In the heart of the region's technology center sits yet another firm making its mark as a hot growth company. But this company has nothing to do with electronic commerce. It's selling good old-fashioned cabinets.
Buoyed by a strong economy and a home remodeling boom, Winchester-based American Woodmark Corp. was named one of the hottest growth companies this year by Business Week magazine. One of the company's strongest segments of growth has been its sales to do-it-yourself retailers such as Home Depot Inc.
"The biggest thing growing is the impact of home centers," said James J. "Jake" Gosa, president and chief executive of American Woodmark. "We've gotten prime space with both Home Depot and Lowe's [Cos.]. Our growth rate has mirrored theirs."
That growth is shown in Woodmark's sales, which went up about 10 percent last year to $241 million, and are predicted to increase by almost 25 percent this year, to $320 million. Last year, the company, which went public 13 years ago, posted a 23 percent increase in net income, to $13 million.
"They had 42 percent of top-line growth in the last quarter," said Ian Jacobs, equity analyst with Sidoti & Co. in New York.
The company provides wood cabinets to all 762 Home Depot stores nationwide and all of Lowe's 480 U.S. stores. The placement of its cabinets in Home Depot stores has helped Woodmark's growth considerably.
"Home Depot is the Goliath of the home-center market," said Jacobs of Sidoti & Co. "In the past 15 years, they have taken 35 percent of the kitchen cabinet market away from other distributors."
About 50 percent of all kitchen cabinets are sold through home centers, he said.
Woodmark has been able to keep pace with the industry's growth by producing better-quality cabinets at a quick pace, Gosa said. The company created a new business model several years ago that allows it to ship the cabinets directly from its plants, cutting out distributors, he said.
Customers can receive their cabinets seven to 10 working days after Woodmark gets their orders. "Kitchen cabinets have been typified by slow-moving companies with excess capacity," Jacobs said. "American Woodmark is much more efficient."
Chairman William F. "Bill" Brandt Jr. led a management buyout of Woodmark in 1980 when it was owned by Boise Cascade Corp. At the time, Woodmark had approximately $30 million in sales. Brandt and the other new managers restructured Woodmark in 1989, and it has been growing ever since.
As part of the changes, Woodmark created new cabinets to be installed in other parts of the house and marketed them to home centers and cabinet dealers. It went from making 18 styles of cabinets to more than 100. It also makes accessories that include spice or towel racks, slide-out wastebasket units and wine racks.
Woodmark also designs different lines consisting of the more expensive "Designer's Choice" and "Designer Series," and the less expensive "Value Line."
"They have done a good job of covering just about all segments of the market," said Dick Titus, executive vice president for the Kitchen Cabinet Manufacturers Association, based in Reston. "They have made some good moves being competitive, winning the bidding to get into the big [retailers]. You chalk that up to some visionary management and good implementation."
The company also has an upper hand in the kitchen cabinet market because it "builds more assembly plants and warehouses in key parts of the country," Titus said. Smaller cabinet makers tend to only go through distributors.
American Woodmark operates eight manufacturing facilities in Arizona, Georgia, Kentucky, Virginia and West Virginia, and other states across the country. The company plans to expand its manufacturing capacity even more in the upcoming years, Brandt said.
The kitchen cabinet market in general has had a good few years, Titus said. "The economy has just raised the level [of sales] for everyone," he said. "Not only has the new housing market been strong . . . remodeling continues to grow and has a terrific potential for future growth."
First-time home buyers are purchasing older houses and spending money to renovate them, Titus said. Many buyers, he said, are "basically tearing down existing houses and building a new house," thus increasing cabinet sales.
"There has been a strong market for products like ours these last few years," Titus said.
A Look at . . .
American Woodmark Corp.
Business: Manufactures kitchen cabinets and vanities for the remodelingand new home markets.
Chairman: William F. Brandt Jr.
President, CEO: James J. Gosa
Ticker symbol: AMWR on the Nasdaq
Web address: www.americanwoodmark.com
Source: Company reports, Bloomberg News
CAPTION: James J. "Jake" Gosa, president and chief executive of American Woodmark Corp., says the company has grown along with home-center retailers: "Our growth rate has mirrored theirs."
CAPTION: Gosa's company is known for its efficiency: Customers can receive their cabinets in seven to 10 working days after Woodmark gets their orders.