Scoring Flooring: Industry Stats for 2015
June 20/27, 2016; Volume 30, Number 26
The flooring industry in 2015 continued its recovery from the prolonged recession. While growth rates pale in comparison to the mid-2000s heydays, the industry last year saw increases of 4.4% in dollars and 3.2% in volume. This comes on the heels of 3.6% growth in dollars and 1.8% in volume in 2014 compared to the respective 5.5% and 3.8% growth rates in 2013. Perhaps more significant is total industry sales surpassed the $20 billion mark for the first time since 2007, and volume is at its highest level since 2008.
Why has the growth been slow and steady and not more robust? For one, housing has not led the recovery from the recession and is actually lagging the economy. Also, in past recoveries there has always been a period of strong economic growth before it settles into normal growth mode. That has not happened with this recovery. When the dust settled, floor covering sales in 2015 totaled $20.457 billion and 18.526 billion square feet. While these numbers are well off 2006 highs of $24.715 billion and 26.36 billion square feet of flooring sold in the U.S., these figures represent the sixth consecutive year of dollar growth and fourth straight year of volume increases. On an even more positive note, the average price per square foot of all flooring was $1.11 in 2015, up about two cents from 2014 and about four cents from 2013. The average selling price is also up significantly from $0.98 in 2010 and $0.94 in 2006.
To put things in further perspective, floor covering sales in 2015 hit the highest level since 2007’s $22.337 billion and are up 26.4% from 2009, when the industry bottomed out at $16.189 billion.
The good news doesn’t end there. As mentioned previously, more floor covering was sold last year in the U.S. than in any year since 2008. Unit growth is up 10.5% from 2011’s low point.
(Editor’s note: FCNews does not include stone flooring in its aggregate total, nor does it include ceramic wall tile. In addition, rubber flooring numbers include sheet, tile, accessories and cove base.)
Also for the fourth consecutive year, every floor covering category showed growth in dollars and all but laminate flooring in units with the resilient category continuing to be the locomotive powering the industry and luxury vinyl tile the catalyst for this explosive growth. In 2015, resilient posted the largest percentage gain of any flooring category, rising 13.9% to $2.724 billion from $2.392 billion in 2014. Since 2010, the category has increased a stunning 58.2% and is now at its dollar high point in history.
Resilient now accounts for 13.3% of the total flooring market in dollars and 17% in volume after a 17% rise in units to 3.145 billion square feet. In 2014, resilient held a 12.2% market share, which was up from 11.9% in 2013, 11.2% in 2012 and 10.8% in 2008. Interestingly, its market share in volume had stayed around 15% for seven consecutive years until leaping to 17% in 2015. That suggests resilient’s average price point has increased by virtue of the migration from felt to fiberglass sheet, along with the transition from residential/commercial sheet and vinyl composition tile (VCT) to LVT.
FCNews research reveals just how much LVT is driving category growth. Sales have gone from nearly $750 million in 2012 to $948 million in 2013, $1.142 billion in 2014 and $1.451 billion in 2015. That represents respective gains of 26.4%, 20.5% and 27.1%. More telling, LVT sales have nearly doubled in three years. It also carries with it a premium price tag as it comprises 53.2% of the category’s dollars but only 33.6% of its volume. To illustrate its growth, those numbers were 47.7% and 26.4% in 2014; 43% and 22.3% in 2013 and 37.4% and 20.6%, respectively, in 2012.
LVT increased significantly in both residential and commercial markets—dollars and square feet—in 2015. Residential LVT saw a 68.3% increase in square footage from 451.5 million in 2014 to 760 million, making up 71.8% of the LVT market. This number was 55.2% a year ago, but the big increase can be attributed to the WPC bandwagon, which, to this point, is almost exclusively residential. The commercial market rose from 257 million square feet to 297.2 million, a 13.5% increase. While residential brought in more dollars—$874.1 million—last year, commercial LVT still performed well, posting a 12.7% increase, rising from $511.25 million in 2014 to $576.4 million in ‘15.
The versatility of LVT—tile or plank—makes it an ideal solution for any number of residential, commercial and project-oriented applications. This multi-tasking ability has allowed LVT to migrate into builder, multi-family and residential-remodeling applications. The large space in which LVT operates, in turn, has afforded manufacturers the means of introducing differentiated product across a wider front, ebbing the march toward commoditization.
Originally, LVT became popular as a water-resistant, hard surface product ideal for mainly kitchens and sometimes spaces such as a laundry room. In the past, LVT would not be considered for bedrooms or other larger living spaces throughout the home. However, this perception has changed in recent years.
Manufacturers that specialize in LVT have observed growing acceptance in the category. Jonathan Train, president and CEO of EarthWerks, which has been making LVT for four decades, said LVT is taking market share from other flooring categories in both residential and commercial segments. “With the tremendous detail in design and performance attributes we are able to incorporate into LVT, it has become a strong competitor for all hard surface options. The ease of installation, durability and overall styling has catapulted this category to find a home in all sectors.”
