The Kitchen Cabinet Slowdown

The slowdown in the housing market is battering home prices, unending credit markets, and threatening the economy. So perhaps it's no surprise that it's also hurting the makers of kitchen cabinets. Take a look at the earnings report today from Winchester's American Woodmark.

The manufacturer of cabinets and vanities is a pretty good proxy for examining the breadth of the slowdown. American Woodmakr sells to home centers and major builders through a network of independent distributors, and it operates 15 manufacturing plants and nine service centers nationwide.

The company said its sales fell by 24 percent in the last quarter, and its earnings are down 72 percent for the past six months. Profit margins are getting squeezed by rising energy costs, higher medical expenses and fewer buyers. And its sales-to-expenses ratio was up for the quarter because the company said it is doubtful it will ever collect $1.5 million from some of its struggling home builders.

"Looking ahead to the remainder of fiscal year 2008 [American Woodmark's fiscal year ends June 30], the company
expects that the continuing impact of tighter credit conditions and falling real estate prices will cause remodeling and new construction markets to remain subdued until these conditions are resolved," the company said in a statement.

As a result, American Woodmark is now projecting that its sales will fall 14 to 18 percent in fiscal 2008 compared to the previous year, with remodeling sales declining in the "mid-single digits" and new construction declining in the "high teens."

By Dan Beyers  |  November 29, 2007; 8:10 AM ET
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