Mohawk Sales Up 1.2% YOY in Q1, Earnings Fell

Calhoun, GA, April 26, 2019--Mohawk reported Q1 2019 net sales of $2.442 billion, compared to $2.412 billion in Q1 2018, an increase of 1%.

Net earnings fell from $209 million in Q1 2018 to $122 million in Q1 2019--a decrease of 41.6%

For the quarter, the company’s Flooring North America Segment’s sales decreased 3% YOY in Q1.

Global Ceramic Segment sales increased 2.5% YOY.

And its Flooring Rest of the World Segment’s sales increased 6% in the same period.

Commenting on Mohawk Industries’ first quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “While U.S. housing markets began softer and higher inputs increased costs, both are showing signs of improvement as we enter the second quarter. Around the world, uneven demand impacted volume, increasing pressure on both price and mix. We reduced our production rates to balance our inventories with our customers’ demand and manage our working capital. Results from our recent acquisitions in Australia, New Zealand and Brazil are on track, and we remain optimistic about our ability to improve their market positions and costs.

Of North American results, the company says, “As expected, operating income for the segment declined due to lower volume, inventory reductions, high material costs and LVT manufacturing variances. The segment’s business improved as we moved into the second quarter, supported by higher retail activity and an improving housing environment. Our new ColorMax technology that blends earth tones was voted the best carpet innovation at the national trade show. The carpet price increases we have implemented are being partially offset by declining product mix. Our commercial business improved during the quarter due to new product launches and channel segmentation. Our recent investments in advanced laminate manufacturing technology are allowing us to expand our market and upgrade our mix. Our LVT continues to grow substantially, and we have a complete offering with different features under our key brands. We have replaced high-cost assets and are consolidating five operations and two warehouses, which will reduce our overhead and cost structure. We are enhancing planning strategies, increasing production output and reducing process variations to facilitate this realignment.”

Says the analyst Stifel, “We had anticipated Q1 being soft from a revenue perspective, particularly in the U.S.. We note the revenues in the Ceramic and Flooring North America segments both were lower than our estimates. We believe U.S. ceramic sales remain under pressure. The company is clearly working hard to manage the correct production rates to maximize operating and inventory efficiencies. We get the sense that the company is making progress on inventories, as the y/y increase was driven by acquisitions…Clearly there are still headwinds with regard to productivity as the company is taking some production offline and ramping efficiency in newer assets.”