Industry expects second half to be better than first

Home Inside FCNews Industry expects second half to be better than first

July 7/14, 2014; Volume 28/Number 2

By Ken Ryan

Despite a rocky start to the year—largely due to the unusually harsh winter that affected much of the country—2014 is still expected to be another modest growth year for the flooring industry, albeit perhaps not at the level many expected in late 2013.

“As we prepared for 2014 we anticipated that [positive] momentum would continue, expecting three or four years of steady improvement,” said Randy Merritt, president of Shaw residential. “Maybe we just hit a blip and will see a better second half.”

Neil Poland, president of Mullican Flooring, shared the sentiments of many when he said demand in 2014 has continued to grow but not at the rates of 2013 due to the colder winter. “Let’s hope the demand spike has just been delayed by the brutally cold winter,” he said. “We are optimistic the demand will accelerate in the next several months.”

Bruce Zwicker, CEO of Haines, the industry’s largest distributor, believes the overall flooring industry will grow 4.5% in 2014 driven by a 6% increase in the second half. More important, he believes the long-term fundamentals that drive the market, including housing starts, job creation, consumer confidence, etc., exist today.

Others, including Luc Robitaille, vice president of marketing at Boa-Franc, makers of the Mirage brand, agreed that a bad winter can’t derail the comeback. “The economy is definitely on the right track and we think it will continue to deliver a sustained growth over the next few years,” he noted.

Flooring retailers grind it out

Challenging times are nothing new for independent flooring dealers. They’ve been through it before with the economic struggles in the mid-2000s, and the successful ones have learned to rely on their business acumen to navigate through the rough patches.

“You just have to grind it out,” said Paul Johnson, president, Interiors One Carpet One in Tulsa, Okla. “You have to continue to improve your business fundamentals and reinvest in your company. Those who didn’t do that during the recession are behind the 8-ball and finding it is really hard to play catch-up.”

Flooring America’s fiscal year runs from October through September, and its first quarter ending in December 2013 was, according to the group, terrific. “Then things stalled, especially in the Northeast and Midwest with the terrible weather we had, and those areas are still limping along,” said Keith Spano, president.

Indeed, the general economy contracted in the first quarter by 2.9%, the worst three-month period since the Great Recession. However, recent economic data is far more encouraging for a better second half and beyond.

On July 3, the Labor Department announced U.S. employers accelerated their hiring in June, adding an encouraging 288,000 jobs to help drive the unemployment rate to 6.1%, the lowest since September 2008.

It was the fifth straight monthly job gain above 200,000—the best such stretch since the late 1990s tech boom. Over the past 12 months the economy has added nearly 2.5 million jobs—208,000 a month, the fastest year-over-year pace since May 2006.

The July 3 report from the Labor Department underscored that the U.S. economy is moving closer to full health.

Several retailers said they have already seen business activity spike, which in turn has forced them to scramble to fulfill orders. Spano said he recently visited Flooring America stores in 10 states in a two-week span, and noted that “everyone is slammed right now from a written standpoint. Everyone is busy, but we will wait to see how the delivered piece comes in.”

Nick Freadreacea, president of The Flooring Gallery in Louisville, Ky., said 2014 has been a tale of two sides. “Sales have been very good for the first half of the year but deliveries were slow due to the prolonged winter. Now the weather is great and we are doing all we can to get the huge backlog installed.”

Overall, Freadreacea said he sees business continuing to grow in the second half and expects 2014 to show marked improvement over the past several years.

July has historically been a busy month for flooring retailers, a trend that would be great if it holds true for 2014. Michael Dominique, owner of Michaels Floor Depot in Clearwater, Fla., said June was his best month of 2014, and sales in the first half were up 10% to 15% over 2013.

Bill Zeigler, owner of Zeigler & Sons, Hanover, Pa., said after an up and down first half, billings have come back strong in June, which “bodes well for a better second half.”

Scott Milligan, owner of Heartland Wood Flooring in Pompano Beach, Fla., said the first half of 2014 was his best ever, with much of that growth coming on the commercial side, as South Florida’s housing market continues to rebound.

Spano said the retail segment, while lagging at times, is showing signs of more robust activity. “We are starting to see jobs for the whole house coming through rather than one-room type jobs,” he said. “That leaves us optimistic for the second half.”

He added that data shows 22% of homes last year at this time were under water compared with 11% this year. “Still, the ones who are in positive territory are not investing in flooring just yet. But with five consecutive months of good job growth—[in excess of] 200,000 jobs created—there is reason for optimism.”

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