Focus 100 Retail: Top retailers and contractors are coming out ahead - Nov 2015
By Darius Helm
As is often the case with markets emerging from recessions, expectations exceed results, and this year is no exception. In 2014, a brutal winter set the tone for the year, leaving the residential market unable to generate much momentum, and that led to higher hopes for 2015, but so far it looks like another year of sluggish growth. However, some regions, like Texas, southern California and parts of the Southeast, have been noticeably stronger than, for instance, much of the Northeast and parts of the upper Midwest.
When it comes to the Top 100 retailers and residential contractors, though, it’s a different story. Most are leaders in their regional markets. While many sell all price points, they’re generally not focused on entry level products, and several have a dominant position in the mid to high price points, where there’s been a lot of activity this year.
The majority of the Top 100 are taking share from their competition. They’re acquiring smaller players or building stores in new territories, putting pressure on existing businesses. And many of them are well established with good reputations, which assures a certain amount of business. And unlike many smaller stores, they also recognize the value of advertising in driving store traffic. Most of this year’s Top 100 are showing single-digit growth for the year, and some are up by double digits.
Many in the Top 100 report that average price points are higher this year, both because of the strength of the luxury market and as part of a general trend toward consumers spending a bit more to get better goods. It appears to be a trend all across the country. Alliance Flooring’s Ron Dunn also cites an uptick in in-store consumer credit for consumers looking to finance an upgrade.
The multi-family market is having another strong year, though the pace of growth has subsided. And builder activity is up, though not by much. But many top retailers are more enthusiastic about the remodel and builder markets than they are about multi-family, perhaps because it takes a lot of work to generate strong profits in the multi-family market, while bigger margins in the other markets can lead to faster gains.
As is the case in the commercial market, there’s nothing hotter than LVT in residential, as the product continues to take share from laminates, hardwood, sheet vinyl, ceramic tile and carpet. Actually, there is a hotter product out there, US Floors’ Coretec, a hybrid LVT with a waterproof core and a cushioned back. It’s so popular that it already has its own acronym, WPC, which stands for wood polymer composite. Some retailers market it as an LVT and others as a hybrid laminate.
In the multi-family market, which is characterized by its high rate of flooring turnover, LVT takes share from both carpet and other hard surface flooring. There is some concern that its lifecycle is so much longer than carpet’s lifecycle that it will end up hurting the sales of everyone from the multi-family contractor to the LVT manufacturer, because it won’t need to be replaced every time there’s a turnover in tenants.
Another big issue in the residential market is installation. Most retailers use subcontractors, many of whom work exclusively for a single retailer. And across much of the country, there aren’t enough installers, or at least there aren’t enough skilled installers. Most retailers and retail groups have developed strategies for finding and keeping good installers, but no matter how good the strategy, it doesn’t change the fact that there aren’t enough to go around.
One of the impacts has been longer timelines, which can generate a good deal of consumer dissatisfaction. And of course installation problems are up. One Top 100 retailer, Touch of Color, has addressed the problem by hiring an installation manager tasked with finding and recruiting good installers, and many retailers have realized that they’re going to have to pay their installers more and treat them better if they want to hang onto them. And of course that means installation costs are up. Another Top 100 retailer, Montana’s Pierce Flooring, is trying to lure to its region installers who love to hunt, fish and camp through a Craig’s List marketing campaign.
The issue is about more than just not having enough installers. As some industry experts have pointed out, it’s also about how installation has been commoditized, with the lowest bidders getting the work. And it’s worst with the big volume retailers, like Empire and the home centers.
The installation problem is a massive challenge, but as Steve Silverman, Abbey’s president and COO, points out, if the market was rebounding as much as everyone hoped it would, installation problems would already have reached a crisis point.
HOUSING MARKET UPDATE
According to the National Association of Realtors (NAR), September total existing home sales were up 4.7% from August and up 8.8% from September 2014, marking 12 consecutive months of year-over-year increases. The NAR reported that September’s existing home sales, which include sales of single-family homes, townhomes, condos and co-ops, rose to a seasonally adjusted annual rate of 5.55 million sales.
