Scoring Flooring: industry stats for 2011

Home Inside FCNews Scoring Flooring: industry stats for 2011

When it came to the year that was 2011, it was pretty much déjà vu all over again in terms of how the industry compared to the previous year—in this case both 2010 and 2009, as they were virtually identical when the final numbers came in. There was one difference, though: For the first time since 2006, the floor covering industry as a whole posted gains in sales. For 2011, the industry saw sales go up a modest 2.5%, from $16.221 billion to $16.629 billion.

Despite the sales gain, unfortunately the result was not due to the overall pie expanding. In fact, it remained virtually un-changed from 2010, dropping slightly from 16.625 billion square feet to 16.554 billion square feet.

As numerous executives told FCNews, the industry experienced some fairly noticeable drops during the recession, with sales off between 11% and 18% each year, but over the last 36 months, it feels as if “we’re bouncing along the bottom of a saucer.” Still others point out the drop was so precipitous over a sustained period, once things bottomed out two years ago they didn’t expect the recovery to be at nearly the same rate as the decline was. Rather, the incline up would be gradual, meaning it would take longer to get back to historical norms.

There are numerous factors as to why the year was not able to sustain any long-term momentum—be it residential or commercial: New housing was still at “incredibly” low levels, and many companies noted existing home sales were down roughly 50% from 2007 levels; foreclosures continue to remain high and many of those that do sell are being “flipped” for rental properties, meaning the floors get replaced with low-priced goods; government spending—from federal to local—slowed and in some cases dried up completely, such as the first-time homebuyer credit; prices for raw materials kept going up at record levels, with some key ingredients experiencing in-creases of more than 30%; consumer confidence fluttered from one extreme to the next—for example, in February the Conference Board’s Consumer Confidence Index hit a three-year high, but in August, it had dropped to its lowest level in nearly two-and-a-half years, and the list goes on.

Executives from just about every facet of the industry echoed the statement, “Every time we took two steps forward in one area, we gave back one-and-a-half in another.”

 

Silver linings

Just like in any storm, there were silver linings within the industry as certain categories and sub-segments posted all-round positive gains.

The resilient category continued its surge of recent years as value-conscious consumers flocked to the product, thanks to its combination of style and durability. The result was a 6.3% increase in sales, from $1.722 billion to $1.831 billion, and a 4.2% increase in units, from 2.37 billion square feet to 2.47 billion square feet. Additionally, rubber showed increases of 3.5% in sales, from $487 million to $504 million, and 2% in volume, from 218 million square feet to 222 million square feet.

Within the category, luxury vinyl (tile and plank) was the winner—and is now clearly the largest product type in resilient with a market share over 33% (in 2008, its market share was 11.5%), with vinyl composition tile the next closest at just over 20%. Coming up fast, though, is fiberglass constructed floors, which now account for approximately 35% of the resilient sheet business and 15.6% of the entire category.

The tile category, which was one of the hardest hit—losing more than  50% of its volume between 2006 and 2009, and 42% of its sales over the same period—continued to claw its way out as it posted back-to-back yearly gains for the first time since 2005/06. Sales were up 6.5% and volume 2.2%, with the gains coming mostly from the commercial side. And, while more than two-thirds of the tile consumed in the U.S. is imported, domestically made product grew 3% over 2010.

Area rugs posted its second consecutive year of sales gains, increasing 2.9% in 2011, following a 2.1% rise in 2010. Un-fortunately, the added sales did not help specialty retailers as the gains were primarily in the form of imports—both machine-made (up 22% over 2010) which primarily accounts for the low-end, mass-market offerings, to high-end wool products (up 2.5%).

One interesting note on the wool rug imports, economic sanctions against Iran could clearly be seen as the country went from being the third largest importer to the U.S. in 2010, with sales of $71.403 million to basically a footnote in 2011 with sales of just $12 million last year.

Based on government data, India, which was already the No. 1 importing country by roughly a 3:1 margin, was the clear winner from the Iranian sanctions as its sales jumped from more than $250 million in 2010 to more than $301 million last year, a 21% increase. Other big winners included Turkey, up more than 29% with sales topping $29 million; Nepal, up nearly 40%, with imports valued at a little under $26 million, and Ireland, up a whopping 91%, with sales more than $12 million.

One other bright spot regarding products was carpet tile, which continues to gain market share over the use of broadloom in the specified commercial market. In terms of dollars, broadloom and tile are estimated to have been equal in 2011 with tile possibly moving ahead for the first time.

The popularity of modular carpet has been a boon for manufacturers that make the product as well as for those who sell and install it as, from top to bottom, tile commands a higher selling price than its wall-to-wall counterpart.

Looking further into the carpet category as a whole, those who put an emphasis on polyester-made goods will say they enjoyed another good year as the fiber continues to gain market share at the expense of both nylon and polypropylene which have been hit harder by rising prices in raw materials. In addition, Mohawk’s triexta is following in polyester’s footsteps as the still new fiber continues to be the mill’s most successful launch in its 133-year history.

 

Commercial saves day

Beyond any individual product type, the commercial part of the industry is what once again accounted for most of the gains as growth was seen in both the specified area and Main Street. Overall, the sector grew between 2.5% to 5%.

Growth primarily came from commercial’s largest segment, corporate, as companies spent money on long-overdue renovations in office space and other facilities. Healthcare also maintained growth as hospitals and local medical facilities updated themselves.

Another general area that continued to gain was the green movement, which is still mainly a concern for the commercial sector as companies and institutions seek to achieve nationally recognized certifications proclaiming their facilities are sustainable and safe, not to mention a growing number of municipalities, along with states and the federal government, are now requiring certain levels of green products as part of any project.

As the economy slowly improves, the general thought is this area will continue to pick up as government agencies add more environmentally friendly requirements to purchasing and as consumers begin to spend again.

But until such a time, the advice from executives it to dig in and expect to work harder and harder with small gains for a few more years in the least before things return to historic norms.

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