Strategic Exchange - January 2012

By Kemp Harr

 

At Floor Focus, we’re junkies for good research and we’ve always believed that you’re only as smart as what the market tells you. Recently we were given a preview of market research data and were able to peer into the minds of 700 consumers who had either bought flooring in the last 12 months or were planning to buy flooring in the next 12 months. Interestingly enough, those planning to buy far outnumber the ones who have already bought, by a greater margin than at anytime in the last six years. 

Another important nugget is that the three most influential resources used to gather information during the selection/buying process were: 1. Recommendations from friends and family; 2. Product displays in stores; 3. Websites from major home centers. So, if you’re a retailer, making sure your clients are happy and that they love the flooring they’ve selected is critical, and making sure your store’s merchandising system is uncluttered and efficient is also important. 

When consumers are asked what the most important criteria are for selecting a floor, they rate quality, aesthetics and durability ahead of price, and as you scroll down the top 16 items on the list, “made in America” is number 14. And further down from that is sustainability and even below that is a salesperson’s recommendation. One more important comment on price before we leave that topic: not only is price not one of the top deciding factors in the selection process but it is less of a factor today than it was two years ago. And while the importance of price has gone down, durability and lasting beauty had gone up.

When asked what room they were selecting floors for, the top five rooms on the list (in order) were bathroom, living room, family room, kitchen and master bedroom.

One disturbing and yet understandable statistic dealt with where the consumer first started shopping; 66% start with the home center, 16% start with a specialty flooring story, and 11% start online. Granted, a higher percentage of shoppers who started shopping at the specialty flooring store actually ended up buying there (82%). But home centers do a surprisingly better job of closing their customers than one might think (75%).

When asked whether social media was a factor in the decision making process, only extreme social media users said it was a factor, and demographically they tend to be younger in age.

PRELIMINARY YEAR-END NUMBERS
Santo Torcivia’s December market report released year-end dollar consumption figures for the U.S. by flooring category. Carpet and rug is up 1.7%, hardwood is up 1.2%, ceramic tile is up 5%, resilient flooring is up 2%, and laminate is down 11.8%. 

These laminate numbers are somewhat surprising. The laminate category is being hurt from two directions. LVT visuals are just as realistic without the acoustical issues that are typical with laminates, and pricing for engineered hardwood is competitive enough for people to buy the real thing. 

Another item that caught my eye is the import numbers for tufted carpets and rugs, which are up 13% year to date on top of a 17% increase in 2010 over 2009. For 2011, India leads the growth with a 16% increase and that’s mostly rugs. However, imports out of China are up almost 14% and that’s more likely a mix of broadloom and rugs.

You can’t help but note that the top line revenue numbers for the home centers are outpacing the overall retail figures and the flooring store numbers. Year-to-date, the home centers have grown 4.9%, while overall retail is up 3.2% and flooring store sales are down 3.9%. What you can’t tell from those numbers is whether the flooring department within the home centers continues to track with the rest of the store. Our last good estimate was that the flooring department represented about 6% of the overall number. Conversations we’ve had with a few key flooring suppliers to the home centers tell us that business within the home centers continues to outpace what they are seeing in the overall market.

Santo points out that the U.S. dollar has bounced back, which makes exports more expensive and imports cheaper. 

Dollars spent on consumer advertising by flooring companies is up 6.8%, which would seem to indicate that they’re betting that demand will improve in 2012.

BLUE RIDGE CLOSES
It was sad to see Blue Ridge Carpet Mills close late last year. Blue Ridge, a commercial carpet mill based in Ellijay, Georgia, operated for 43 years, with peak sales in 2005 at over $50 million. 

The company had primary focus on the commercial office business, a secondary focus on retail floors and it was known for its patterned broadloom products. In 2002, Blue Ridge entered the modular carpet sector when it acquired Lowe’s Carpets.