Existing single family home sales were up 5.3% in September to a seasonally adjusted annual rate of 4.93 million from August’s 4.68 million, and 9.6% above September 2014 sales, while condo and co-op sales were essentially unchanged from August to September, though they were up 3.3% from last September.
Regionally, existing home sales were the strongest in the Northeast, up 8.6% from August and 11.8% from September 2014. Midwest sales were only up 2.3% from August, but that was still 12% over last September. In the West, sales rose 6.7%, and 9.5% from September 2014. And in the South, sales were up 3.8% from August and 5.7% from September 2014.
Median single-family home prices hit $223,500 in September, up 6.6% from last September, and median condo and co-op prices rose 1.9% from last September to $209,200. And for the third month in a row, distressed sales accounted for 7% of total existing home sales, compared to 10% last September. Foreclosures accounted for 6% and short sales were only 1%, which is the lowest since NAR began tracking them in October 2008.
August new single-family home sales reached a seasonally adjusted annual rate of 552,000 units, up 5.7% from July and 21.6% from August 2014. The South led the way, up 27.6% from the previous August, followed by the Northeast at 24.1%, the Midwest at 15.4% and the West at 11.4%. And following a dip in 2014, the square footage of single-family homes has continued to rise. However, part of the reason for the larger sizes relates to low levels of first-time homeowners; if those levels rise to meet historical averages, home sizes will likely stall or dip.
Following two months of declines, housing starts were up in September 6.5% to a seasonally adjusted rate of 1.21 million units, according the latest Commerce Department data, but those gains were almost entirely due to a 17% increase in multi-family housing starts. Single-family housing starts were up just 0.3% to a rate of 740,000 units, seasonally adjusted, compared to the historical norm of 1.2 million units. Construction was up in all regions except the Midwest. And compared to September 2014, total housing starts are up nearly 18%.
Looking ahead, permits in September were down 5% from August, with single-family permits down 0.3% and multi-family permits down 14.6%.
While conditions are challenging for the smaller mom and pop retailers, the bigger firms are steadily taking share and making gains, even in underperforming markets.
One such firm is Great Floors, headquartered in Coeur d’Alene, Idaho, with 18 retail flooring locations as well as a granite fabrication business. Estimated 2015 sales for Great Floors, which is #20 on this year’s Top 100 list, should top $129 million, if the double digit growth rate is sustained for the balance of the year. The firm reports that all of its locations are showing growth this year.
The firm has three locations in Idaho, including its stone fabrication operation in Post Falls and its retail flooring businesses in Coeur d’Alene and Meridian, and it has another 16 in Washington. Its latest location in Kennewick, Washington celebrated its grand opening two months ago. The 24,000 square foot store will serve the Tri-Cities metro area, a market of about 300,000 people clustered in and around Kennewick, Pasco and Richmond. Great Floors has serviced builder accounts in that region for several years, and the Kennewick operation will enable the firm to meet demand for residential remodeling as well.
This year, Great Floors has experienced a clear uptick in remodeling projects. More full remodels are being done, and more clients are upgrading to higher quality products. Residential remodel accounts for the bulk of the firm’s revenues, followed by builder business. Multi-family makes up another 10%, and Great Floors also has a growing commercial business.
Carpet accounts for 40% of revenues, and Great Floors sells more PET than nylon, though this year there has been increased demand for value-added nylon products. On the hard surface side, laminate, hardwood and luxury vinyl are the strongest categories. The firm has had a lot of success with mid- to high-end laminates. LVT is particularly strong in retail and property management, taking share from everything from sheet vinyl to carpet. Great Floors is also dipping its toe into the cabinet business, with an eye to full bath and kitchen remodels.
On the other side of the country is Touch of Color, which has eight locations in Pennsylvania, including three Big Bob’s Flooring Outlets, three Touch of Color Flooring operations and two TOC Design Groups—high-end design centers direct to the trade. Two of these operations are new this year, a Big Bob’s and a TOC Design Group, both in Mechanicsburg. The other Big Bob’s Flooring Outlets, which are franchise operations, are in Harrisburg and Lancaster, and the other TOC Design Group is in Harrisburg. The three Touch of Color Flooring locations are in Pittsburgh, Philadelphia and Harrisburg.
