Fortune Brands Home & Security, Inc. (NYSE:FBHS) Q2 2019 Earnings Conference Call - Final Transcript
Aug 01, 2019 • 04:30 pm ET
Thank you. [Operator Instructions] Your first question comes from the line of Tim Wojs from Baird. Your line is open.
Good afternoon, everybody. So maybe just to start off first on the market. I guess -- I'm curious kind of what you thought Q2 was really representative of. Is it just kind of a delay from some of the weakening metrics that we've seen in housing over the last couple of quarters? Or do you feel that just the underlying R&R market is maybe just a touch softer? I'm just kind of curious if it's more of a timing issue in your mind or if it's something that maybe that growth curve is maybe just a little less steep.
Yeah. I think effectively, the second quarter was softer and delayed because of the reacceleration we expected. We're seeing that now. I think we lost a quarter along the way here. So I think where we would have expected the kind of activity that we're feeling right now in late April and May, that's what we're experiencing. So that'll lead to, we think, a healthy fall building both new construction and R&R, but we've incorporated that, kind of that lost level of activity in the second quarter and slower ramp into the third quarter into what we're guiding. I think the market's still healthy. If you look at overall demand, both for new construction, especially at the entry level point, and R&R, it's still strong. I think there are parts of the country that it was tough to do R&R work, especially outdoor R&R work in late April and all of May. And that didn't start picking up again until June. So that impacted things like decking and doors and other outdoor activities.
But we think that three plus percent R&R growth for the year, accelerating into kind of a normal 4% to 5% in the next year, it's a healthy market. Clearly, the existing housing stock, turnover was a little softer. The impact of lower rates will eventually help that as housing price appreciation has moderated, both in new construction and in the existing housing turn. So all those things set up for better second half and we think a pretty healthy market. We're not calling for an enormous acceleration here. We're calling for a modest acceleration into the second half, and that's what our guidance has indicated. So...
Okay. Great. That's helpful. And then just maybe I'm curious to your view, just on a high level view on inventories, just kind of what you're seeing with your customers. You did note pretty good POS in Plumbing. And so just curious in some of your stock businesses, how you feel your customer inventories look right now?
Sure. Nick will address that.
Sure. Tim, how are you?
Perfect. Yes. I would say if you look across the inventories, it's pretty much leaned up. In the first half, I think as people are prudent and pull back a fair amount. So