Rising costs, labor shortages, tariff concerns, waning consumer confidence…those are the headwinds offsetting record levels of home equity, an aging housing stock, steady demand and a robust luxury sector that’s almost single-handedly managing to fuel kitchen/bath market growth.
And those are the very same headwinds stoking concerns – and stunting 2025 profit forecasts – among design firms polled by Kitchen & Bath Design News, industry-related trade associations and market-research firms (see related story).
According to KBDN’s survey findings, for example, a majority of kitchen and bath design firms report that they expect their company’s annual revenue to either decline from the previous year, or remain static in fiscal-year 2025. Profit projections mirror similar sentiments, as do forecasts for lower gross-profit margins this year.
“It’s hardly a surprise that savvy design firms have implemented strategies to mitigate the impact of rising costs, tariff concerns and other market headwinds.”
Perhaps of equal concern, business forecasts, by and large, have grown increasingly tepid as the year has progressed. Indeed, roughly half of the design firms surveyed by KBDN report that 2025 revenue and profit estimates have substantively changed in the past six months, with many companies noting that their projections are more pessimistic now than at the outset of the year. In contrast, less than 20% of surveyed companies report that their 2025 projections are more bullish now, while nearly half say that the current business climate is too unpredictable to be certain.
All of this, while unsettling, should hardly come as a major surprise.
For months already, it has been reported that both consumers and business owners alike are increasingly feeling the pinch of rising costs and growing uncertainty, particularly in light of shifting U.S. trade policies and their potential effect on tariffs. Indeed, median spending on home-remodeling projects, while still above pre-pandemic levels, is reportedly well below its 2023 peak. At the same time, a growing number of homeowners – buffeted by stubbornly high interest rates, recession fears and inflationary pressures – are increasingly reassessing their remodeling priorities and deferring major expenditures, while focusing for now purely on preventative maintenance. The on-again, off-again nature of tariffs is also roiling supply chains, stunting housing affordability and impacting prices for cabinetry, plumbing fixtures, appliances, windows, flooring and other key products – which have already risen an average of 40% in the five years since the COVID-19 pandemic.
Yet despite these myriad challenges, the state of the kitchen and bath market is far from bleak – thanks in no small part to the resiliency of companies, large and small, that have implemented any number of strategies aimed at blunting the impact of market headwinds and keeping their businesses on solid footing.
One out of five design firms surveyed by KBDN, for example, reports that its stockpiling key products and materials in anticipation of tariff-driven price hikes, while a significant number say that they’re actively seeking alternative product suppliers, stepping up their advertising/marketing efforts, narrowing their offerings when pricing is an issue and attempting to effectively streamline costs.
To address client recession concerns, companies report they’re also lowering their markup on certain remodeling projects, diversifying to help keep pipelines filled and shoring up relationships with employees and subcontractors. Still others are focused on selling higher- margin projects, while experimenting with fixed-fee design rates instead of typical hourly rates, and studying the benefits of joining a buying group to obtain bulk pricing for key products.
Economic downturns, evolving fashion trends, new forms of competition, changing lifestyles and demographics, once-in-a-lifetime pandemics…kitchen and bath design firms have years of experience navigating market headwinds and adapting to change.
Given that lengthy track record of suppleness and resilience, there’s no reason to believe that savvy business leaders won’t similarly find ways to weather the challenges of 2025.