The bulk of Touch of Color’s revenues come from the residential market—10% residential remodel, 35% builder and 35% multi-family tenant turnover work. The other 20% is commercial work, including hospitality and multi-family new construction.
The firm got its start 12 years ago doing multi-family turn work, which was mostly carpet back then. Soon after, it entered the builder market, and then it began submitting bids for commercial work. About three years ago, it entered into the residential remodel market in Harrisburg with its first Big Bob’s franchise. The firm is a member of CCA Global’s FloorExpo residential contractor group.
Touch of Color has made huge gains in the last year, due to both organic growth and business from the new locations, and it’s on course to be up an estimated 33% to $37 million, putting it at #61 on the Top 100 list. The firm has grown every year since its founding in 2003, even through the recession. Co-founder and CEO Scott Appel was the grand prize winner in Floor Focus’ 2012 Future Focus awards for young industry professionals.
One of the most prominent flooring retailers, #18 on this year’s list, is Nebraska Furniture Mart, which has locations in Des Moines, Iowa; Omaha, Nebraska; Kansas City, Kansas; and Dallas, Texas—each more massive than the last. The Texas store, located in The Colony on the northern outskirts of Dallas, opened in May of this year. It covers nearly two million square feet, with a 560,000 square foot showroom that includes a 40,000 square foot flooring department.
Same store sales are up about 5%, but revenues from the new operation have provided a big boost, and the firm is expected to grow an estimated 32% this year, bringing total sales to $136 million.
The firm’s Kansas City, Dallas and Omaha stores all sell electronics, furniture and appliances, along with flooring. The Boise store, the smallest of the group, sells just flooring and appliances.
Hard surface continues to take share from carpet, though carpet still makes up nearly half of the firm’s flooring business. And this year the carpet business has been up, but not without a struggle. Fiber brands like Stainmaster and Shaw’s Anso have been performing well. Rugs have been posting double-digit growth for over a year, in part because of gains in hard surface, led by luxury vinyl. Tile and stone are also growth categories, while laminates continue to lose ground.
Business has been strong at the high and low price points, but the middle continues to suffer. About 85% of Nebraska Furniture Mart’s flooring revenues come from residential remodeling, with the balance from builder and multi-family.
The firm, which is a member of the National Floorcovering Alliance (NFA), is owned by Berkshire Hathaway, which also owns Shaw Industries.
Another Berkshire Hathaway owned operation is RC Willey, a major retailer with six Utah locations, three in Nevada, one in Boise, Idaho, and one in Rockland, California. The firm, which is also an NFA member, will be adding a new location late next year or in early 2017 in the Sacramento market, about 30 miles from the Rockland location.
Like Nebraska Furniture Mart, RC Willey does much more than flooring. In fact, flooring only accounts for an estimated 9% of the firm’s overall business. RC Willey also sells furniture, appliances and electronics. This year, flooring business is up an estimated 8% to approximately $72 million, making it #28 on this year’s Top 100 list. About 90% of its flooring revenues come from the residential remodel market, and it also does some builder business. Its Boise operation, which has been its strongest location this year, does about a quarter of its business in the builder market.
Carpet accounts for about 75% to 80% of RC Willey’s flooring revenues, and that includes both polyester and better goods like Stainmaster PetProtect nylon carpet and Mohawk’s SmartStrand Silk. The biggest hard surface category is laminate flooring, in part because the dry climate is actually outside of most manufacturers’ humidity recommendations for hardwood flooring, meaning there’s no protection against product failures. RC Willey focuses on the higher end of the laminate market, which offers similar realism in textures and visuals as higher end LVT and ceramic.
