Credit These Words

Right now, we don’t need a take-those-limas-and-like-it approach, because we know that business isn’t the same as, say, two years ago. And it’s not time to start peering into the abyss and describing what it’s like to just keep falling. We’re looking at a readjustment, not a disaster.
Readjustment, however, doesn’t grab the attention like disaster. Or housing bust. Or recession. Or, on some occasions, depression. It’s easy to conjure up awful images on the future of construction and, along with it, the U.S. stone trade.
The natural reaction is to get conservative with your business. Personally, I don’t find conservative to be a dirty word at all, if used correctly. It doesn’t hurt to be prudent, but there are also times when penny-pinching leads mainly to sore fingertips.
For one thing, let’s take a look at one of my favorite bugaboos for our current economic state: the housing bubble. We built too much and we can’t sell all of them, and bunches of us are heading for the poorhouse and that big plate of beans. It’s just horrible.
It’s also more than a little on the far side of inaccurate. Usually, a housing bubble goes pop when the inventory – the number of properties available to buy – grows faster than actual demand. Too many houses lower the value of all homes, and the number of new-home starts slow down.
This time, the downturn isn’t caused by too many houses. Instead, it’s the disappearance of eligible buyers and, more importantly, the funds they need to buy properties. In other words, it’s not that we built too many nice homes; we ran out of money to lend to own them.
The deflation of the credit bubble, which is a term that’s literally on the money, isn’t limited to housing. For example, I actually read the huge annual report a few months ago for my personal money-market account, which is based on the financing arm of Ford Motor Co. It painted a not-too-bright picture of finding new money to lend to people for buying new Focuses and Explorers, which also means the interest I’m earning may lack some pep in the near future.
Much of the speculation about the impact on the housing industry came from reports about The Home Depot Inc. and Lowe’s Companies Inc., the parent companies of the omnipresent big boxes full of wood, nails, roses, tools and, yes, stone. The words significant downturn and problems with cabinet sales aren’t exactly friendly for associated goods, such as stone countertops.
These insights came from something called guidance reports, where industry analysts get on big conference calls with company executives to ask pointed questions. Since Home Depot and Lowe’s are public-stock companies, the execs are obliged to do this, although they also start off by reading statements up to 20-minutes long to possibly wear down the lesser listener.
Transcripts of these calls appeared on the Internet. And, yes, officials from both companies noted that areas such as kitchen and millwork weren’t doing as well as last year. However, nobody reported any drastic dropoffs, and overall business was ahead of 2006 in some areas, such as the Ohio Valley.
And the big news about “cabinets” at Home Depot? It turns out that the chain decided to phase out the cheaper ready-to-assemble cabinet kits they’d been selling, in favor of pre-assembled pieces. Revenues in that area are behind last year’s numbers, but kitchen remodeling still looms large in Home Depot’s future plans.
You’ll hear plenty of words in the months ahead, although turnaround isn’t likely to be one of them in the short-term. It’s a cinch that the almost unrestricted boom with stone and new-home construction is going to slow down, although it’s been my perception that tract- and spec-home work aren’t the meat-and-potatoes of most fabrication shops.
The real test will be with custom construction and remodeling, and those are cash or home-equity-loan propositions. The word here is caution, as consumers try to sort out their financial positions. Images of bank runs (as with Northern Rock in the United Kingdom) or moribund quarterly returns on investments won’t make them feel good, although this will likely make them wait on work instead of canceling orders.
The thing to avoid, as far as the stone trade, is becoming reactionary. The growth curve may flatten a bit, but it’s still headed up. What we’re seeing isn’t the start of a long-term problem, such as a lengthy recession or an out-and-out depression.
The best watchword may be careful; give machine purchases or business expansion plenty of thought, but don’t stop. There’s an old adage that you can’t cost-save your way to a profit; you grow by moving ahead.
So what’s my call? My business is words; I use what I need, and sometimes I employ extra, but I don’t waste them. And, I make them count.
It’s the basis of my outlook for the stone industry as well. Don’t go overboard, but don’t pull back, either. It’s not hard to find sure footing as long as you remain watchful and keep moving ahead.