Shaw's Merritt Says Downturn To Continue This Year

Chattanooga, TN, March 6, 2008--This year isn't likely to be much better than 2007 for the flooring industry, Shaw Industries President Randy Merritt said at an industry meeting Wednesday.

Merritt thinks the flooring business will continue to suffer during 2008 due to housing industry problems and by the end of the year will have lost $4.4 billion of annual revenue from its peak in 2005.

In a keynote speech to the annual Fibertech meeting held in Chattanooga, he added that he is optimistic about the health of the flooring industry long term but for the remainder of 2008, “We face challenges. The residential side of the market will be down even further by the end of 2008 and commercial side will be flat at best.”

Unit sales were down 10 percent from 2006 and revenue was down 8 percent.

Merritt attributed the current downturn to the current housing fiasco, increased costs of food, electricity and water and oil—which is now trading at $104 a barrel. With housing, “new home construction is down 700,000 units and there is still a 10 to 11 month supply on the market. Existing home sales were down 13 percent in 2007 and in the fourth quarter alone, they were down 25 percent,” Merritt added.

Merritt admitted that this is indeed another economic cycle—but the difference with this one is the credit crisis. He quoted recent banking reports that predict that mortgage write-downs could reach $600 billion. He also quoted Warren Buffett’s recent letter to shareholders that stated that we’d gone from the dot.com bubble to the housing bubble. “You only learn who’s swimming naked when the tide goes out”..

On a brighter side, he said carpet is still the best value in the flooring business and for the long term. “Older people prefer its softness underfoot, its safety due to slip resistance and its visual appeal. There will always be a need for flooring.”

Carpet accounts for about 55 percent of floorcovering in new homes, Merritt said. And Shaw, like other major carpet manufacturers, has continued to diversity into hard surfaces, most notably with its purchase of Anderson Hardwoods last year.

Despite the tough times, Merritt remains an optimist. "I tell my salespeople at Shaw, there is still $20 billion worth of business out there. So there’s still plenty of business for people who can do it cheaper, better and faster.”

Related Topics:Shaw Industries Group, Inc.