Michael Raskin, president and CEO of Raskin Gorilla Floors, said LVT no longer has to be “sold.” Customers and end users are seeking out the product instead of having it presented to them by salespeople as an option. “More people are using it and asking for it right off the bat. You don’t have to educate people about it anymore.”
Also driving the category are its floating options, be it non-skid backings, click or self-stick strips. However, traditional glue down is still a large part of the market because of the lower price points in addition to the commercial market’s reservations about using a floating product.
As LVT grows, it is taking share from other resilient categories, especially VCT, but sheet vinyl as well. Sheet vinyl—both residential and commercial—has grown only 2.8% in the last two years, going from $791 million in 2013 to $813.5 million in 2015. Residential has led the way here, but if not for the rebound in new home construction and manufactured housing, sheet vinyl would be down. The commercial market has taken the bigger hit, declining 13.9% in dollars from $254.24 million in 2013 to $219 million in 2014. The category was only down slightly in 2015, 1.4% to be exact. Sheet remains the volume leader in residential resilient sales with 55.1% of the market, down from 60.2% in 2014, but comprises only 38.9% in dollars, down from 43.2% in 2014.
“For residential products, sheet vinyl is still viable because it has unmatched value and properties that other products can’t mimic,” said Jamey Block, Armstrong’s vice president of product management for resilient. “It still has a strong position in kitchens, bathrooms and utilitarian applications in the home—basements, mudrooms, workout rooms, etc.”
Paul Murfin, CEO, IVC US, said sheet remains strong in multi- and single-family builder markets. “That is where a lot of the growth was. There are still viable segments in the retail part of the business as [sheet] is still the best value floor covering in the industry. I think it’s just the upper end of sheet that faces some challenges relative to the lower end of LVT.”
As the overall flooring market pivots toward hard surfaces, resilient flooring is poised to reap a sizable portion of that shift because of its sheer size and for offering an incredible value through price and durability. That value proposition is further buttressed by the numerous design options that are available in different constructions. It all adds up to an exceptional product that provides residential and commercial customers with an ideal flooring solution that doesn’t break the budget.
Despite an improving housing market, the U.S. carpet industry ended 2015 virtually flat, with overall sales barely edging higher while volume fell. Overall, carpet sales in 2015 rose 0.7% to $8.870 billion compared with $8.809 billion in 2014. Volume (carpet and rugs), however, fell 1% to 11.09 billion square feet from 11.21 billion square feet in 2014. Residential carpet sales fell by an estimated 2% in 2015, while units inched up 1.5%. Conversely, commercial sales increased about 2% while units were down 1% in 2015 vs. 2014.
For the second year in a row, commercial carpet outpaced residential carpet, led by the rise of modular formats, which continue to make inroads into multiple commercial applications. Interestingly, carpet tile has yet to penetrate the residential segment and carpet executives said they see no reason that will change anytime soon.
The long-term shift from carpet to hard surfaces has accelerated faster than most executives predicted; the tangible evidence can be found in the shift in overall market share as well as the space allotted to hard surfaces in retail showrooms. Carpet today represents more than 43% of the overall flooring market—still the highest percentage but declining year over year. In 2009, for example, carpet was 48% of the market. When combined with rugs, soft surface commands just north of 50% of the overall flooring market. Compare that to 2006, when carpet and area rugs commanded a 63.6% share of the overall flooring industry.
Shaw and Mohawk continue to be the driving forces in bringing soft, luxurious carpet to the market that earn praise for their style, performance and durability. Fast-growing Engineered Floors has taken market share at the commodity level with PET products that have quickly gained acceptance in the multi-channel segment and builder markets.
For the second year in a row the U.S. rug business outperformed carpet, growing an estimated 4% in 2015. Rugs are in a unique spot, having benefited by the growth of hard surfaces; as a result, dealers are increasingly pairing hard surface sales with rugs. Manufacturers are also seizing opportunities in so-called custom rugs programs, which continue to gain steam.
While the new home construction sector did not reach the lofty highs that many analysts were expecting last year, the modest movement was more than enough to help lift sales of hardwood flooring to a respectable level in 2015.
FCNews research shows the segment generated $2.059 billion in 2015, a 6% jump over the year prior, with volume totaling 815 million square feet, a 5.8% uptick over 2014. The slower volume growth rate compared to the rate of increase in value reflected the impact of higher raw material costs that manufacturers had to absorb over the past two years. Industry watchers cite the lingering effect of protracted winters which negatively impacts harvesting, along with price increases instituted by many of the major Canadian manufacturers who must also compensate for unfavorable exchange rates.
But for most industry observers, it was the slower-than-expected housing market that kept growth in check. According to the National Association of Home Builders, housing starts reached 1.11 million units in 2015. That translates into a 10.8% increase over 2014. “We expected new construction to be much stronger than it was last year,” said Dick Quinlan, senior director of hardwood products at Mohawk. “We felt strongly that construction would grow by about 14%.”
Nonetheless, the hardwood flooring sector grew to represent 10.1% of total flooring sales in terms of dollars in 2015; compared to five years ago, the hardwood flooring category accounted for 9.8% of total sales and just over 4% in terms of volume. More significantly, the wood flooring category in 2015 represented the third-largest hard surface category—in terms of dollars—behind resilient and ceramic tile, respectively.
