “It was very slow this December, but we had three great months leading up to December.”

Florida: (Patio) “Overall we’re up 10% for the year.”

Texas: (Hearth, Patio, BBQ) “Pellet grill sales were up. Gas grill sales were down.”

Texas: (Hearth, Patio, BBQ) “The Holiday shopping season saw the most positive change in 2016, helping to make the fourth quarter the best this year. 2017 is off to a good start; let’s hope it continues.”

Virginia: (Hearth, BBQ) “Finally a month in which we stayed busy.”

Midwest

Illinois: (Hearth) “December was a good month for us.”

Michigan: (Spas) “December sales were flat with 2015. We didn’t make up for October or November like I thought we would. Store traffic was down 30%. Our closing ratio was extremely high, there were just fewer people to talk to. It appears that the holiday excitement was not there this year. Contracts for delivery and installs from web retailers are up from 2015 in double digits. Service seems to be extremely good. It actually makes up for big-ticket sales that didn’t happen. 2016 was just a good year. A better fourth quarter would have made it a great year. We’re looking with starry eyes at 2017 sales. We hope it’s great for everyone.”

Minnesota: (Hearth, BBQ) “A very long and warm Fall hurt us badly. When we’re moving into late-season territory, it becomes easier for homeowners to put off until next year that fireplace or stove project.”

Ohio: (Hearth, BBQ) “Slow winter start. Hot – cold – hot – cold.”

Ohio: (Hearth, BBQ) “Hearth accessory sales (tool sets, screens, etc.) are becoming so hard to forecast. We have too much leftover stock collecting dust. Between online sales and mass merchant junk, we’re really struggling with where our niche can be. There will be a lot of research done before next season to streamline this product category.”

Wisconsin: (Hearth, BBQ) “It was a busy month doing installations, selling large ticket items. We didn’t sell as many accessory items as in previous years.”

Wisconsin: (Hearth, Patio, BBQ, Spas) “December sales numbers are down because we delayed billing into January to avoid as much profit at year-end. Overall sales were good for 2016. Up 17% over 2015.”


Consumer Confidence

The Consumer Confidence Index, which had increased considerably in November, posted another gain in December. The Index now stands at 113.7 (1985=100), up from 109.4 in November.

“Consumer Confidence improved further in December, due solely to increasing expectations which hit a 13-year high (Dec. 2003, 107.4),” said Lynn Franco, director of Economic Indicators at The Conference Board. “The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices which reached a 13-year high, was most pronounced among older consumers.

“Consumers’ assessment of current conditions, which declined, still suggests that economic growth continued through the final months of 2016. Looking ahead to 2017, consumers’ continued optimism will depend on whether or not their expectations are realized.”

A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth. The Index is based on a probability-design random sample conducted for The Conference Board by The Nielsen Company.

The Index is based on a probability-design random sample conducted for The Conference Board by The Nielsen Company.

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West

California: (Hearth, Patio, BBQ, Spas) “Good year all around; looking forward to 2017.”

Colorado: (Hearth, BBQ) “The $300 tax credit ended on December 31 and ALA (American Lung Association) voucher sales kept us busy until the end of December. All things considered, it’s looking strong for spring.”

Montana: (Hearth, BBQ) “It was a very cold December with lots of snow. Wheat prices are down. Cattle prices are down.”

Oregon: (Hearth, BBQ) “December was a month of incredible sales – we continue to be blown away at how many jobs are coming in. Our sales team is working at maximizing time and energy to handle the bandwidth of current demand.”

Canada

Ontario: (BBQ) “Had a great December. Warm weather helped a lot.”

Ontario: (Hearth, BBQ) “Booked into mid-January for fireplace installations. A nice problem to have.”

Ontario: (Hearth, Patio, BBQ, Spas) “Consumers exhibit lots of hesitation on purchasing larger items.”


Stock Watch

COMPANY – EXCHANGE SYMBOL 52 WEEK Week Ending % CHANGE MARKET CAPITALIZATION
    High Low 02-Dec-16 30-Dec-16 4 WEEK 26 WEEK 52 WEEK ($000,000)
HNI Corporation (a) HNI 56.96 29.84 52.19 55.92 7.1% 19.8% 55.1% $2,490.0
Pool Corporation (b) POOL 107.98 72.41 99.86 104.34 4.5% 9.8% 29.2% $4,310.0
Rentech (b)(e) RTK 4.15 1.42 1.50 2.48 65.3% -2.4% --29.5%     $57.5
Restoration Hardware Holdings (a) RH 80.52 24.75 34.76 29.95 -13.8% -0.2% -62.3% $1,250.0
Wayfair, Inc. (a) W 49.34 27.60 37.11 35.05 -5.6% -7.9% -26.4% $3,000.0

(a) = New York Stock Exchange
(b) = NASDAQ
(e) = Rentech is the parent company of New England Wood Pellet, which is the parent company of Allegheny Pellet.

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