1983: a better year for home centers

By Frank W. Denny President, Home Centers Division W.R. Grace & Co.

HILE thE mediocre short-term indicators for the home center industry, particularly with regard to housing, have been discussed at length in the media, we feel the need to stress the "positives" of this expanding industry right up front. Its past and continued growth can be attributed to several favorable economic, environmental and social factors, the most important of which follow:

Favorable Factors

(l) The age of the housing stock increases the need for rePairs and improvements, while the increasing cost of new housing encourages peoPle to maintain and

Story at a Glance

Positive f actors regarding home centers outweigh the negatives. costs will inhibit f uture home center building competition will Put more pressure on gross margins and operating expenses.

upgrade their existing homes. The median sales price of a new single family house rose from $48,800 in 1977 to approximately $72,000 in 1982, for an increase of 8.1% annually.

(2) The 25-44 year old age group, with prime emphasis in the 35-44 sector, which rePresents the target customer, will grow aPproximately 2.8V0 and 4.190 Per year, respectively (1982-1987), compared to the total PoPulation growth of I .l 90.

(3) The rise in the cost of professional labor services is increasing faster than the cost of materials, encouraging more PeoPle to ''do-it-yourself " Labor services are forecast to increase at a6.6Vo average annual rate over the next five years versus a 5.6V0 increase in the cost of materials.

(4) The increasing awareness bY manufacturers of the "do-ityourself" potential is reflected in the improved design and Packaging of products and the extensive amount of literature available on the subject.

The following are what we consider to be the most significant negative factors impacting the home center industry:

Unfavorable Factors

(l) High interest rates, the scarcity of mortgage money, and escalating construction costs have all inhibited new home construction and housing turnovers, which are critical to the home center industry. Total housing starts in 1982 will be approximately 1,050,000 units, the lowest level in 36 years, with the projected rate of 1,850,000 units in 1987 still below the 2 million unit rate of 1978. Similarly, housing tur(l'lcasc turtt t0 Pagt'57)