Flooring and Home Appliance Industries: Strategies Amid Declining Revenues

Current Revenue Trends in Flooring and Home Appliances

Revenue trends in the flooring and home appliance sectors show a mixed picture. While new product launches with high growth potential are promising, macroeconomic factors and shifting consumer trends are causing declines in customer transactions and comparable sales. Pricing strategies and unit sales are also influencing revenue outcomes.

"Earlier this month, we launched and floored our new semi and fully automatic KitchenAid espresso machines at premium retailers, providing a product lineup offering in one of the categories with the highest growth potential based on current market trends." --- (WHR, earning call, 2024/Q1)

"Three Months Ended Other Metrics May 3, 2024 May 5, 2023 Comparable sales decrease 1 (4.1) % (4.3) % Total customer transactions (in millions) 208 214 Average ticket 2 $ 102.87 $ 104.44 At end of period: Number of stores 1,746 1,738 Sales floor square feet (in millions) 195 195 Average store size selling square feet (in thousands) 3 112 112 Net earnings to average debt and shareholders’ deficit 28.1 % 24.2 % Return on invested capital 4 32.6 % 28.0 % 1 A comparable location is defined as a retail location that has been open longer than 13 months." --- (LOW, sec filing, 2024/Q1)

"The decrease in comparable customer transactions reflects the impact of macroeconomic factors, including the continued shift in consumer consumption trends away from goods and towards services and the impact of a high interest rate environment, pressuring home improvement demand." --- (HD, sec filing, 2024/Q1)

"I would say year to date down mid single digits. Three-quarters of that is pretty much pricing carryover on promotions, and the rest is units, so the unit decline is obviously a little bit less than we showed in revenue, and the same thing now flips as we look at the second half, because we had the promotion price increase and we will start getting positive comps against last year, and that stabilizes.On the unit side versus the trend which we had so far, I wouldn’t expect too much change, but the difference on the revenue side between first and second half is coming from price realization per unit sold." --- (WHR, earning call, 2024/Q2)

"Christian Carlino: Got it. That's really helpful. And I appreciate the color in the prepared remarks, but I guess, how would you disaggregate some of the bigger ticket trends between more remodeling oriented categories that are more likely financed versus others like big ticket seasonal and appliances, and how are you thinking about the recovery path for maybe these 2 sides of big ticket broadly?" --- (LOW, earning call, 2025/Q1)

Cost-Cutting Measures and Operational Efficiencies

Companies in the flooring and home appliance industries are focusing on operational efficiencies and cost-cutting measures to combat declining revenues. Masco Corporation and Whirlpool Corporation have implemented initiatives to drive operational efficiencies, achieve cost savings, and expand margins. Lowe's is leveraging scale to reduce transportation costs, further enhancing operational efficiency.

"In the quarter, our gross profit grew $16 million and gross margin rose 140 basis points to 37.6% as a result of our ongoing initiatives to drive operational efficiencies and achieve cost savings." --- (MAS, earning call, 2024/Q2)

"The sequential margin expansion of approximately 100 basis points quarterly in the second half is driven by on track MDA North America pricing actions, incremental global cost takeout actions such as part complexity reductions and manufacturing efficiencies, continued strength across our international businesses, and SDA global seasonality." --- (WHR, earning call, 2024/Q2)

"Driving sales now. We're making some of that investment in price, and there's going to be a bit of a lag defect as the new cost turn through inventory here over the next 3 quarters and then also continuing to benefit from lower transportation costs as we leverage our scale to drive rates with our carriers." --- (LOW, earning call, 2025/Q1)

"In local currency, International sales decreased 1%. Despite modestly lower sales level, our initiatives to drive operational efficiencies and our favorable price cost performance in the quarter contributed to significant gross margin expansion of 140 basis points to 37.6%.SG&A as a percent of sales was 18.5% and was impacted by higher employee-related costs." --- (MAS, earning call, 2024/Q2)

"Overall, the segment delivered 5.6% EBIT margins for the quarter. While the MDA North America business had a slower start than expected, we are confident that previously announced promotional program actions will drive sequential margin expansion of over 1 point per quarter, with pricing action benefits being fully realized in the third quarter." --- (WHR, earning call, 2024/Q1)

Innovation Strategies

Companies in the flooring and home appliance industries are focusing on product innovation, strategic investments, and managing complexity to drive growth. Masco emphasizes design and capabilities, Whirlpool leverages its iconic brands to meet evolving consumer needs, and Lowe's invests strategically to enhance its total home strategy.

