Remodeling Means Big Business for Industry
Top architectural woodworkers and store fixture manufacturers earn 47 cents on the dollar for remodeling projects, according to a new Wood & Wood Products survey.
By Larry Adams
Renovation and remodeling projects represent about 47% of all architectural woodworking/store fixturing sales, according to Wood & Wood Products' 12th annual survey of those industries.
Twenty-four of the Top 25 companies in W&WP's survey do a substantial amount of business in the renovation arena (see Top 25 chart). In 1998, approximately $513 million worth of millwork and fixtures were sold to this market by the companies in the combined store fixture/millwork survey. This represented 47% of the market, up from the 42% reported in last year's survey.
Companies that say they exclusively sell store fixtures reported more than $159.15 million in sales for remodeling projects. Architectural woodworking companies report that 63.3 percent of their sales, totalling $117.21 million overall, went toward remodeling projects. Companies that produce both fixtures and millwork report more than $236.87 million in remodeling sales, or approximately 42 percent of all sales.
The renovation of a the New Amsterdam Theater in New York City, depicted on this month's cover, is a prime example. The theater located in Times Square, was badly run down, as was much of the neighborhood, before the area was revitalized through the combined efforts of government and business. Midhattan Woodworking Corp. was brought in to complete the millwork portion of the job. "I didn't make a fortune on the job, but it was high-profile," says George Greco, vice-president of the Old Bridge, NJ-based company.
Is This a Growing Market?
"I don't see a difference," says Frank Huschitt III of Imperial Woodworking Co., an architectural woodworking company in Palatine, IL. "It's always been the case for the clientele we serve that we go in and build something new. Companies go into a space, gut it out, and then have us start over."
Semantics aside, architectural woodworking and store fixture firms may need to drum up more remodeling work if construction continues to lag. Construction of retail stores had an exceptional 1998, but through the first two months of 1999 new construction was down by 13 percent, while hotel construction dropped by about 33 percent since the start of the year, according to the latest figures from F.W. Dodge, a New York-based tracker of residential and business construction nationwide.
At the same time, merger and acquisition activity has increased. The grocery and banking landscapes have been peppered with a number of recent mergers, including Kroger and Fred Meyer, Safeway and Dominicks and NationsBank and BankAmerica. In addition, Kmart has leased a number of former Venture stores and HomeLife has been divested from Sears and is trying to create its own corporate identity. When companies merge, the two firms often blend identities, operations and resources. These new entities may mean new opportunities for store fixture companies, especially in the retail arena, and millwork companies, in the hospitality and banking industries.
"Consolidation, company growth or shrinkage, that is the defining pulse on the market," says Michael Ostroff, president of Patella Woodworking of Jersey City, NJ. "More expansion means more work, just as consolidation can mean more work."
Kmart Remodeling Creates Business for Fixture Makers
Kmart is spending between $600,000 and $650,000 per store to remodel some 1,800 of its stores by the year 2000. Since 1997, Kmart has spent more than $327 million to convert its stores into the Big K format.
"We're adding a huge amount of new fixturing, creating wider aisles, increasing the brightness of stores and lowering site lines," says Floyd Hall, chairman and chief executive officer of Kmart, in a issue of GlobalShop Today. Hall was the keynote speaker at GlobalShop, the multi-trade show event that included store fixtures which was held March 27-29 in Chicago. "We are trying to dramatically improve our look to signal that it's not the same Kmart anymore."
Two company's reaping the benefits of Kmart's remodeling program are Goer Manufacturing Co. of North Charleston, SC, and L.A. Darling Co. of Paragould, AR.
Goer recently delivered more than 500 remodel projects to Kmart stores. Working with Kmart helped Goer boost sales to $52.5 million last year, breaking its previous sales and profit records. The store fixture manufacturing company, which predicts it will have an even better year in 1999, sells exclusively to retailers, and approximately 70 percent of its sales, or
L.A. Darling, North America's third largest store fixturing company, produces fixtures for many of the nation's largest retailers. The Arkansas company had more than $100 million in sales in 1998, all of which were to retailers, and about 40% of its sales went toward retailers rehabbing their businesses.
"Retail stores refurbish their look every five to seven years," says Evart English, president of LA. Darling Co. "The retailers want to go with a new look."
"What is happening right now, is that we do a lot of stores that are coming out with a private label, and they want it in every store," says Vic Romano, president of Vira Manufacturing, Perth Amboy, NJ. Vira reports that 85% of its $30 million in sales is store fixtures, and of that, more than 70%, or nearly $18 million, goes toward renovation work.
John Iwanski contributed to this report.
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