Blue Ridge struggled throughout the recession and wasn’t able to hold on long enough for the market, and in particular the corporate office sector, to recover. The demise of the company was due, in part, to the fact that it wasn’t vertically integrated and had only one plant, so it couldn’t consolidate operations to cut costs. And, while the company’s management was talented, much of its equipment was dated. For several years, Blue Ridge was able to develop very distinctive products but wasn’t able to carve out a sustainable following that could carry it through the downturn. In the end, I’m not sure if it was the lack of A&D connection with the folksy brand image or just too many other mills with the same look and a better balance sheet. I do know that the company didn’t have the resources to either invest in its brand or to build out a competitive sustainability platform—both of which are necessary to compete in this market.

Blue Ridge opened its doors in 1968 as Davis Mills with a Small Business Administration loan to its founder, Ralph Davis. Through its history, it was owned by the Lowy Group (a floorcovering distributor/wholesaler based in St. Louis); a private equity firm in Houston, Texas; and River and Associates based in Chattanooga, Tennessee. Mike Gallman, former CEO, spent 21 years at Shaw Industries before taking the helm at Blue Ridge in 1998.

CHANGING OF THE GUARD
The recent announcement about the two new business unit leaders at Mohawk and Dal-Tile brings to light the abundant changes in key leadership positions within the manufacturing sector of this industry. One of the most interesting details is that all of these new leaders are flooring industry veterans. With Mohawk, Frank Peters is stepping down, and 46 year old Brian Carson, who spent 16 years at Armstrong, is taking over as president. At Dal-Tile, J.T. Turner Jr. is taking the helm as Harold Turk steps down. In, J.T.’s case, he’s been with Dal-Tile for 21 years.

At Mannington Mills, Tom Davis is retiring after 18 years and Russell Grizzle is taking over as president and CEO. In this case, it appears that chairman and owner Keith Campbell likes the Milliken leadership training system. Tom came over from Millken 18 years ago and Russell spent 31 years at Milliken prior to making this move.

We recently noted that James Lesslie, who started in the fiber business at Allied Signal 29 years ago, spent ten years at Queen/Shaw and most recently seven years at Beaulieu as COO, has now joined Bob Shaw at Engineered Floors as the assistant to the chairman.

Earlier this year, Paul Murfin, who spent four years at Beaulieu and six years at Armstrong, took the helm as president of IVC.

Brad Townsend recently took the vice president of sales role at J&J Industries after spending 27 years at Shaw. 

David Vita, who now holds the top spot at Beaulieu Commercial, spent 22 years at Shaw before making the switch.

And Lindsay Ann Waldrep recently took Crossville’s marketing vice president position after spending six years at Mohawk and four years before that at Harris Tarkett. 


Copyright 2012 Floor Focus 



Other Archived Articles

Trade Sales & Manufacturer Shipments Edge Down in January   Full Article
Washington, DC, March 12, 2015—The combined value of distributive trade sales and manufacturers’ shipments for January was estimated at $1,302.5 billion, down 2.0% from December 2014 and down 0.3% from January 2014, says the Commerce Department.

Retail Trade Sales Down from Previous Month But Up YOY   Full Article
Washington, DC, March 12, 2015—Retail trade sales were down 0.6% (±0.5%) from January 2015 but up 1.0% (±0.9%) over 2014, says the Commerce Department.

LL's Free Air Quality Testing Won't Meet CARB Standards   Full Article
New York, NY, March 12, 2015—Lumber Liquidators will offer free indoor air quality testing for its consumers--conducted to workplace standards,-- but OSHA's thresholds for formaldehyde in the workplace are not as stringent as CARB's for the home.

Parterre's Vertu Resilient Plank Wins ADEX Recognition   Full Article
Wilmington, MA, March 12, 2015—Parterre’s Vertu Resilient Plank won two ADEX awards.

Consumer Survey Reveals Optimism about Housing Market   Full Article
Washington, DC, March 12, 2015—Consumer optimism toward the economy is growing and appears to be contributing to further improvement in overall housing sentiment, according to results from Fannie Mae's February 2015 National Housing Survey.

