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Masco Cabinetry

Masco Cabinetry. Business Review Letter May 2011. Promotional Environment. Situation: Aggressive Competitive Environment AMWD Lowered Price Position Clutter and complexity have increased Competitors strategy unclear Home Centers driving additional promotions Cost of doing business

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Masco Cabinetry

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  1. Masco Cabinetry Business Review Letter May 2011

  2. Promotional Environment Situation: Aggressive Competitive Environment • AMWD Lowered Price Position • Clutter and complexity have increased • Competitors strategy unclear • Home Centers driving additional promotions • Cost of doing business • Participating in additional incentives • Designers pushing “best value” • Selling what is easiest to close • Multi-layered promotions KraftMaid Activity • Home Centers • Promotions in place almost constantly • Spikes at end of promo period • Extreme % off on select door styles mid-March through April (gained 3 share points at THD) • Dealers • Lower level of promotions in January compared to Home Centers • Spikes at end of promo period • Planning promotions further out with some flexibility to adjust Cannot Sit on the Sidelines

  3. Promotional Environment Promotions drive volume – must pay to play

  4. Promotional Environment Financial Impact of Promotions • Revenue during non-promotional periods is extremely depressed • Some level of participation is required • Increased revenue penalty during non-promotional periods • Extreme levels of promotion are dilutive • Door style promotion gained $4.7 million in revenue with an impact of ($3.4) million to contribution margin Need to match competition 600bp decline in CBM for doorstyle promotion period Other Impacts – Actively working to improve coordination and limit impacts • Efficiency - Operations and Customer Care dealing with massive demand spikes during promotional period followed by troughs afterwards • Stock Outs – Shortages of decorative hardware and plywood due specific promotions • Lead Time – Uneven demand patterns creating swings in lead time

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