Truist Reports Observations from Surfaces 2024

Charlotte, NC, January 26, 2024-"Industry participant commentary from recent floorcovering trade show points to: (1) substantial push from [Lowe’s] for flooring suppliers to cut Covid-era price increases. (2) potential bottoming of demand but no strong signs of pickup. (3) growing optimism that an industry turnaround should be seen in 2024 with pent-up demand driving above average growth rates. (4) the deflation that saw high teens declines in LVT prices seems to be abating. (5) LVT share gain slowed substantially in 2023, but industry is in disagreement if this is temporary due to primarily importing factors," reports Truist.

“We recently attend the flooring industry show Surfaces and came away with the following industry commentary.

“[Lowe’s] Pushes Some Suppliers For Price Cuts; May Use For Price Decreases. Commentary from the show pointed to communications from Lowe’s (LOW, Buy, Ciccarelli) the last day or so to flooring suppliers asking for them to cut in half their Covid-era price increases. While price pushes are nothing new from the big box, these are much bigger and more structured. We suspect [Lowe’s] will use extra margin to try to drive sales growth with retail reductions. [Lowe’s] has struggled in flooring for many years, and in our opinion, has grown below the industry. The impact of this may take some time to be able to project on the market, but if successful we would expect Home Depot to embark on similar moves.

“Residential Business Still Weak But Could Be Bottoming. A consensus of major industry participants report that while business still remains down from the prior year, the rate of deceleration is less, contributing to a view that business may be getting ‘less worse.’ Regardless, the industry remains weak and is still down over the prior year.

“Significant Optimism For 2024. Despite a weakish trend, optimism for a floorcovering rebound is growing for 2024 given several weak years, coupled with housing momentum and lower rates. Flooring is a consumer confidence driven purchase, thus can turn quickly once the consumer is ready to spend.”