Home-improvement spending by homeowners increased 4.3% in 2005 from the previous year, according to a January report by Harvard's Joint Center for Housing Studies. That's good news for Aurora, Ill.-based flooring-accessories manufacturer Roanoke Companies Group Inc. The strong remodeling market has helped the company's revenue grow an average of 40% annually since 2000, says company President and CEO Richard Tripodi.
Roanoke especially has benefited from a high number of kitchen and bathroom remodeling projects because it supplies products such as grout, sealers, caulking and adhesives used in flooring that's typically installed in bathrooms and kitchens. Some of Roanoke's largest customers are The Home Depot, Lowes and Menard's.
With such growth, Roanoke needed more capacity, and so began construction in April 2005 on an expansion of its Aurora manufacturing and distribution facility from 160,000 square feet to 263,000 square feet. The expansion included adding new mixing equipment, material-handling systems and automated warehousing equipment. These are expected to reduce costs and increase efficiency and production. The expansion, which concluded last fall, cost upwards of $7 million.
Roanoke opted to increase its production capacity in the Midwest rather than at its Dalton, Ga., facility because of the location's proximity to trading partners, a strong labor market and access to a vast transportation network, Tripodi says.
"We are located approximately a mile from our corrugated supplier, which provides us great service, allows us great inventory control and better use of our warehousing," Tripodi explains. The company also has metal suppliers in the Chicago area and chemical suppliers in the Midwest that can deliver materials within 12 to 18 hours.
Roanoke planned the expansion with the intention of doubling its overall sales.
"We've made expansion plans in the past, but never enough to handle our growth, so this time we decided we're going to look out a few years and say 'OK this is what we need,' " Tripodi says.
Part of Roanoke's success can be attributed to the recent housing boom as more homeowners fix-up their homes in preparation for sale. But there is speculation that the housing bubble is ready to burst, and the Harvard home-improvement report shows the 4.3% increase in homeowner spending is down from a 20.4% increase in the first quarter of 2005.
"We are starting to see signs of softening in the remodeling market," said Nicolas P. Retsinas, director of Harvard's Joint Center for Housing Sales, in a January statement. "Rising short-term interest rates and slowing home-price appreciation have tempered homeowner spending on home improvements."
Despite the discouraging news, Tripodi says he expects company sales will continue increasing because during housing slowdowns, homeowners often invest in their current properties when they can't afford to purchase new homes. "Our business tends to do well in recessionary periods as well as boom periods for similar reasons," Tripodi says.