Laminates account for nearly half its hard surface business, but it’s ceding some share to LVT, and Coretec in particular, which the firm promotes as a hybrid laminate. Hardwood is mostly engineered, with a lot of handscraped woods in domestic species rich in character, like hickory. The firm also sells sheet flooring, which as of last year is all glass-backed, and it’s not a category that’s currently showing much growth. But despite that, total hard surface sales are up over 30% so far this year.
Sergenian’s, which has locations in Wisconsin and Florida, sells to both the residential and commercial markets. Residential is the bigger part of the business in Florida, while commercial is about 55% of the business in Wisconsin. The firm, founded in 1930, is headquartered in Madison, serving both the Madison and Milwaukee metro markets. The Florida locations, Tampa and Sarasota, were added about four years ago through the acquisition of G. Fried Flooring America.
On the residential side, Sergenian’s is a member of CCA Global’s Flooring America, and on the commercial side it is part of Starnet. This year, the firm anticipates solid single digit growth, with total sales estimated at close to $33 million, taking it to #68 on this year’s list. For commercial work in Wisconsin, the firm has over 40 installers on staff, about three quarters union workers. A few months ago the firm opened up an operation in Fort Myers, Florida called Sergenian’s of Florida, focused on commercial and builder business, which should lead to further growth in 2016. And it is also opening a new distribution center and commercial offices, expanding from 27,000 square feet to 38,000 square feet, which it will move into next May.
Airbase Carpet & Tile Mart, originally founded in 1967, is an NFA member with seven locations in Pennsylvania and three in Delaware, along with wholesale operations in Charleston, South Carolina and Dalton, Georgia. The firm has traditionally been heavily focused on carpet, but the category has been steadily losing share to hard surface. A decade ago, carpet accounted for over 70% of revenues, but this year it’s closer to 55%. And polyester fiber now dominates carpet sales, with nylon accounting for less than 20% of the mix.
On the hard surface side, business is strong. LVT has become a huge category, and within that category, nothing is as strong as US Floors’ Coretec. Hardwood is also picking up, as is ceramic, which increasing numbers of customers are installing themselves, driven by high installation costs. Rug business is up, thanks in part to hard surface gains. Sales of sheet vinyl, which is just about entirely glass-backed, have been extremely sluggish. And because of increased use of carpet in accent areas, the firm’s remnants business has been strong.
This year, sales at Airbase are up by an estimated 3% to $51 million, making the firm #40 on this year’s Top 100 Retail list.
Headquartered in Billings, Montana, Pierce Flooring is #50 on Floor Focus’ Top 100 list. Montana is a unique market. It’s the fourth largest state in total area, 90% of the size of California, but it ranks 44th in population at barely a million residents. That translates to less than seven residents per square mile, a population paucity only exceeded by Wyoming and, of course, Alaska. As such, Montana can be a particularly challenging market to serve.
Pierce, another NFA member, is the largest independent flooring retailer in the state, with seven locations, all in the most populated towns. Connected by I-90 from west to east, the firm has one store in Missoula, one in Butte, two in Bozeman and two in Billings, and further north, on I-15, the firm has a store in Great Falls. In addition to serving Montana, in recent years Pierce Flooring has also reached out further east and north to serve the growing population drawn to the Bakken oil fields of North Dakota. Pierce’s Billings stores are a little over 300 miles from Williston, South Dakota, a frontier town for the Bakken, which in that part of the country qualifies it as one of the nearest flooring operations.
Even though shale oil development has stalled in the region, there’s still a ton of work just to catch up with the influx of businesses and workers, and that means commercial development in a region devoid of infrastructure, as well as the construction of multi-family and single-family residences. Pierce Flooring credits projects in that market, along with Montana’s own allure for wealthy people seeking both nature and isolation, for strong growth this year. Driven by a dynamic second half of the year, Pierce is poised for 17% gains for estimated 2015 sales of $44 million.
