Egads: No more $150K kitchen remodeling
Wake up and good morning. So financial jitters and a stumbling bailout really are causing a disturbance in the force -- The Force -- that had seemed so far untouchable in the Tampa Bay area. We're talking, of course, about interior decorators spending gobs of dough on upscale homes around here. It really is a big part of our economy. One that now is apparently getting squeezed. Consider this anecdote from a Wall Street Journal story today:
"On Tuesday night, Christine Macholz of Spotlight Kitchen & Bath Galleria in Safety Harbor, Fla., was supposed to sign a contract for a $150,000 kitchen remodel that involved raising the ceiling, taking walls down and installing all-new cabinets and appliances. Then the client called. Citing stock losses, the client put the project on hold until after the holidays. 'You have to justify everything you spend,' says Ms. Macholz, who says her firm has seen a 20% to 30% decline in revenues over the past year."
Conventional wisdom and anecdotal evidence from local businesses like Gallery of Cabinets in St. Petersburg indicated remodeling activity had been holding relatively steady despite the general housing downturn. Some homeowners viewed remodeling as a cheaper alternative to buying a bigger home; others needed to make their homes more attractive to prospective buyers in a struggling real estate market here. But even before the credit crisis, the amount of money people have been willing to spend renovating has been falling. According to the latest report by Harvard University's Joint Center for Housing Studies, homeowner improvement will fall by an annual rate of 11.1 percent to $122-billion by the first quarter of 2009. The Journal article headlined "Bear Market Renovation" included this sub-head: As Business Dries Up, High-End Decorators Slash Their Budgets, Embrace Ikea. Well, thank goodness Ikea's arrival is less than a year away, right here in Tampa!
Here's another angle to moving away from the troubled housing scene. There's a new look at Tampa-based Walter Industries, the once vacillating homebuilder-turned-conglomerate-turned-coalseller-turned-energy convert. The company this week made some real decisions and decided to commit its future to metallurgical coal, the kind of coal used in making steel. The good news is Walter for years struggled as an unfocused mix of businesses and even put its coal operations up for sale after some mining accidents in Alabama. The bad news is Walter is putting a lot of its eggs now in one basket, so if steel demand sinks, then Walter's coal business dips with it. So let's see. ... Is it possible that Walter shares peaked at $111 only three months ago and now the company is trading at ... $35? Ouch. Here's the outline of Walter's plan to divest its financing business and here's the best remark from a conference call with analysts on Oct. 1, described by Walter chief financial officer Vic Patrick as a "watershed moment" for the company:
"So what will Walter Industries look like in 2009 following this transaction? Our company which entered the new millennium as a diversified conglomerate will be a pure-play natural resources and energy company."
Finally, some applause, please, to a MaketWatch story that bothers to point out that the one Wall Street firm that looks to be a winner in this bailout fiasco is Goldman Sachs! "Only Goldman, by virtue of its ($5-billion) investment from Warren Buffett and its ability to buy retail bank deposits, will be the last bulge-bracket investment bank unencumbered by commercial-bank ownership," says the story. Just to remind you: Who used to run Goldman Sachs and made his fortune there? Treasury Secretary Hank Paulson. What a stroke of luck!
-- Robert Trigaux, Times Business Columnist