Plavecsky's Ponderings By Jim Plavecsky
by Jim Plavecsky
March 26th, 2020

The Good, the Bad and the Unexpected

In December I wrote a blog entitled 2020: The Good, the Bad and the Ugly in which I talked about three factors that could come into play for 2020:

  1. The Good: the housing market and the general economy both looked strong;
  2. The Bad: unemployment was so low, so we would have difficulty finding people to work in our door and window plants; and
  3. The Ugly: the possibility of an unknown or “unexpected” factor that could come into play to cause a significant downturn.

Well, guess what?

I promised myself that I was going to give readers a break and not mention that phrase that we have all been hearing about like 100 times a day that begins with a “C” and ends with a nine, because I am so sick of hearing it that I swear I’m going to explode. So, in this blog I am simply going to refer to it as the “Unexpected.”

Yes, I think we can all agree that the Unexpected is happening. I think we would also agree that whatever sales and profit numbers that we have forecasted for 2020 should be thrown out the window. (Excuse the pun!)

So, what happens now? Well, here is my prognosis for the balance of 2020:

  1. We will overcome the Unexpected. Americans are resilient. We have seen far worse. The Unexpected happens for a reason. It brings us together, forces opposing ends of the political spectrum to agree on things and moves us forward. Consider two gamers playing Xbox, arguing over who is better. Turn the power off and they will both say the same thing, “Turn that power switch back on.” The Stimulus Package is indeed the government’s attempt at turning the power back on! Perhaps a Higher Power is teaching us a lesson knowing that it will unify a nation. Everybody is hoping and praying that the Unexpected goes away by mid-April or May, but with a vaccine being a year away, we may get a reprieve this summer with a second wave of the same next winter. The Unexpected is something we are just going to have to deal with over the next year or so, while finding a way to resume some sense of normalcy so that the economy can get back on track. My prediction is that the Unexpected will indeed subside due to the extreme measures we have practiced early on, and that most of us may cautiously resume some sense of normalcy in May. I say cautiously because some new habits have been formed that will stay with us forever. Social distancing and hand washing are going to be new habits that may stick with us for a long time. I myself have always been a fist bumper as opposed to a hand-shaker, and I fully expect to see many converts in the future. I used to laugh at that funny commercial, but I am now going to squeeze my Charmin every chance I get! On a more serious note, many businesses may not be able to fully recover, so many people will still be out of work. This may end up being good news for door and window companies down the road, as we should have a larger labor pool to source from, unlike we did over the past few years.
  2. Business is going to take a sharp hit due to the Unexpected. However, it will bounce back nicely. The shutdowns simply cannot go on indefinitely. Sooner vs. later the government will have no choice but to open up the economy again. People need to put food on the table and pay their bills. I am not sure to what degree this new stimulus package, costing $2 trillion, will help. I am waiting to see the details. Business in March is surprisingly strong, but April will be a different matter. Right now, most of my customers who are still allowed to operate are surprisingly busy due to orders that are still in the pipeline. The exceptions are door and window companies that sell directly to the consumer. Their business has already fallen substantially. Homeowners simply do not want installers in their homes. But those feeding off the pipeline that goes to distributors and dealers are still busy. However, I expect April to show a sharp decline for everyone as the pipeline eventually runs dry. New construction still seems strong, but the replacement market is taking a hit. Eventually, when we get back to normal, the consumer-direct businesses will rebound first and then those servicing the distributors and dealers will come back to normal as well. Yes, the pipeline will soon get turned back on, and when it does, you better be ready. The late summer and fall may end up busier than normal due to pent up demand. With vacations being canceled and homeowners penned inside their homes, many are now noticing that their windows may need replaced and they just may have some extra cash that was originally targeted for vacation. Yes, when you are locked in your home for weeks on end, you do tend to notice things that need to be upgraded.
  3. The Unexpected will cause a wave of more conservative spending habits at the corporate level. Companies that have been heavily leveraged will seek to be more conservative based upon the uncertainty in the marketplace. Orders for new equipment will take a hit. I myself have already seen an uptick in the demand for used equipment as opposed to new equipment for several reasons. My customers will be seeking to reduce debt based upon market uncertainty brought on by the Unexpected. Also lead times for new equipment are getting even longer due to recent shutdowns of some equipment manufacturers. Used equipment can fill a gap there as well.

So, just when it seemed that 2020 was moving in the right direction, the Unexpected that I talked about in a December blog did indeed come into play. But we will get through it as a nation and as an industry and in the long term it will end up bringing us closer together and making us stronger in the long run!

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