Commercial business accounts for the biggest part of Pierce Flooring’s revenues, followed by residential replacement, though builder and multi-family business is also robust. Carpet sales have been fairly strong at Pierce, both with higher end soft yarns, fashion forward styles from mills like Tuftex and high performance products like PetProtect, as well as polyesters in property management and lower end homes. Hard surface products are even stronger, driven most prominently by WPC (waterproof core) products like Coretec. Laminate sales have softened, sheet vinyls are hanging on at reduced levels, and ceramic is up, thanks in part to programming from HGTV. Pierce is also selling cabinets in Billings, and if it gains traction, the program will be rolled out to other Pierce locations.
One of the major players in the central Midwest is Cap Carpet, which is headquartered in Wichita. The firm has 16 locations in four adjacent states, including operations in Des Moines, Iowa; St. Louis, Missouri; Omaha, Nebraska; and seven locations in Kansas—two in Topeka, three in Wichita and two in Kansas City.
Cap Carpet’s retail operations include several locations that are members of CCA Global groups, including Carpet One and ProSource, and the firm also has a Big Bob’s Carpet Outlet franchise. In addition to retail and to-the-trade businesses, Cap Carpet also has an aviation interiors business and White Oak, a higher end mill focused on natural fibers like wool and mohair, all made to order.
Cap Carpet also used to have Floor Trader stores (another CCA group), but over the last couple of years, the firm has been converting them into its proprietary The Floor Project formats. The first two stores, in Wichita and Topeka, are doing well. Another three, launched earlier this year, are still getting up to speed. The concept engages customers online, where they can submit photos of rooms they want to remodel, which The Floor Project then digitally manipulates so that different floorcoverings can be dropped into the images. Basically, any flooring that customers can see in the store, they can first see online through images of their own rooms—from the comfort of their own homes. And when customers go to the store, they can bring their handheld devices and use displayed product QR codes to instantly generate images of the product in their room photos, displayed on their own devices or on the store’s high definition TV screens.
This year, business at Cap Carpet is up an estimated 2% to $54 million, making the firm #36 on this year’s Top 100 list. The firm serves the higher end builder and residential remodel markets, and it also does negotiated commercial work. The year started off poorly but has picked up steadily through the summer and into the fall. The builder market has been strong, and the luxury market is also surging. Omaha and Kansas City are two particularly strong markets.
Guy’s Floor Service, founded in Denver in 1942, is a family owned business now in its third generation. The firm has locations in Denver and Colorado Springs, serving the builder, remodel and commercial markets. The firm also has a stone fabrication operation, into which it recently made a sizeable investment to upgrade equipment and increase efficiencies. The firm has been making stone countertops for about a decade, and it accounts for an estimated 10% of sales.
The biggest part of Guy’s Floor Service’s business is in the single-family builder market, and multi-family business has also been strong, while residential remodeling currently only accounts for a small part of the firm’s revenues. Colorado is a state with positive migration, and that has been fueling single-family and multi-family new construction. Nevertheless, housing starts are still barely at half the pace they were before the recession.
Guy’s Floor Service’s flooring business is up about 15% this year, with anticipated sales of around $56 million, making the firm #35 on this year’s Top 100 list. Guy’s reports that low to middle price points are strong right now, with some evidence that customers are buying up into higher quality goods. LVT is strong in all markets, and the firm is installing huge amounts of it in multi-family, where it has steadily replaced sheet vinyl in kitchens and bathrooms, and carpet in other parts of the space.
New Jersey based Worldwide Wholesale covers most of the state, along with parts of Pennsylvania and New York, through its operations in Edison, Lawrenceville and Fairfield. This year, business was slow in the first quarter, but it has since significantly rebounded. Flooring sales this year should hit an estimated $32 million, up from $30 million last year, which puts the firm at #69 on this year’s list.
The firm does most of its business in the middle to higher end of the market. Residential remodeling is the biggest part of the firm’s business, but this year it’s the builder business that is most active, particularly among the larger privately owned builders. The firm also does some multi-family and commercial bid work.
Carpet, which accounts for 45% of flooring sales, has been in a growth mode this year, driven by higher priced products. Worldwide Wholesale, an NFA member, has a Stainmaster Flooring Center in its showrooms, but it offers a much wider range of carpet. PET and SmartStrand business is bigger than nylon for the firm, but even the PET products are at the higher end of the price range. The firm also sells wools and Axminster woven constructions.
