AMWD
#That's the multi-billion dollar question because the analysis coming out of this recession they are so far removed from any recovery we've ever had in the past.
And the variables even the builders are facing today on labor shortages and land costing versus kind of our GDP numbers, inflation numbers and so forth, the things are almost out of balance from where you traditionally like to look at the macroeconomics of our industry.
Typically, the things we look at, I mean housing is, if you can go back to the pre-recessionary numbers that we follow pretty closely and our analysts would typically follow this, is housing is a very significant impact on the economy as a whole and obviously we're linked directly to that, tied very closely to it real-time, so we watch that.
I think it's something on a market-by-market basis that is a leading indicator from a consumer confidence perspective and their willingness to go out and make that purchase and that investment whether it be at a first-time homebuyer or a buy-up consumer, or somebody out just upgrading.
Today it's continuing to grow.
If you take out the dynamics of the labor shortages and so forth, the industry actually is very strong.
Good or bad even with those barriers they are doing some throttling in the markets such as the labor shortages that's really only throttling the market down to the low-single or low-double digit level which by any standards is still considered healthy growth.
We're watching the factors out there.
I mean, the impact of the global economy or the China economy, obviously you get down in areas like Houston with the impact of fuel.
Fuel has a positive and a negative.
Industries as a whole, that's got some challenges and particularly in a regionality perspective as a whole you expect some of that discretionary income to get back in the hands of consumers and they start to make choices to go out and upgrade kitchens and so forth.
We have not yet seen that.
I do believe there is still a hesitation in a lot of consumers' minds to go out and spend kind of that mega discretionary income.
You're seeing it in appliances, you're seeing it even in automobiles, but those are all things that at some point they break down, they have to replace.
You can always put a couple of additional screws into your cabinet door and make it hang on for a few more years.
Overall though, I mean, if you look at the housing starts and where we're sitting today versus getting back up to that 1.1 million, 1.2 million on the single family starts, you have to believe.
Our confidence in the industry is very, very strong.
There could be some points of time over the next three years where we level out and potentially look at a recession, but on my personal opinion to be small, there's a lot of pent-up demand out there and yes some of that's been filled by multi-family and rentals and so forth, but we've got to get back up to that 1.1 million to 1.2 million single family start just to sustain the population growth in America.
So, it will come.
I think there is going to be a lot of bumps in the road, but I think we have to hang on, we have to be flexible and I think the growth is going to be here to stay for a while.
Yes, this is <UNK>.
We got more vocal on Waypoint as you mentioned roughly three quarters ago just due to its scope now and its size within our business, it's approaching 10% of our total revenue.
As far as the outlook, I mean, as I mentioned we do expect it to continue to be a growth engine.
<UNK> mentioned we are going through our budget process now and part of that budgets, we're actually looking even longer term strategically and where we truly feel Waypoint can go.
We are very optimistic with regards to the growth of Waypoint giving you specific analogies.
We're in the earlier layer, mid innings of a game.
It's hard to say.
I will definitely say we feel it's a strong growth opportunity for us.
I mean when you look at the reality, we just started the business really five years ago.
It took us, I'll say, three years to get up and running but within the past couple of years, really grown this to almost 10% of the business and in our opinion has been pretty amazing, just reflective of our platform and the incredible group of sales folks we have out there that believe in the product and the service.
So at this point, we kind of openly communicated in the past we are where we are with regards to the number of dealers.
I think we don't have a big plan to go out and aggressively grow the number of dealers, but we do feel there's opportunity to continue to penetrate within the dealer base we have and that is the greatest opportunity we have.
So there is going to continue to be growth there.
Comps will get tougher.
Obviously you can't go out and continue to grow market share the way we've grown it.
So comps are going to get tougher, but we continue to have a lot of confidence in it.
This is <UNK> again.
Demand is always volatile and you have to remember with us we are working on offers, as <UNK> mentioned early on, from the time that we actually get the feel like the new construction market there is a lag from when they actually get it from that and we start seeing the impact on our demand, even when the home center or the dealer business when we actually get the incoming order to we when produce and ship it, there is a lag of roughly 30 to 45 days.
So that one in itself drives volatility.
So we love to load our production system any time you get into the holiday season, obviously the last couple of weeks of December, volumes particularly fall off tremendously even in new construction.
So if you look at the quarter as a whole, it's really hard to give you any dynamics or trends that occurred.
There were some ups and downs.
I think home center definitely saw a stronger January than what they probably would have anticipated that offset maybe a little bit lower.
You saw a couple of them talk about pullback or pull-forwards in October that impacted November.
We see some of that that's really driven by the promotional calendars that they run.
So if they run a promotion our incoming will go up quite a bit and then for the weeks following the promotion, they will fall back off.
But no really specific trends I would really say other than what you mentioned on weather.
