Housing Slowdown Sector Impact

Thursday, April 26, 2007 | 12:15 PM

Yesterday, we picked up Dan Gross’ challenge as to what other sectors the Housing slowdown was making its impact felt.

Our experiment in “Crowd-Sourcing” worked out well – you contributed scores of suggestions based on observed data, both public and private.

Here’s a list of your observed sector impacts as they relate to the Housing slowdown:

RV Sales: a lot of the people who were buying $100,000 RV's were taking the money out of their house to do it. No longer

Thoroughbred horse auctions: have seen their gross and median prices decline in California, Maryland, Florida and Kentucky.

Convention Centers: As RV and Boat sales slow, the RE industry, the construction suppliers, and boating mfrs will have less need for the big convention spaces.

Lawnmower mfrs:  Toro said its Q1 sales rose 29%, while Briggs & Stratton said the drop in sales was mainly due to lower sales volumes of lawn and garden equipment and portable generators, and lower unit shipments of engines. One explanation: As homeowners get hit with ARM resets, they are dropping that lawn service and doing it them selves.
Outdoor Power Equipment and the small-engine manufacturers: They are paradoxically doing fine, but probably for the same reasons.

Contractors: tradesman are much more available now, as they have experienced a slowdown in both construction AND remodeling projects.

Condo/Homeowners' Associations:  Many condo owners could face special assessments, as some owners to walk away from loans they can't afford. That presents a problem for deferred maintenance issues and unfunded reserves.

Furniture companies: all hurting. STLY, HOFT, FBN, ETH. They are getting the double whammy...lower sales and they can't compete with overseas companies. (ETH did just say yesterday that they see signs of the consumer making a comeback)

State property and sales tax receipts: They are reported down in many states even as government stats say sales are strong. (I'm sure many states are now looking at the decrease in remittances to Mexico and Central America and adding up the taxes they SHOULD have collected from homebuilding labor).  Property taxes keep rising nearly everywhere, even as house prices are falling  Despite the housing downturn, the market value of millions of homes still exceeds their assessed value. According to the USA Today, all but five states limit how quickly property taxes can rise.

Building Materials: Lumber Wood Production, Bldg Materials Wholesale, Home Improvement Stores, Select metals (copper, aluminum)

Airlines: Over the past week, Southwest Air, JetBlue, Continental and UAL all said domestic bookings were weak. Expect this to eventually work its way to Travel related industries, like Cruise liners, rental cars, regional and domestic focused airlines, etc.

Auto Suppliers: Watch companies like Graco (GGG) – they missed expectations, but, more importantly, the composition of earnings gave a clear indication how weak the housing-led decline is domestically and, by contrast, how strong the international end markets are. Graco's manufactures equipment to apply paint and other coatings on automobiles, appliances, furniture, etc. The company recorded its first profit decline in six years. North American volumes dropped by 9%, while international sales grew by 23%.

Construction Equipment: Komatsu and Kubota's N. American equipment businesses are doing poorly thanks to lower housing construction.

Truckers: like RRs, are having a rough YoY time in volume terms: www.truckline.com Railroad volume is anemic YoY (see: www.aar.org) for container boxes shipped from Asia (15% of which is furniture) as well as for materials (wood for housing, etc)

Autos:  Camry sales ex-hybrid Camry are actually down. SUV sales are flat to down except for the redesigned Rav4, and that is due to a redesign. Tundra sales were good. In short, the equivalent of same-store sales for Toyota was flat to down. Also, AutoNation's CEO Sees Soft Car Market Ahead  Considering how many car loans were refinanced into homes and paucity of customers paying for cars with cash, it is ridiculous to assert that the LTV of individual consumers has no impact on car sales. When I was selling, I saw it all the time. There are only so many times you can rollover an upside down person before it becomes impossible. (This would explain Harley's (HOG) poor earnings  inventory build).

Thanks to everyone who participated in this crowd sourcing experiment!

(All yours, Dan)

Thursday, April 26, 2007 | 12:15 PM | Permalink | Comments (29) | TrackBack (2)
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The latest news about Harley Davidson's earnings on MarketWatch are as of 4/19. Was this adjusted somehow? Even the chart looks good (tho slightly down for the day)...

Harley-Davidson gets lift from first-quarter earnings report

(11:39 AM ET) NEW YORK (MarketWatch) -- Shares of Harley-Davidson Inc. (HOG : Harley-Davidson, Inc
News , chart , profile , more
Last: 64.74-0.81-1.24%
12:15pm 04/26/2007

HOG64.74, -0.81, -1.2%) rose 4.3% to $63.92 on Thursday after the Milwaukee-based motorcycle maker posted first-quarter earnings of $192.3 million, or 74 cents a share, on revenue of $1.18 billion. The company said the latest results reflect the impact of a three-week strike during the quarter at its manufacturing plant in York, Pa. In the same period a year earlier, Harley-Davidson earned $234.6 million, or 86 cents a share, on revenue of $1.29 billion. The average estimate of analysts polled by Thomson Financial was for a profit of 72 cents a share in the March period. Looking ahead, the company said it expects earnings per share growth of 4% to 6% in 2007 and 11% to 17% in 2008. It anticipates shipping between 94,000 and 97,000 Harley-Davidson motorcycles in the second quarter.

Posted by: Regis | Apr 26, 2007 12:36:20 PM

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