In hard surface flooring, hardwood is the biggest by volume and LVT is the fastest growing. Laminate is suffering, and sheet vinyl has become a limited part of the business. Ceramic business is steady. Worldwide Wholesale also sells blinds, though that’s a category that the firm feels it needs to focus more on.
Rite Rug, with over 30 locations mostly in the Midwest, is experiencing double digit growth this year, with estimated sales expected to top $223 million, pushing up the firm to #9 on this year’s list of top flooring retailers. The firm reports growth in all divisions with the exception of laminates, which are flat. Even rugs, which these days only account for a small portion of total sales, have had a strong year.
The firm sells both polyester and nylon carpet, and this year the shift to PET has slowed. In general, higher price points for carpet are selling better. Hard surface flooring has also seen a move toward higher end goods.
Beyond flooring, Rite Rug also sells blinds, though it’s a small part of the business. And the firm also does a small amount of work in the commercial market.
Headquartered in Green Bay, Macco’s Floor Covering Center, also an NFA member, has half a dozen retail locations in Wisconsin, along with a commercial business, and it also owns Hadinger Flooring in Fort Myers, Florida. This year, the firm’s business is up by an estimated 12%, so revenues for the year should top $32 million, making the firm #71 on this year’s Top 100 list.
In Wisconsin, commercial business, which until recently accounted for about a third of revenues, now makes up nearly half. New construction in the state has helped drive sales. In Florida, the firm targets the residential remodel and builder markets. Builder has been particularly strong, and in that market the firm focuses on higher end custom homes, as opposed to tract housing.
The fastest growing flooring category is LVT, and hardwood is also up, while ceramic business has been sluggish. Carpet, the bulk of which is Stainmaster nylon, is also down a bit.
Getting good installers has been a tough proposition in Wisconsin, where the labor pool is smaller and the colder climate is not much of a draw. Florida, on the other hand, has a growing population mostly driven by the warm climate—some of them, no doubt, even coming from Wisconsin—and the firm has found that it can recruit and train installers in the tract home market, put them to work doing higher end installations, and pay them more. In Wisconsin, Macco’s uses both inhouse installers and subcontractors, and its commercial operation, which is 100% union, has a reputation for its installation expertise.
Mill Creek Carpet, Tile & Flooring, with 15 locations in Oklahoma, Kansas and Texas, started out in the lumber business 81 years ago. It expanded into millwork products—doors, windows, etc.—then into flooring in 1991. Carpet is its biggest category, followed by ceramic tile, hardwood and LVT—which is growing faster than any other category. Laminates are holding their own, particularly at the firm’s outlet store in Tulsa. The firm has a substantial blinds business, and it also sells cabinets, though that’s primarily to the builder market. In addition, Mill Creek has its own granite fabrication operation for countertops. Flooring accounts for over 85% of total sales.
While 2014 wasn’t a growth year, this year is looking much better—to date, business is up by low double digits. Total 2015 flooring sales are estimated at $41 million, moving Mill Creek up to #54 on this year’s list. The builder and residential remodel markets account for most of the firm’s business, with some mainstreet sales going through the retail operations. The firm also does a little multi-family work.
Mill Creek’s president is Gary Cissell, well known for his long tenure with Nebraska Furniture Mart. He also served a term as president of the NFA.
GROUPS & SERVICES
There are several national groups for flooring retailers and residential contractors, along with training programs and other tools to help businesses succeed. The biggest group is CCA Global, which is itself made up of 12 entities, including seven flooring groups, two groups with strong flooring synergies, and a handful of other organizations. Total member sales are in excess of a billion dollars.
The biggest CCA group is Carpet One Floor & Home, which has nearly 1,000 locations in the U.S., Canada, Australia and New Zealand, including 900 in the U.S. Another major group, Flooring America/Flooring Canada has over 500 locations. ProSource, which wholesales direct to the trade, is made up of close to 140 locations across the country. The Floor Trader, a group whose members offer competitive prices through its warehouse style format and no frills presentation, has about 50 locations across the country. And at the higher end is the International Design Group, representing more than 90 showrooms focused on the luxury market.