"As I mentioned before, product innovation is really important and product innovation isn't limited just to technology, it's design and capabilities." --- (MAS, conference, 2024/05/15)

"In an increasingly digital world, the company is driving purposeful innovation to meet the evolving needs of consumers through its iconic brand portfolio, including Whirlpool, KitchenAid, Maytag, Consul, Brastemp, Amana, JennAir and InSinkErator." --- (WHR, press release, 2024/04/02)

"And now that, again, that we've had we now have these foundational things in place, We think that we now have the ability to make some strategic investments where they make sense, you know, and where they give us capabilities or they give us the ability to kind of build on this total home strategy." --- (LOW, conference, 2024/06/26)

"So that's really the fundamental nature of where we're focusing our innovation. In terms of narrowing 80/20 is a fundamental component of our operating system and we look at the long tail and we understand the costs associated with that and we know and we believe that there's no line item on the P&L that says complexity but there is a cost to complexity." --- (MAS, earning call, 2024/Q2)

"We regularly review our capital structure and liquidity priorities, which include funding innovation and growth through capital expenditures and research and development expenditures as well as opportunistic mergers and acquisitions; and providing returns to shareholders through dividends, share repurchases and maintaining our strong investment grade rating." --- (WHR, sec filing, 2024/Q2)

Product Development Initiatives

Companies are focusing on enhancing customer experience through improved online search functionality, significant product launches, foundational IT and supply chain improvements, reducing purchasing friction, and expanding partnerships for better shopping experiences.

"We continue to work on improving our online search functionality and serving the most relevant product offerings to our customers." --- (HD, earning call, 2024/Q1)

"We also have a massive product launch in Q2, which we will invest with significant marketing dollars." --- (WHR, earning call, 2024/Q1)

"So as we think about it, Brian, it's a combination of taking the foundational things that we've already put in place and we were very purposeful that the first 5 years was going to be about really foundational things: IT infrastructure, supply chain, pricing tools, merchandising assortment tools, etcetera." --- (LOW, conference, 2024/06/26)

"And the areas that we're focused on in partnership with the Home Depot is, first, is really making sure we've got the resources at the retail stores, the sales reps, the product rep to really reduce the friction in terms of the purchasing experience." --- (MAS, conference, 2024/05/15)

"The Home Depot is focused on improving the interconnected shopping experience for its customers and following a successful pilot with Instacart earlier this year, is expanding the partnership nationwide." --- (HD, press release, 2024/05/23)

Marketing and Sales Strategies

Companies like Home Depot, Whirlpool, Lowe's, and Masco are focusing on improving sales efficiency, maintaining margins, enhancing customer experiences, and leveraging BOPIS to navigate a challenging market. These strategies aim to sustain sales growth and optimize returns despite industry headwinds.

"Sales per retail square foot is a measure of the efficiency of sales based on the total square footage of our stores and is used by management to monitor the performance of the Company’s retail operations as an indicator of the productivity of owned and leased square footage for these retail operations." --- (HD, sec filing, 2024/Q1)

"But you’ve been able to maintain your margin outlook for the year at 15.5%, and I’m just curious if the ability to hold the margins is due to the fact that you’re still executing from a sales growth standpoint and your own sales growth outlooks are similar, despite a weaker industry, if there’s other drivers that are allowing you to maintain that outlook that you’ve been able to maybe put into gear in a softer market backdrop." --- (WHR, earning call, 2024/Q2)

"We're not going to call out the comps, but just financially speaking, seeing higher sales as we're opening up space on the front end, lower payroll costs, improved returns as we've increased or improved that experience and then the customer experience with the improved front end and BOPIS." --- (LOW, earning call, 2025/Q1)

"You continue to expect to outperform the market this year overall by 1% to 2% this year, Sales down slightly year over year in the first half versus a modest growth outlook in the back half." --- (MAS, conference, 2024/05/15)

"our primary financial objectives are to grow sales and earnings per share as fast as possible while generating an exceptional return on investment." --- (HD, conference, 2024/04/04)

Supply Chain Adjustments and Efficiencies

Companies are focusing on manufacturing efficiencies, automation, and optimizing input costs (WHR), leveraging supply chain assets (HD), and investing in supply chain and IT infrastructure (LOW). Additionally, supply chain finance programs (MAS) and operational efficiencies (MAS) are being utilized to enhance performance amid declining revenues.