Within the hardwood flooring sector, industry observers are seeing increased growth on the engineered side of the business vs. solid. What was characterized as a 50-50% split just two years ago, analysts say engineered now represents about 54% of the business. “Clearly the engineered segment is driving the most growth,” said Dan Natkin, senior director, residential products, Mannington. Along with that shift, he added, is the trend toward wider, longer products.
Strong end-use consumption was only part of the reason behind hardwood’s performance in 2015. A return to stability in terms of raw material pricing also helped suppliers rein in lumber costs and better forecast their production needs. This represents a departure from the 2013–14 period when lumber pricing fluctuations forced large-scale changes in pricing.
Ceramic tile sales were exceptionally strong in 2015, its sixth consecutive year of growth. Led by gains in the construction and housing markets, and buttressed by low interest rates and an improving employment picture, industry experts estimated sales increased 9.8% to $2.61 billion with volume up 9.9% over 2014 to 2.19 billion.
That compares to a 6.2% dollar increase in 2014. The biggest change was in volume, which gained a tepid 0.5% in 2014. Out of the last five years, only 2013’s 12.9% increase bested the 9.9% gain seen in 2015.
Ceramic tile now constitutes 12.7% of the overall flooring market in terms of dollars and owns an 11.9% share of volume. The category has been picking up share in recent years as ceramic commanded 11.8% of flooring dollars two years ago and 11.2% in volume. Five years ago ceramic only had an 8.65% share of dollars and 8.05% share of volume.
Led by Mohawk/Daltile, there has been a surge in new investments in domestic production, which has contributed to the growth in consumption of U.S.-produced tile. In fact, according to the Tile Council of North America, 2015 was a record year for U.S. manufacturers as an all-time high of 857.2 million square feet of ceramic tile were shipped domestically.
Perhaps more than any other category, ceramic’s success is tied to the housing market. And in 2015, there was good news on many fronts—an increase in housing starts for both single- and multi-family housing, and an increase in commercial spending on new construction and remodel work. Since 2010 single-family homes have grown larger while multi-family dwellings continue to shrink. Since ceramic tile represents a greater percentage of the flooring used in a single-family home than a multi-family home, this is expected to have a positive impact on the ceramic tile category going forward, experts say.
Tile demand in the commercial market grew in 2015, with strong activity found in hospitality and assisted-living healthcare facilities that are taking inspiration from residential designs. Executives note that tile fashions have improved markedly in the last few years and consumers have reacted by using ceramic products more extensively in their projects with wood looks, wall tile and decorative accents leading the charge.
A sizeable falloff in shipments from China coupled with intensified competition from LVT, WPC and other engineered flooring products wasn’t enough to derail laminate flooring sales growth in 2015. FCNews research shows laminate flooring sales reached $1.137 billion in 2015, a mild uptick from $1.135 billion in 2014. Volume, however, declined 3% to approximately 1.034 billion square feet. Industry analysts attribute the falloff, which translates into roughly 30 million square feet of product, to the elimination of some Chinese-made laminate flooring imports that did not comply with CARB-2 federal regulations.
Taking all the major floor covering categories into account, that puts laminate flooring at 5.6% of the total flooring market—down slightly from 5.8% in terms of dollars compared to 2014, but down in volume compared to 6% last year. To put things in the proper perspective, the laminate flooring category accounted for 6.5% of dollars and 5.5% in terms of volume in 2009. So while it only generates about half of what the hardwood flooring category produces in terms of dollars, the volume of laminate flooring sold exceeded that of hardwood by more than 200 million square feet.
Much of that volume, industry analysts note, is generated by the residential replacement market. Some experts say this key end-use sector represents nearly 90% of category sales. “Clearly residential replacement is where this product fits, and it’s where most of the installations occur,” said Jeff Francis, hard surfaces laminate category manager, Shaw Industries.
At the same time, industry observers report increased activity in the new home construction sector as more builders look to laminate as an entry-level product. FCNews research reveals the builder segment accounted for roughly 8% of laminate flooring sales last year—up 4% from just a few years ago. “Residential replacement is still the dominant category by far, but we’ve seen solid movement in new construction,” said Brian Parker, director, product management, residential tile, Armstrong.
Another factor contributing to laminate flooring’s consistent performance on the sales side is the proliferation of entry-level products at home centers and mass merchants combined with higher-end, step-up options available via specialty retailers. Industry experts also provide evidence that specialty retailers are having success with private-label laminate flooring programs supported by the nation’s leading buying groups and retail chains. While many concede that home centers, mass merchants and big boxes continue to drive the bulk of category sales, as much as 70% in 2015, FCNews research shows, specialty retailers actually grew their share of the laminate business over the past few years.
“We see the home center/mass merchants as the dominant category in terms of volume,” said Derek Welbourn, CEO of Inhaus. “However, they are limited by the selection they carry. “High quality and diverse product mix is still much stronger with specialty retail.”
Technological advances in laminate (i.e., thicker cores, enhanced surface textures, etc.) are also providing high-margin opportunities for retailers.