Then there’s the FEI Group, which includes two sub-groups relevant to flooring: Home Solutions by FloorExpo and
MultiFamily Solutions by Floor Expo, serving the single-family and multi-family builder market. It’s collectively known as FloorExpo, and it is the most well represented group on Floor Focus’ Top 100 list.
There are also two groups added in the last few years that fit well with the flooring groups. Innovia is a group whose members manage a range of multi-family operations—collectively managing hundreds of thousands of units—and Lionsbridge is a group for general contractors in the property insurance market.
CCA Global has been providing a lot of incentives to ensure that its members fully embrace the opportunities in digital marketing, including a national program with Houzz launched this summer that features Carpet One banner ads that pop up when users search on Houzz for flooring. This year, just within Carpet One, website leads are up 28% and views are up 26% compared to last year.
Member sales at CCA’s flooring groups are up by mid-single digits this year, and a bit more in some cases, mostly driven by residential remodel activity, with some builder business, depending on the region. And multi-family business has remained strong.
The FloorExpo groups have had a good year, though expectations were for more growth. Some regions have been great for builder business, like Texas, southern California and much of the Southeast. Las Vegas has been strengthening, too. The Northeast has been slower. But the low rate of first-time homebuyers has continued, and that has hindered development. The current homeownership rate of 63.4% of the population is lower than it has been for nearly 50 years. It peaked at 69.2% at the end of 2004, nearly two years before the bursting of the housing bubble. And since that time, the homeownership rate for those under 35 has fallen from 44% to 35%.
That shift in homeownership has been a boon to the multi-family sector, where the vacancy rate remains a very healthy 4.3%. For this year, over 200,000 units had been completed as of early October. FloorExpo’s multi-family contractors report a strong summer “turn season”—it’s traditionally the season when most apartment tenants move in and out.
The single-family market is up by mid-single digits this year, and the multi-family market is running a hair in front of that. And all signs point to continued growth next year.
Abbey Carpet Co., another large national flooring group, is having a better year than 2014, but it’s still below expectations. On average, Abbey members are up about 6% year over year. And while the multi-family market is still strong, the builder and remodel markets have been more robust this year.
In the years following the recession, locations and members went down, finally stabilizing in 2011, and now for the second year in a row, membership at Abbey is up. The group is made up of two entities, Abbey Carpet & Floors, which accounts for most members, and Floors To Go, a smaller national group. Abbey Carpet & Floors was originally formed in California in 1958 (as Abbey Carpet), and Floors To Go became a part of the group in 2002.
Member carpet sales, which include sales to the builder and multi-family sectors along with residential remodel, are up an estimated 3% this year, as the category continues to lose share to hard surface flooring. The resilient category has been doing well, with major growth in LVT along with sheet vinyl that’s holding its own, and even growing in property management and manufactured housing.
Hardwood is up by double digits, though prices are down. And ceramic tile, which isn’t as extensively offered by members compared to hardwood and LVT, is nevertheless surging right now, with faster growth than any other category. This correlates with the regions that are showing the most growth—Texas, Florida and other parts of the Southeast, parts of southern California—all of which are strong tile markets.
On the topic of installation, Steve Silverman, Abbey’s president and COO, reports that the problem of qualified installers is a bigger challenge on the hard surface side, and he points out that the problem would be much worse if the industry were posting double digit growth. The fairly mediocre growth rate may, in fact, be helping to mitigate the problem.
Alliance Flooring is another national group, made up of two retail groups (CarpetsPlus ColorTile and Carpetland) as well as Floorco, which sells direct to the trade. Every year, co-founder Ron Dunn and his wife Sandy take an RV tour of the country to visit members. This year’s tour took the couple from the Ohio River to upper Michigan, then down through eastern Wisconsin into Iowa and southern Illinois, visiting a total of 28 member stores. Members report that, though business is up, it’s not flowing in the door like it was before the recession. However, nearly all of the group’s members are showing growth this year, with a lot of regional variations.
