Jasper, IN – Fortune Brands Home & Security (FBHS), whose holdings include MasterBrand Cabinets, reported an 11% rise in fourth quarter kitchen cabinet sales, reaching $655.5 million. CEO Nick Fink attributed the gain to growth across all types of cabinetry products and at all price points.
For the year ending December 31, 2020, FBHS saw cabinet sales reach $2.469 billion, a 6% increase over 2019, a performance all the more remarkable set against a 15% drop in second quarter sales due to the COVID-19 pandemic.
Fink says more of the same growth lies ahead, in an explanation provided during an earnings call with investment analysts.
U.S. housing is currently substantially under-built, according to Fink, and this will provide a multi-year tailwind propelling long-term housing construction and remodeling. Demographics will play a major role.
“The key millennial generation has accelerated their delayed move toward household formation, and they’re showing increased interest in home ownership,” Fink says. “Pandemic or no pandemic, this generation’s move toward household formation had to happen as they formed families [for whom] we simply lack the housing stock.”
Another factor affecting home buying is workplace flexibility. Born of necessity during the pandemic, “It has allowed many younger homeowners to leverage technology allowing for larger homes further from urban cores,” Fink says. “Multifunctional spaces within the home as well as increased trends towards entertaining at home and outdoor living are accelerating new home buying and remodeling.”
MasterBrand’s less expensive cabinet lines received a boost by anti-dumping tariffs, blocking Chinese competition. This category – IKEA-style full-access “frameless” cabinets – is favored by the next generation homeowners, driving a longer-term shift to value-priced products and away from semi-custom and custom cabinets.
“Within our value price point cabinets, we continue to gain share from both domestic players and from the absence of Chinese suppliers who have exited the market over the past few months, or who’ve been replaced to a lesser extent with other importers with higher costs and longer lead times,” says Fink. “Our advantage of a low-cost [U.S.] supply chain is competing and winning against [both] domestic competitors and higher costing imports.”*
To increase the supply of value-priced cabinets, MasterBrand fast-tracked an 840,000-sq. ft. factory in Jackson, GA, staging a hiring fair February 9 as it hustles to get 160 first-shift workers.
For 2021, Fink is projecting robust 5.5% to 7.5% sales growth. “Demographic forces, combined with very healthy homeowner balance sheets, are driving accelerated activity in the housing industry.”
But those projections don’t include the recently acquired Larson Manufacturing, a storm door and screen business acquired in November 2020, which could drive sales growth into the 12.4% to 14.5%. Larson is headquartered in Brookings, SD and has door and window factories in Brookings, SD; Lake Mills, IA; and Mocksville, NC.
“Our key housing markets are entering a period of long-term expansion,” says Fink. “The current environment has accelerated trends already in place prior to the pandemic and there is renewed consumer focus on the value and role of the home.”
In 2003, Fortune Brands acquired another door manufacturer, Therma-Tru, a producer of fiberglass and metal interior and exterior doors. Larson produces storm doors with solid wood cores wrapped in its proprietary DuraTech cladding. Said to be the largest storm window and door manufacturer in the U.S., Larson holds more than 20 patents.
*FBHS earnings report transcript courtesy of SeekingAlpha.com
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