Homebuilders across the nation are busy answering mending demand as consumers put more than six years of housing turmoil behind them and start to nest again.
Under those shiny new granite countertops are shiny new dishwashers and other appliances from the likes of Whirlpool (WHR). On top of those counters are gadgets such as the home soda-making machine by SodaStream (SODA) and juicers out of the Williams-Sonoma (WSM) catalog.
Consumers have clutched their wallets tightly for years, worried about a shaky economy. More recently, fears of tumbling over the so-called fiscal cliff kept at bay the urge to splurge.
But the economy is slowly improving. A debt deal in Washington and a resurgent housing market have helped boost a slew of appliance, home furnishings and related companies.
But the need to fill up new houses is not the only factor driving the group. Consumers are coming out of their shells. Homeowners have put off splurges for so long, many are just ready to buy.
"The momentum that's starting to build in the economy has really opened up availability for the consumers — who have actually had a higher percentage of savings over the last few years — to start being healthy consumers again," Martin Franklin, chairman of the consumer products giant Jarden (JAH), told IBD.
Jarden, which makes Sunbeam kitchen mixers and other household goods, is the top-ranked company in IBD's Consumer Products-Specialty group. Whirlpool and SodaStream are in the Household- Appliances/Wares group.
Williams-Sonoma, which owns Pottery Barn and other retail chains, is in the Retail-Home Furnishings group.
The scattered and strengthening stocks, and industry groups map out the edges of the improving economy and housing market. Whirlpool's revenue continued to decline in the third quarter, but its earnings have vaulted higher in the past three quarters.
Its household appliances group, ranked No. 23 on Friday, has held a strong position for the past several months.
Home furnishings retailers have flitted in and out of the top 50 industries over the same period, and currently rank No. 81. The broad-based specialty consumer products group, which includes — in addition to Jarden — makers of everything from baby monitors to kitty litter, lagged at a No. 101 ranking Friday.
Small Appliances Are Big Sellers Consumers collectively spent $457.8 billion on all types of appliances in 2007, according to Euromonitor International. The recession took hold in December of that year and, accompanied by massive waves of home foreclosures, put an end to the party.
But spending on appliances fell less than 5%, to a low of $441.7 billion, in 2009. In 2012, it rebounded to $468 billion — 2% above 2007 levels.
SodaStream is an IBD 50 stock with a top-tier 99 Composite Rating. The Israel-based company is working to show that its machines, which start at around $80, are more than just a fizzy fad.
The company blew away third-quarter estimates and raised its outlook for the year on strong sales in the U.S. More than half its revenue last quarter came from the CO2 canister replacements and flavor packs for making various drinks, showing consumers are using and reusing the devices.
"The view that, at least in the U.S., consumer interest is a fad that will fade ... is being proved wrong," Roth Capital Partners analyst Anton Brenner wrote in a client note.
The company's CEO recently told IBD that it's playing on Americans' eco-consciousness. Americans on average go through about 2,000 bottles and cans a year, the company says. Its pitch: One machine, and reusable SodaStream bottles, can cut that waste way down.
Kailing Cai, Euromonitor's U.S research analyst, said smaller kitchen appliances and less-costly home upgrades have shored up many retailers' sales during the housing downturn.
"They're things that are accessible for most consumers. It's much easier to do a new coat of paint, new dishes, new lighting .. . than a whole new living-room set," she said.
If the rebound in homebuying and homebuilding continues, it should contribute to bigger-ticket items, she said. Consumers who put off replacing aging microwaves and balky dishwashers could return to the market in 2013.
"While industry demand remains in many markets relatively weak, we are optimistic about some growth that we're seeing," specifically the U.S. housing market, said Whirlpool CEO Jeff Fettig during an Oct. 23 conference call.
Standard & Poor's estimates worldwide appliance demand will rise at a low-single-digit rate this year, and will be largely flat in the U.S. But Whirlpool — the largest company in the appliances group, holds a Composite Rating of 88. It has received rising attention as earnings turned around in the past two quarters from growth-based institutional investors, including CGM Focus Fund, Fidelity's Magellan Fund and Vinik Asset Management.
On the revenue side, appliance sales are getting some retail support from Home Depot (HD). The home improvement giant is building out new appliance showrooms that feature Whirlpool, as well as other major appliance brands.
But competition is picking up too. Samsung, locked in a fierce smartphone battle with Apple (AAPL), thinks it can become the world's top kitchen appliance maker by 2015.
The Korea-based electronics maker unveiled some refrigerators and other kitchen appliances loaded with screens and technological gadgetry during last week's Consumer Electronics Show in Las Vegas.
"I'm confident of Samsung becoming the world's top appliances maker by 2015 with $18 billion sales, as we set up a very well-structured framework for key products and moving step by step to the goal, first starting with fridges," Yoon Boo-keun, president of the division, told Reuters.
The costs of commodities like copper and steel that go into appliances — while moderating — also continue to climb, creating another potential head wind. With consumers still skittish and competition fierce, S&P doesn't see appliance manufacturers having the leverage to pass on those higher costs.
Mass Marketing, Unique Tastes In the houseware and furnishings sector, Bed Bath & Beyond (BBBY) has the top market share in 2012, with 10.2%, according to Euromonitor data. (The Netherlands-based cheap-chic haven Ikea holds the No. 2 share.) But Bed Bath & Beyond shares have struggled since management warned investors of a pending earnings slowdown in June. Earnings for the most recent quarter ended in November rose 8%. That was just above analysts' lowered expectations, but well below the 28% gain in the same period a year ago.
TJX (TJX) — which sells housewares out of its HomeGoods stores, and discounted clothing and housewares from its T.J. Maxx and Marshalls chains — holds the No. 3 market position with a 2.6% share. TJX is a member of IBD's Retail-Apparel/Shoes/Accessories group.
Consumers have embraced bargains. But shoppers haven't completely spurned upscale retailers like Williams-Sonoma, which ranked No. 5 in Euromonitor's data at 2.4% market share last year. And improved fortunes for housing should lift it further.
"As we look beyond the current holiday season, we increasingly believe that WSM and its Pottery Barn division are positioned well for 2013 amid a strengthening home market," Oppenheimer analyst Brian Nagel wrote in a client note just before the Christmas holiday.
The one hiccup he saw then was the rising number of promotions — one-day sales and deep discounts — on some goods needed to keep customers coming in the door.
But those higher-tier retailers have items that resonate with austerity-weary shoppers.
"They have a specific aesthetic," Euromonitor's Cai said. "I think that is something that's part of the zeitgeist right now. Consumers are interested in having products and designs that seem unique and not super mass-marketed."
