Chins up! Cabinet industry is down, but hardly out.

It was fun white it lasted, but alas, all good things must come to an end.

After 127 months of consecutive year-over-year sates growth, the kitchen cabinet industry recently bid adieu to "The Streak." Sales for November 2006, as tracked by the Kitchen Cabinet Manufacturers Assn.'s Trends of Business Survey, dipped 2.9% compared to what participating KCMA members reported for November 2005. It was the first time since April 1996, when Bill Clinton was rounding out the final year of his first term as president, in which cabinet sales had fallen below the corresponding month of the previous year.

The November slide spawned a negative growth streak that reached three months and counting in January. Indeed, the New Year got off to an auspicious start, to say the least. Not only did the KCMA report that January 2007 cabinet sates decreased 12.7% over January 2006, housing starts plummeted to an annual rate of 1.41 million, the lowest in nine years.

On top of this bad news came word that several of the nation's major cabinet companies had resorted to raying off employees in response to the slowdown. KraftMaid Cabinetry, for example, laid off an estimated 400 to 600 hourly workers at its Middlefield and Orwell OH, facilities. (At press time, the Tribune-Chronicle reported that KraftMaid was beginning to recall some of the laid-off employees.)

A Little Perspective, Please

The recent reversal of the cabinet industry's fortunes has been a topic of concern among many woodworking machinery and supply representatives I spoke with during the fast month at trade shows and meetings. Because home construction is a major driver of cabinet sates, the sudden chill to housing starts has sent a shiver down the bones of those who count on their cabinet customers to keep their businesses humming.

After climbing to a dizzying record height of 2.068 million units in 2005 and a respectable 1.801 million units fast year, a potential plunge in housing starts to 1.408 million units this year would have to be viewed as a long way down, but hardly disastrous. The combination of rising interest rates, record home prices and a large inventory of unsold new homes conspired to make this market correction an inevitable, necessary, and I hasten to add, temporary evil.

The silver lining in the black cloud currently hovering above the U.S. cabinet industry is the fact that the remodeling market accounts for more than two-thirds of annual cabinet sales. A new report, "Foundations for Future Growth in the Remodeling Industry," released by the Joint Center for Housing Studies at Harvard University, reveals that in spite of the addition of some 11.4 million new homes over the past decade, the average age of U.S. homes stood at 31 years in 2005, compared to 23 years in 1985.

The report further notes that the nation's aging housing stock will lead homeowners to increase spending on remodeling and repairs by nearly 45% after adjusting for inflation between 2005 and 2015. Kitchen cabinet and bathroom vanity manufacturers stand to be major beneficiaries of this trend, in particular because homeowners tend to invest more in higher-end products than the ones they replace.

Don't Confuse Cabinets with Furniture

In quick succession within the last couple of months, Broyhill, Hooker, Pulaski and other major residential furnituremakers announced the closing of the fast vestiges of their domestic wood manufacturing operations. All of the wood furniture bearing their brands will be sourced from other countries, mainly China.

Some suppliers worry that the U.S. kitchen cabinet industry will follow the lead of domestic home furniture manufacturers. Yet, contrary to what has happened in the furniture industry, major cabinet companies are not closing plants, they are building new ones--American Woodmark in Virginia, Merillat in New Mexico, KraftMaid in Utah, to name a few. The cabinet industry has a long track record of investing in manufacturing technologies and adopting production strategies that lower costs, improve quality, increase customer options and shorten lead times. These are but four important factors that help insulate them from the threat of foreign competition.

The year-end 2006 trade statistics recently released by the U.S. Department of Commerce's International Trade Commission reveal that kitchen cabinet imports increased 6% to $886.2 million. Approximately $550 million or 62% of that total emanated from Canada. China, the second leading source of U.S. cabinet imports, accounted for $214.7 million of last years total. White enjoying incremental growth, cabinet imports still hold single-digit market share.

The trend to build one kitchen at a time to a customer's exact specifications within a shortened delivery time will not only help repel (foreign competition, but provide the U.S. cabinet-industry with the strength it needs to grow business.

Dick Titus, executive president of the KCMA, predicted that while cabinet manufacturers have "adjusted production schedules in response to the current market, long term, the outlook still is positive with renewed growth expected this spring."

Assuming Titus is correct, we can't wait to hear the words, "Play ball!"