The 2015 Industry Pulse: Market Recap

Did 2015 Live Up to its Expectations? Dealers and manufacturers weigh in
By Stacey Freed
January 26, 2015
FEATURE ARTICLE

Editor’s Note
Every year, Window & Door asks dealers and manufacturers for their thoughts and projections for the New Year. As a follow up, we asked last year’s contributors to our Industry Pulse survey to revisit their projections. Did 2014 live up to its expectations? Read on for the full story.
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“All three components of home construction spending post gains,” touted the National Association of Home Builders in December 2014, reporting that single-family housing starts, multifamily construction, and remodeling improvements all continued their upward climb as 2014 came to a close. This foundation set the course for a better year for the window and door industry, which many had predicted.

“I saw an increase in consumer confidence that made us move forward,” reports Keenan Burns, COO and executive vice president of A.W. Hastings & Co., a leading distributor of Marvin Windows and Doors. Statistics back this up: The Consumer Confidence Index rose to 88.7 in November 2014, up from 72.0 the previous year.

That confidence, combined with pent-up demand and an aging housing stock, drove window and door industry growth in 2014. “We grew the 10 to 15 percent we expected to see in our business,” Burns says, referring to his predictions from last year’s Industry Pulse. “A lot of projects that had been put on hold came to fruition, as did a lot of new projects put on the boards.”

Deceuninck North America, also saw the double-digit growth it predicted for 2014.

Though, Filip Geeraert, president and CEO, notes that he was disappointed in the market’s growth as a whole. “Last year, new home growth was expected to be 20 to 30 percent. And, on the remodeling side, to a certain extent, the average real market growth was disappointing,” he says. Still, he believes that Deceuninck is in a good position. “A lot of our customers grew and were able to capture new distribution and customers. We have new products and zero back orders.”

Another company that saw growth, San Antonio’s Southwest Exteriors, which sells Renewal by Andersen windows and Therma-Tru entry doors, attributes that success to “very favorable market conditions.” Steward Scott Barr explains, “Texas is blessed with a lot of good things right now: homes-for-sale inventory down to four months, upward pressure on prices, confidence that your home is a good investment.”

Barr also says that the housing stock in his part of the country is ready for replacement windows. “In the ‘70s and ’80s, a lot of homes were built well but did not have high-quality components— siding, doors and windows.” Many of those homeowners—what Barr calls the empty nesters, or it’s-our-last-home people— are contacting Southwest Exteriors.

All of the Industry Pulse contributors interviewed say that demand for energy-efficient products was also a factor driving growth in 2014. “Energy Star has been impactful on the consumer. It has a good reputation and people look for that brand,” says Steve Dillon, marketing director for Veka. “Energy Star is doing a good job keeping consumers aware and bringing movement.”

Expansion

Increased business meant growth in physical plants as well as staff in 2014.

“We hired in the office and in a big way in production,” reports Joe Guarino, president and CEO of window and door manufacturer Sunrise Windows.

Veka, too, hired additional staff—more than 100 people for its three locations—as its infrastructure grew. “We added extrusion lines, floor space—internal and external—and warehouse and storage space,” Dillon says. The company compounds onsite and, over the past three years, has put in two silos in preparation for growth.

As Southwest increased production capacity, the company hired project managers and crew leads. It also invested heavily in its marketing events team—a lot of college students working part time, Barr says—and grew its inside sales center, which schedules appointments and handles inbound and outbound calls.

But for many, including Guarino, finding labor has been difficult. “The biggest challenge we had this year was finding production labor when we needed it. I’ve heard that from others in the industry as well,” he says.

In fact, according to the Associated General Contractors, “83 percent of construction firms report having trouble finding qualified workers to meet growing demand for construction services.”

Guarino isn’t exactly sure what’s driving the labor issue. He feels “there are plenty of good people out there.” He said his company is going to do “a better job of attracting, screening and orienting individuals. It’s about targeting the right people and orienting them to become comfortable and effective.”

Back to Normal?

All of this insight begs the question: does the upward growth trajectory mean the window and door industry is back to normal? Geeraert believes that, with housing starts still shy of where they were before the Recession, there is still room for growth. “It may take three or four years, but I believe it will go back to the ‘normal’ one-and-a-half-million housing starts, and remodeling will [also rise].”

U.S. housing starts have been settling into a new normal since they peaked at 2.27 million in 2006, then plummeted down 74 percent just four years later.

“We’re all still trying to figure out what normal is going to look like,” Burns says. “We’re doing things differently today, like the way we apply our process to offset and balance growth. It’s part of our scalability. I don’t see the rate of growth being what it was prior to the downturn. We’re still short of the 1.7 million permits that were being pulled. We’ve all adjusted down to an operating level based on a 29 or 30 percent reduction prior to the downturn. But it’s getting better. We’ve eclipsed the million mark and that was a threshold everyone was looking for.”

Product Trends

What category sold best in 2014?

According to surveyed dealers and manufacturers, vinyl windows were the hottest sellers last year. Here’s how the rest of the numbers shook out:

Sales

Did they meet expectations in 2014?

Respondents to last year’s Industry Pulse survey were optimistic in their projections for 2014. Regardless of how accurate their projections turned out to be, 79 percent of survey respondents reported that they felt sales met their expectations.

Dealer Sales
While sales did increase for the majority of dealers, sales declined for more dealers than those who anticipated the hit.

Manufacturer Sales
On the manufacturing side of the equation, last year's survey participants were even more hopeful than dealers for 2014 sales. At year end, they saw a slightly larger decline and more consistency than anticipated.

Staff

How did employment change for the industry in 2014?

Employment levels are often seen as indicators of general economic health. Though there are still huge challenges to overcome in terms of finding labor, as long as the industry is moving in inverse of the unemployment rate, we’re in good shape, and that seems to be the case.

Dealer Hiring
The good news is that employment is definitely up across the board, even if not as much as anticipated. And, most of the difference in those projections was made up in keeping staff consistent, rather than decreasing employees.

Manufacturer Hiring
On the manufacturing side of the business, empoyment levels increased more than projected. This segment also decreased staff more than anticipated, but not in a huge way overall.

The 2015 Industry Pulse

Main Article

Market Recap

Did 2014 live up to its expectations? Stacey Freed investigates

Terms of Improvement

Positive factors for 2015

Product Trends and Innovation

Expected introductions in the New Year

Employment Outlook

Staffing and training trends throughout the industry