I won't really say it was a favorability other than that it's favorable with regards to if you look at the comps of prior years I can't comment ---+ I don't know exact whether a year ago, but we have been pretty fortunate this year with regards to weather.
I think the advantage of the weather is that particularly on the builder side, and even on the consumer side, that it gets folks out and allows them to keep that buying process going.
So we don't actually ---+ when we put our budgets together, we don't budget an impact of weather.
So I think it's just the risk that we assume and I'd probably say the same for builders and so forth is that nobody really goes out and creates a plan for weather.
So I think it has ---+ to me this has not had a negative impact, it basically is where we'd like it to be relative to our plan.
Thanks.
You mean with regards to promotion.
(inaudible)We sometimes try to figure out the psychology of competitors, but I really don't know.
I mean I can make assumptions.
I have no idea what their overhead leverage looks like.
I have no idea out there what their trade-off margin versus going on and get incremental revenue coverage on overhead and so forth.
So, where we are and our position right now, I don't feel it's ---+ strategically we don't feel it's the right time to go out and do heavy promotions.
I think the promotions have shown that we're not getting any additional consumers in the door.
So unfortunately all it does is kind of move consumers around.
What we're really focused on and what you see due to our over indexing is that we are truly focused on trying to improve our competitive advantage and trying to improve the incoming customer base for our customers.
So the promos you see, they get more aggressive I can't really explain why.
That's really a question our competitors will have to answer.
But we did ---+ in my mind we responded appropriately conservatively on this one.
We always will respond appropriately in the future.
But you'd really need to ask them that question the why.
We really don't know.
I'm hoping it's a hiccup.
I mean logic says due to the efficiencies of the market I just find it hard to believe it'd be anything long term.
And we saw ---+ you have to go back to that ---+ as you recall, <UNK>, go back four or five years ago, when we were really, really heavy into the promotion that's come way down even today.
So the logical side of me says that there was a hiccup, but we'll see.
I'm hoping it's hiccup.
And what you see in the dealer world tends to be more normalized.
You get some one-offs and so forth but it appears to be more normalized than what you were seeing in the home center side.
It's a good question.
Honestly it's something we're asking ourselves now to step back and what's not in the formula right now obviously is what type of future investments we have to make internally to continue to grow our business and to grow obviously return for shareholders and what impact that can have.
So we feel good about where we are.
Where that steady-state mode is, honestly it's something we are spending a lot of time now thinking about in how future investments can impact that.
I'd like to come back and tell you that it may be slightly higher than that.
But we really need to do our ---+ continue to finish up our strategic work before I can answer that question.
Hi, <UNK>.
Thanks.
I'd really like deferring answering that question with any specific details until next quarter when we wrap that process up and we complete our fiscal year we will start talking about our fiscal year 2017 projection.
But as you've seen and as we even talked at the conference at KBIS there are some pretty standard assumptions that are being battered around with respect to calendar year 2016.
Most folks are talking about a housing start number in the high-single digit to 10%.
So let's call that a 9% to 11% type range.
The remodel industry most folks are in kind of low single digits, 3% to 5%.
Those are probably not unreasonable expectations for folks as they think about calendar year 2016.
I believe you also have wedged in your risks and opportunities, a risk that always would be out there, there would of course be inflationary considerations.
We had a stable environment with respect to input cost and fuel actually has been running over the last bit.
If those were to go the other way, of course that would be a significant risk or if overall demand was to spike either way that could be a risk or opportunity depending on how you're able to take advantage of that.
So those are really be my generic comments at this point of time and then we'll give you a little bit more color on that as we wrap up our process here over the next couple of months.
Yes, so again on the outlook as far as our capital budget goes, we are in the midst of that process as well.
Certainly it would be a step back from the run rate.
So we had $30 million that we spent really over two fiscal years with respect to South branch.
You would pull that out for the expansion fees.
But we're also taking a hard look at productivity projects, our replacement capital, capacity capital et cetera to make sure we're well positioned to take advantage of the overall marketplace.
So I don't think it'll be as low as if you went back, say, three to four years, when the market was depressed and we were restricting spend.
I think it'll be higher than that, but not to the levels we've seen with our recent South branch spending.
I think it's a pretty clean comparison.
Of course, it makes it a tougher comp for us.
That was really the first quarter where we really started to accelerate and trend positively.
We saw things turn from an inflationary standpoint.
We were better leveraging our infrastructure costs on our new construction business as well as our manufacturing footprint.
We've been able to continue to manage that throughout fiscal year 2016.
So, I think it's a reasonable comp period to use.
Thank you.
Thank you.
Since there are no additional questions, this concludes our call.
Again, thank you for taking time to participate and speaking on behalf of the management of American Woodmark, we appreciate your continuing support.
Thank you and have a good day.
