Strategic Exchange: Tough times reveal which retailers aren’t “swimming naked” – August/September 2024

By Kemp Harr

It’s tough out there in the retail flooring world. Flooring demand nationwide was showing some signs of recovery in May and June, and then July showed up and the spigot slowed to a drip. From now until the end of the election, consumers are going to hear nothing but bad news about the current state of the country-not good for consumer confidence.

Right before press time, we learned that LL Flooring was seeking bankruptcy protection, and founder Tom Sullivan had resigned from the board again. This called to mind Warren Buffett’s quote, “Only when the tide goes out do you discover who’s been swimming naked.”

In Jeffrey Lorberbaum’s Q2 conference call, the Mohawk chairman stated that we are at the bottom of the cycle, but he doesn’t expect that Q3 will be any better.

The big question is whether the Fed has held out too long on easing interest rates. One of the biggest contributors to inflation has been shelter costs, and in Florida and Texas, we’re already starting to see home values drop. In Florida, only 2,800 homes changed hands this June, down from 38,000 in June of last year.

Who stands to benefit from LL Flooring’s troubling financial times and board of directors infighting? Don’t forget, LL’s annual revenue in 2023 was $905 million, and at its peak in 2021, it was well over $1 billion. Equity analyst Truist claims that Floor & Décor stands to be the beneficiary. So, while these publicly traded national chains focus on the pro, it could be a great time for the independent retailer to reset their showroom and train their salesforce in preparation to service the consumer when they return to the market next year.

FLOORING SUSTAINABILITY SUMMIT IN D.C.
Before I even begin to summarize this event, which was held in Washington, D.C., July 16 to 18, it’s important to give credit to the Tile Council of North America (TCNA) for initiating this effort. Additional kudos should go to the National Wood Flooring Association (NWFA) and the North American Laminate Flooring Association (NALFA) for quickly joining in to support it. I’ve always credited Eric Astrachan, TCNA’s executive director, for recognizing early on that trade associations that are funded purely by domestic producers will eventually have to react to what consolidation and foreign sourcing does to their funding base. All the constituents that thrive in a healthy market should help fund the organization that stimulates its growth.

Eric’s deputy director, Bill Griese, served as the chairman for the event. As Bill stated in our FloorDaily interview, the purpose of this event was to open a dialogue up on the topic of sustainability between designers, building owners and suppliers focused on floorcoverings of all types: tile, stone, wood, vinyl, laminate and carpet. The intended outcome of this event is to find opportunities for alignment and prioritize initiatives. The three main themes for this year’s summit were embodied carbon, material health and ingredients, and green building codes and standards.

The best part of the program was the size of the crowd that it attracted, as well as the quality of the speakers and the message they had to convey. This year’s inaugural event attracted just over 200 participants.

After a welcome reception the night before the opening, the conference kicked off with a keynote panel that included Alexander Cochran with the American Institute of Architects, Peter Templeton with the U.S. Green Building Council, Cheryl Durst with the International Interior Design Association and Vicki Worden with the Green Building Institute. Templeton provided an update on the development of LEED v5, which should be out in draft form in the fall. We also learned about the importance of durability and resilience, and how hard it is to create a system where one product can objectively be compared to another. Worden stressed the importance of EPDs (environmental product declarations). Naturally, since we were in Washington, we learned about how priorities could change depending on which party is elected to lead the country in the fall. One key point that was made is that humans are master bullshitters; as such, we need third-party certifications to minimize greenwashing, and we need to make sure that the goals we set don’t drive manufacturers to produce products that are cheaper, weaker and thinner but meet carbon standards.

One well-stated summary of what our collective focus should be is to create the optimal environment for human beings with minimal negative impact on the environment. A healthy discussion took place that stressed the difference between a cradle-to-gate assessment and a cradle-to-grave assessment-the latter of which factors in post-production shipping factors but, more importantly, rewards products with a long service life and that are easy to recycle or reuse.

There were many more participants who are passionate about their role in protecting our climate and Mother Nature, and, unfortunately, I don’t have room to list them all here. I invite you to go to www.flooringsummit.com for a more thorough review, and don’t miss the interview I did with Sarah Templin, who manages Gensler’s product sustainability standards.

The good news is that there will be a published summary of the discussions released in October, and this event will be held again next year, July 16 to 17 in Washington, D.C.

If you have any comments about this month’s column, you can email me at kemp@floorfocus.com.

Copyright 2024 Floor Focus

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