Millennials Account for Largest Share of Home Buyers, Says NAR   Full Article
Washington, DC, March 12, 2015—The millennial generation represented the largest share of recent buyers, according to the 2015 National Association of Realtors Home Buyer and Seller Generational Trends study.

Three Tarkett Rubber Textures Win ADEX Platinum   Full Article
Chagrin Falls, OH, March 12, 2015—Tarkett received the Platinum Award for Design Excellence (ADEX) for its new range of rubber textures: Brushed, Concrete and Leather.

Fuse Alliance Focuses on Digital Marketing to Raise Awareness   Full Article
Laguna Niguel, CA, March 12, 2015—Fuse Alliance, a member-owned organization of professional, commercial flooring contractors, unveiled a next generation public facing website that clarifies the group's target audience and services offered.

U.S. Container Imports Down Over 5% in 2015   Full Article
Minneapolis, MN, March 12, 2015—Total U.S. container imports are down over 5% this year, compared to January and February of 2014, reports Zepol. Nearly the entire decline in imports is attributed to the West Coast ports of Los Angeles and Long Beach.

Armstrong Top Execs Offered Retention Award to Stay Through Spinoff   Full Article
Lancaster, PA, March 11, 2015—Armstrong World Industries is giving three of its top executives an incentive to stay at the company through the spinoff of its flooring business into a new, independent company next year, reports Lancaster Online.

Small Business Optimism Edges Upward   Full Article
New York, NY, March 11, 2015—U.S. small business optimism edged up in February amid signs of tightening labor market conditions, bolstering the view that a recent slowdown in economic activity will be temporary, reports Reuters.

LL Class Action Lawsuits Extend Beyond Formaldehyde Issue   Full Article
Toana, VA, March 11, 2015—Lumber Liquidators is currently facing at least 12 class action lawsuits.

Foreclosure Inventory Fell 33.2% Year Over Year   Full Article
Irvine, CA, March 11, 2015—CoreLogic's January 2015 National Foreclosure Report reveals U.S. foreclosure inventory declined 33.2% from January 2014, and completed foreclosures declined 22.5%, reports World Property Journal.

The Floor Store Earns Sixth Armstrong Elite Retailer Recognition   Full Article
Lancaster, PA, March 10, 2015—The Floor Store’s new San Francisco, California showroom has been named an Elite Retailer by Armstrong, the chain’s sixth location to earn the distinction.

Wholesale Inventories Up Slightly   Full Article
Washington, DC, March 10, 2015—Wholesale inventories were up 0.3% to $548.7 at the end of January, says the U.S. Census Bureau.

Job Openings Figure Virtually Flat   Full Article
Washington, DC, March 10, 2015—There were 5.0 million job openings on the last business day of January, little changed from 4.9 million in December, the U.S. Bureau of Labor Statistics reports.

NWFA's Wood Flooring Expo Recognized for Growth   Full Article
St. Louis, MO, March 10, 2015—The National Wood Flooring Association’s Wood Flooring Expo has been recognized as one of the 50 fastest-growing shows in the U.S. by Trade Show Executive magazine.

Milliken Recognized As Ethical Company for 9th Consecutive Year   Full Article
Spartanburg, SC, March 10, 2015—Milliken has once again been recognized as a 2015 World’s Most Ethical Company by the Ethisphere Institute.

LL Schedules First Investor Call Following 60 Minutes Broadcast   Full Article
Toano, VA, March 10, 2015—Lumber Liquidators has announced that it will host an investor call on Thursday, March 12 at 10:00 a.m. EST.

Armstrong LVT with I-Set Wins ADEX Platinum   Full Article
Lancaster, PA, March 10, 2015—Armstrong Commercial Flooring's Natural Creations Luxury Vinyl Tile with the I-Set Installation System recently received the Platinum Award for Design Excellence (ADEX).