In general, members that are doing better have a good balance of business, with multi-family and builder business along with remodel. Most of the larger members have some multi-family business, which really requires a separate strategy, with a select group of products on hand and efficient installers ready to work for less per square foot. However, members that take the time to develop and invest in that business have been doing well in the market. But overall, remodel business has been stronger than builder and multi-family.
So far, it’s been a great year for new memberships with Alliance—during a ten-day period last month, the group added 18 new stores. Some of the new members are filling in under-represented regions. Other dealers are adding locations. And there’s even a new Floorco.
On the carpet side, higher end broadlooms have been strong, including soft nylons from Shaw, Mohawk and Beaulieu. Stainmaster PetProtect is also generating a lot of activity. Polyester carpet isn’t growing at the pace of recent years, but it’s still doing well, particularly for stocking dealers competing against big boxes. And members report that styling has improved with polyesters.
In hard surface flooring, LVT is unstoppable. And sheet vinyl is holding its own at the lower end of the builder and multi-family markets. Hardwood is in a growth mode, as is ceramic. However, laminates are down, though in some markets, like Florida’s Gulf Coast, the category remains strong.
The group has also developed strategies to combat the installer issue, including incentive programs for installers designed to increase professionalism and reduce errors. Most group members use subcontractors for installation.
Founded in 1991, the National Floorcovering Alliance (NFA) is the smallest of the national groups, with 42 members, but all members have at least $10 million in sales, and most are marketshare leaders in their regions. At the beginning of last month, the group had its annual meeting in San Diego, and with 250 guests it was the most heavily attended NFA meeting ever.
While some members reported sales down by single digits, the majority said sales were up by a similar percentage, and a handful reported more robust sales. Nebraska Furniture Mart, for instance, was up closer to 30%, thanks to the opening of its new massive store in Texas, but same-store sales for the retailer were actually up closer to 5%.
A highlight of the event was the election of board members, to start serving terms at the beginning of next year. Newly elected board members include Ian Newton from Flooring 101, based in Oxnard, California, and Ryan Bechtold from Oregon-based Contract Furnishings Mart. And Zac Akin from Akin Brothers Flooring, headquartered in Oklahoma City, was reelected to the board.
Speakers at the event, held at San Diego’s Del Coronado Hotel, included Don Maier, CEO of Armstrong Floor Products; Carole Cross of Mobile Marketing; and Jeff King, an attorney with the WFCA, who spoke about the Department of Labor and its new focus on subcontractor relationships.
Bridgeway Interactive makes online systems for the residential builder community, and sister company Creating Your Space develops websites and other online tools for residential retailers. In the past 18 months, the firm has made a significant investment in rebuilding its website and marketing platform to make it more responsive and mobile friendly. Although this is the fifth generation of the platform, it was by far the most comprehensive redesign and rebuilt, incorporating MongoDB, a document based database, as well as relational data in SQL server, ensuring fast loading and highly available websites. On the Creating Your Space side, the overhaul results in responsive design, allowing sites to reconfigure for the screen through which they are viewed, as well as the way catalogs, visualizations and product databases work for a more flexible and customizable product and a better experience for the customer.
In Bridgeway, the new platform offers more flexibility for customization across a range of capabilities, enabling builders to more easily steer homebuyers. The upgrade also helps designers who meet with homebuyers to be better informed when going into an appointment with them.
Bridgeway’s 15th annual conference, held November 9 and 10 at the Silverado Resort and Spa in California’s Napa Valley, will feature the latest online marketing tools and resources, and it will also feature training from Houzz on how to effectively reach customers using its social media platform.
Copyright 2015 Floor Focus
Related Topics:National Flooring Alliance (NFA), Nebraska Furniture Mart, Tuftex, Armstrong Flooring, Creating Your Space, Mohawk Industries, Coverings, Carpet One, The International Surface Event (TISE), Beaulieu International Group, Starnet, FEI Group, Shaw Industries Group, Inc., Great Floors