Strategic Exchange: The industry remains optimistic amid uncertainty – May 2025
By Kemp Harr
I ran into Eric Astrachan, the executive director of the Tile Council of North America (TCNA) and asked him if he was still going to be in this role next year. For those of you who don’t know Eric, he is all buttoned up and is normally all business, with something of a lawyer-like demeanor-sticking strictly to the numbers and the facts. It’s also worth noting that he has already named his successor, Bill Griese, but has not divulged the timing of his retirement-so this question is one that many may be pondering.
He answered with a barrel laugh and said, “Are you kidding? My 401K has now lost half of its value, so there’s no way I can retire now!” We laughed together, but we both knew that the decline in value of our investment accounts is not funny.
At press time for this May issue, the GDP numbers were released, revealing that the U.S. economy shrank 0.3% in the first quarter of 2025-worse than most economists expected. And most of the damage was due to a significant increase in imports-up 41.3% for the quarter-as businesses rushed to get ahead of looming tariffs. Another significant factor was reduced government spending, which can be attributed to recent efforts to reduce the overall size the federal government as well as curb its upside down spending habits.
This is the first negative GDP quarter since the beginning of Covid in Q1 2022. I mention this because we know that consumer sentiment is already way down with a 52.5 rating for April, a 32.4% year-over-year decline-and this economic news could put the consumer in a deeper funk. Let’s not forget that our economy is driven by consumer spending. And as we’ve said many times before, flooring is a deferrable purchase-one that can be put off until the consumer feels good about what the future holds.
As we traveled to the NWFA and Coverings expos, we were encouraged by the crowds and enthusiasm at both events, but there was a definite shroud of uncertainty as we all wondered where Trump’s tariff threat will end: is it a negotiation tactic-part of his “art of the deal,” or is the current administration seriously going to tax the flow of imports as they enter the U.S.? Most people are realizing that the damage to the value of the U.S. dollar has already made the cost of imported goods more expensive. One has to wonder if that was part of the plan or just an unfortunate consequence.
LOWE’S ACQUIRES ADG
In mid-April, Lowe’s announced its plans to acquire the Artisan Design Group (ADG) for $1.325 billion.
ADG was formed in 2016 through the combination of Floors Inc. and Malibu Floors and has expanded by buying contractors who are focused on selling and installing flooring, cabinet and countertops. In the past nine years, with the help of PE firm, The Sterling Group, ADG has purchased 19 additional businesses, building a nationwide footprint: Accents & Interiors, Arlun, Atlanta West Carpets, Builders Wholesale Flooring, Distinctive Kitchens & Baths, Dixie Interiors, Great Floors, Heritage, JR McDade, Just Floors, Kermans, Markraft Cabinets, Metro Carpets, Nonn’s, Pacific Carpets, United Finishes, Value Plus Flooring, Vintage Design, and WCCV.
At this point, ADG is a national provider, with a network of over 3,200 installers and 2024 revenues of approximately $1.8 billion.
The industry has seen this sort of consolidation before, of course, and there is always a sense of sadness as the leadership retires and moves on. Some of these operations were, just a few years ago, family-owned business with generational leadership. Lowe’s is telling investors that this acquisition is part of its strategy to build the pro side of the business. It remains to be seen if Lowe’s will maintain the businesses in the same way that Sterling did or if they will simply become cogs in the mega-retailer machine. It will also be interesting to see if Starnet and the FEI group will allow locations owned by Lowe’s to remain members of their group.
OUR ANNUAL REPORT
Pulling together this Annual Report on the flooring business and getting it right is an arduous task, especially with two consecutive years of declining sales.
On the one hand, we have the challenge of determining who is telling us the truth about their declining revenue, but on the other hand, we have to wonder if some of the import numbers are wrong because the goods were misclassified when they entered the country. Was that really engineered hardwood, or was it coreboard? Are those tufted materials carpets, rugs or artificial turf? Another challenging factor comes from when the government recalculates its import numbers from the previous year without explaining why.
That said, after the last calculator key has been punched, we always feel good about what we put out. With a 4% decline overall, it seems that we are pulling out of the post-Covid lull and returning to an improving pace of operation.
If you have any comments about this month’s column, you can email me at kemp@floorfocus.com.
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