"We are confident there are additional cost takeout opportunities ahead, as we shared at our investor day, such as manufacturing supply chain efficiencies including automation across our business, and continuing to optimize our input costs back to pre-COVID levels. For full year guidance, we are reiterating flat net sales of $16.9 billion driven by new product launches, strong replacement demand, previously announced MDA North America pricing actions, and continued strength in our international businesses." --- (WHR, earning call, 2024/Q2)

"We also facilitate a voluntary supply chain finance program (the "program") to provide certain of our suppliers with the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions." --- (MAS, sec filing, 2024/Q1)

"Well, there's certainly a component of being early with respect to or being early days with respect to leveraging all of our supply chain assets." --- (HD, conference, 2024/04/04)

"We've made lots of investments in supply chain, IT infrastructure, omni and some of the things I've talked about." --- (LOW, conference, 2024/06/26)

"In local currency, international sales decreased 5%. Despite lower sales, our continued efforts to drive operational efficiencies as well as our price cost performance in the quarter, helped lead to gross margin expansion of 210 basis points to 35.7%." --- (MAS, earning call, 2024/Q1)

Customer Engagement and Loyalty Initiatives

Lowe's and Home Depot have successfully implemented loyalty programs and customer engagement initiatives, with Lowe's leveraging store associates to educate customers and Home Depot seeing strong engagement in remodeling projects. Masco Corporation also focuses on loyalty programs to retain market share.

"We could not have rolled this loyalty program out a year ago. because we were still in the process of retiring a 30-year operating system, which is now for all intents and purposes, behind us and the store associates engagement was simply tremendous in educating the customer and making sure that they were articulating the value." --- (LOW, earning call, 2025/Q1)

"And there’s still the continued pressure that we see in finance big projects as they called out in kitchen and bath, specifically in the kind of remodeling finance projects, but really pleased with some of the customer engagement, some of those pull-forward categories so far." --- (HD, earning call, 2024/Q1)

"And third is a loyalty program, to make sure that we as we gain share, that we retain that share." --- (MAS, conference, 2024/05/15)

"Joseph McFarland: Peter, to add on Brandon quickly. We're pleased with the first kind of loyalty perk that we rolled with Mother's Day, the engagement we had with the members and new members as well as our associates and our ability to gain incremental loyalty members." --- (LOW, earning call, 2025/Q1)

"And so we see a highly engaged customer at the Home Depot. I will just caveat that all my comments are relevant through the end of our fiscal year. We" --- (HD, conference, 2024/04/04)

Competitive Analysis and Market Positioning

Companies are focusing on competitive responses, promotional activities, and sales force execution to better position themselves. They are also adapting to consumer behavior shifts due to interest rates and discretionary spending, with a notable shift towards value products in a down market.

"Marc, can you talk to the competitive responses you’re seeing so far, because I completely understand your point on the restatement to AHAM, but you do have a competitor that posted some better trends, and it looks like that competitor and maybe one of your retailers has talked about promotional activity maybe staying stable at the heightened levels." --- (WHR, earning call, 2024/Q2)

"it's coming in with growth initiatives and how we can execute better through sales force execution, whether it's better segmentation or better standardization of how we make our sales call so that we are more effectively highlighting the benefits versus the competition." --- (MAS, earning call, 2024/Q2)

"And you mentioned the lockup effect, just simply don't know. Is it a factor of folks waiting for rates to decline or is there a mindset shift that becomes accustomed to a higher rate environment and says this is normal, I have to upsize, I have to improve in place." --- (HD, conference, 2024/04/04)

"I think as I'll get the breakdown across the year on ticket and transactions, we're, for the most part, expecting average ticket to hold, consistent over the course of the remainder of the year just as we saw here in Q1, some slight pressure, ticket related, as we've shifted down in the smaller ticket seasonal projects, which has boosted transactions." --- (LOW, earning call, 2025/Q1)

"In a down discretionary environment, you are impacted at the super premium and premium level significantly more and you do see more business in the value, so you’ve got a shift to a lower margin in terms of your brand portfolio. Also, as you look at your product portfolio, I talked about the type of products that you see a consumer replacing relatively quickly, we’ve always talked about within our portfolio, refrigeration is the lowest in terms of margin, very competitive space through laundry, and then to more your cooking and dish." --- (WHR, earning call, 2024/Q2)