Homebuilders across the nation are busy answering mending
demand as consumers put more than six years of housing turmoil
behind them and start to nest again.
Under those shiny new granite countertops are shiny new
dishwashers and other appliances from the likes ofWhirlpool (
). On top of those counters are gadgets such as the home
soda-making machine bySodaStream (
) and juicers out of theWilliams-Sonoma (
Consumers have clutched their wallets tightly for years,
worried about a shaky economy. More recently, fears of tumbling
over the so-called fiscal cliff kept at bay the urge to
But the economy is slowly improving. A debt deal in Washington
and a resurgent housing market have helped boost a slew of
appliance, home furnishings and related companies.
But the need to fill up new houses is not the only factor
driving the group. Consumers are coming out of their shells.
Homeowners have put off splurges for so long, many are just ready
"The momentum that's starting to build in the economy has
really opened up availability for the consumers -- who have
actually had a higher percentage of savings over the last few
years -- to start being healthy consumers again," Martin
Franklin, chairman of the consumer products giantJarden (
), told IBD.
Jarden, which makes Sunbeam kitchen mixers and other household
goods, is the top-ranked company in IBD's Consumer
Products-Specialty group. Whirlpool and SodaStream are in the
Household- Appliances/Wares group.
Williams-Sonoma, which owns Pottery Barn and other retail
chains, is in the Retail-Home Furnishings group.
The scattered and strengthening stocks, and industry groups
map out the edges of the improving economy and housing market.
Whirlpool's revenue continued to decline in the third quarter,
but its earnings have vaulted higher in the past three
Its household appliances group, ranked No. 23 on Friday, has
held a strong position for the past several months.
Home furnishings retailers have flitted in and out of the top
50 industries over the same period, and currently rank No. 81.
The broad-based specialty consumer products group, which includes
-- in addition to Jarden -- makers of everything from baby
monitors to kitty litter, lagged at a No. 101 ranking Friday.
Small Appliances Are Big Sellers
Consumers collectively spent $457.8 billion on all types of
appliances in 2007, according to Euromonitor International. The
recession took hold in December of that year and, accompanied by
massive waves of home foreclosures, put an end to the party.
But spending on appliances fell less than 5%, to a low of
$441.7 billion, in 2009. In 2012, it rebounded to $468 billion --
2% above 2007 levels.
SodaStream is an IBD 50 stock with a top-tier 99 Composite
Rating. The Israel-based company is working to show that its
machines, which start at around $80, are more than just a fizzy
The company blew away third-quarter estimates and raised its
outlook for the year on strong sales in the U.S. More than half
its revenue last quarter came from the CO2 canister replacements
and flavor packs for making various drinks, showing consumers are
using and reusing the devices.
"The view that, at least in the U.S., consumer interest is a
fad that will fade ... is being proved wrong," Roth Capital
Partners analyst Anton Brenner wrote in a client note.
The company's CEO recently told IBD that it's
playing on Americans' eco-consciousness
. Americans on average go through about 2,000 bottles and cans a
year, the company says. Its pitch: One machine, and reusable
SodaStream bottles, can cut that waste way down.
Kailing Cai, Euromonitor's U.S research analyst, said smaller
kitchen appliances and less-costly home upgrades have shored up
many retailers' sales during the housing downturn.
"They're things that are accessible for most consumers. It's
much easier to do a new coat of paint, new dishes, new lighting
.. . than a whole new living-room set," she said.
If the rebound in homebuying and homebuilding continues, it
should contribute to bigger-ticket items, she said. Consumers who
put off replacing aging microwaves and balky dishwashers could
return to the market in 2013.
"While industry demand remains in many markets relatively
weak, we are optimistic about some growth that we're seeing,"
specifically the U.S. housing market, said Whirlpool CEO Jeff
Fettig during an Oct. 23 conference call.
Standard & Poor's estimates worldwide appliance demand
will rise at a low-single-digit rate this year, and will be
largely flat in the U.S. But Whirlpool -- the largest company in
the appliances group, holds a Composite Rating of 88. It has
received rising attention as earnings turned around in the past
two quarters from growth-based institutional investors, including
CGM Focus Fund, Fidelity's Magellan Fund and Vinik Asset
On the revenue side, appliance sales are getting some retail
support fromHome Depot (
). The home improvement giant is building out new appliance
showrooms that feature Whirlpool, as well as other major
But competition is picking up too. Samsung, locked in a fierce
smartphone battle withApple (AAPL), thinks it can become the
world's top kitchen appliance maker by 2015.
The Korea-based electronics maker unveiled some refrigerators
and other kitchen appliances loaded with screens and
technological gadgetry during last week's Consumer Electronics
Show in Las Vegas.
"I'm confident of Samsung becoming the world's top appliances
maker by 2015 with $18 billion sales, as we set up a very
well-structured framework for key products and moving step by
step to the goal, first starting with fridges," Yoon Boo-keun,
president of the division, told Reuters.
The costs of commodities like copper and steel that go into
appliances -- while moderating -- also continue to climb,
creating another potential head wind. With consumers still
skittish and competition fierce, S&P doesn't see appliance
manufacturers having the leverage to pass on those higher
Mass Marketing, Unique Tastes
In the houseware and furnishings sector,Bed Bath & Beyond
(BBBY) has the top market share in 2012, with 10.2%, according to
Euromonitor data. (The Netherlands-based cheap-chic haven Ikea
holds the No. 2 share.)
But Bed Bath & Beyond shares have struggled since
management warned investors of a pending earnings slowdown in
June. Earnings for the most recent quarter ended in November rose
8%. That was just above analysts' lowered expectations, but well
below the 28% gain in the same period a year ago.
TJX (TJX) -- which sells housewares out of its HomeGoods
stores, and discounted clothing and housewares from its T.J. Maxx
and Marshalls chains -- holds the No. 3 market position with a
2.6% share. TJX is a member of IBD's
Consumers have embraced bargains. But shoppers haven't
completely spurned upscale retailers like Williams-Sonoma, which
ranked No. 5 in Euromonitor's data at 2.4% market share last
year. And improved fortunes for housing should lift it
"As we look beyond the current holiday season, we increasingly
believe that WSM and its Pottery Barn division are positioned
well for 2013 amid a strengthening home market," Oppenheimer
analyst Brian Nagel wrote in a client note just before the
The one hiccup he saw then was the rising number of promotions
-- one-day sales and deep discounts -- on some goods needed to
keep customers coming in the door.
But those higher-tier retailers have items that resonate with
"They have a specific aesthetic," Euromonitor's Cai said. "I
think that is something that's part of the zeitgeist right now.
Consumers are interested in having products and designs that seem
unique and not super mass-marketed."