State of the industry: Carpet looks to play catch-up in tough year

Home Categories Carpet State of the industry: Carpet looks to play catch-up in tough year

September 15/22, 2014; Volume 28/Number 7

By Ken Ryan

The carpet category grew both in dollars and units virtually every year for 50 years. But the flooring industry was then hit with the worst recession in its history, and since then carpet has been slowly on the mend.

According to carpet executives, by the end of 2014 housing starts will have recovered 70% of 2006 historical highs, with 93% by 2015. The carpet industry has recently rebounded somewhat following a brutal, weather-related slump during the first two months of this year, albeit not as robustly as some had hoped.

“Most of us agree that, on average, the carpet industry in 2014 is up modestly overall after a 2013 that was up 3% to 4% over the previous year,” said Karel Vercryussen, president and CEO, Beaulieu America. “That’s not exactly a cause for celebration, but it’s encouraging in terms of sales and shipments. But, when considering where carpet has been heading these last several years, there is cause for some celebration.”

Tom Lape, president of residential, Mohawk, said there is, in fact, good news out there. “Consumers are coming back, and they are shopping.” He cited some encouraging housing and economic data as well, including existing homes under contract are the highest in 11 months, new home sales are bouncing back and mortgage applications are higher. “Mortgage apps were down double digits early in the first quarter and have bounced back.”

Noting that the residential carpet segment has been playing catch-up following the dismal start to 2014, Shaw president Randy Merritt sees the overall category as “close to flat” at this point. “The average selling price of carpet is down slightly for the first time in several years due to the influx of PET at lower prices and the general weakness in the remodel segment. The winter of 2014 was exceptionally harsh across the country and led to the slow start of the year. We believe this slowed the new home construction process, and we will need a strong finish to the builder business.”

Lape and others talked about a bifurcated market in which the commodity end of the category and the premium side are showing buoyancy while the middle of the market is most challenging.

Overall, James Leslie, assistant to the chairman at Engineered Floors, suggested macro forces favor an upward trend in buying. “There is pent-up demand out there. Even with millennials starting families later and buying homes later, there will be a breakout. The macro forces indicate it is going to happen. We feel we are in the best part of the year right now–September and October.”

Larry Heckman, president of Best Buy Flooring, agreed there is pent-up demand out there, but suspects some of the reluctance on the part of consumers is the result of unsettling events in the Middle East and Eastern Europe. “As soon as we get some [positive] news, we’ll have people spending money and buying. The overall pulse I get is that we’re up as a market.”

In 2008, carpet represented 51.3% of the industry, according to FCNews estimates. By 2011, that number was 47.4%; by 2013 it was 46.9%. No one denies the gains being made by hard surfaces at the expense of soft surfaces, particularly in high-traffic areas in the home where hardwood flooring and LVT are being put down as “easy-to-care-for” alternatives.

“The multi family business is an example of where we are seeing more LVT going in places where carpet used to go,” Merritt said.

T.M. Nuckols, senior director of product strategy at Invista, added that LVT is taking away share from carpet by creating looks at price points previously not available in hard surface offerings.

Fiber

Polyester has grown significantly during the past several years at the expense of other fibers, especially nylon, and executives see that trend continuing.

As well, polyester has evolved from a nice value alternative to nylon to a strategic component of every carpet manufacturer’s overall product offering. Vercryussen said polyester is also shedding its image as the low-price fiber and is steadily closing in on nylon in terms of acceptance driven by improved performance.

Mohawk’s view is that its own triexta fiber and polyester are the growth platforms in today’s market. “Polyester really sets the foundation combo of value and performance,” Lape said. “We believe triexta is at the top of the pyramid for performance characteristics and design and styling, particularly the soft attributes. You can’t get that softness in nylon and polyester.”

Executives agreed that nylon, which still dominates the commercial marketplace, is not going away. “We recognize that even though polyester has come a long way since its introduction, there are still many dealers and consumers who prefer nylon,” Vercryussen said. “We think consumers are more ‘fiber agnostic’ these days, thanks to advances in polyester technology and similar warranties between nylon and polyester carpeting.”

Merritt said excess capacity in PET today is contributing to a very competitive environment. “There is very little staple polyester being sold. The industry is now predominantly filament—nylon, PET and some polypropylene.”

Ed Williams, president at Lexmark Carpet, said the surge polyester has enjoyed in recent years may be slowing a bit; and with multi-family as one of the stronger segments, momentum may be swinging back toward nylon, at least in that sector. “In talking to various people there is a lot of work being done in the nylon area on the part of the mills,” Williams said.

Trends and innovations

The soft craze that hit the market a few years ago shows no signs of abating, and manufacturers are seizing that opportunity with ever-softer products that are resonating with consumers who can literally feel the difference. According to Merritt, credit goes to advances in tufting technology, which continues to evolve and produce aesthetically pleasing, stylish patterns. “Carpet is generally a soft product today—softer than ever.”

To meet the growing need for soft, Beaulieu America recently introduced two entries into the popular super-soft category: Bliss Vivid and Bliss Hypnotic. Both products are companion textures made of Tryelle, the super-soft PET filament fiber.

Best Buy’s Heckman said consumers are buying into the ultra-soft trend as long as the product delivers on performance with the latest in designs and colors, such as earth tones, brown grays and tan grays.

Nuckols said while ultra-soft products are hot, there is still a market for products that are soft, but not quite ultra soft.

In the meantime, innovation is the engine that is driving this soft trend.

Mohawk, for example, is reinvesting and expanding its triexta platform with up to 100 launches planned. “Triexta now plays in all levels of the market, all distribution channels,” Lape said. “It was launched in the ‘06 time period, which means it was launched in the face of the biggest downturn ever in flooring. That shows the legs of this product.”

Commercial

The commercial segment is up slightly in dollars in 2014 when compared to 2013, and probably flat to slightly down in units, according to industry executives.

Jack Ganley, president of Mannington Commercial, said 2014 started off sluggish as companies took a wait-and-see approach before releasing dollars for capital projects. This hesitation was largely due to continued economic uncertainty.

Lee Martin, president of Masland Contract, a unit of The Dixie Group, said the overall commercial segment is somewhat more active than 2013 and certainly stronger than 2012. “My feeling is that the commercial segment is up in dollars and probably flat to a small increase in yards,” he said.

Much of the commercial growth is in hospitality and assisted living, although the overall healthcare segment has experienced a slowdown in growth, Ganley said, as that sector waits to fully understand the implications of the implementation of the Affordable Care Act.

“We continue to see moderate growth in both the corporate and retail sectors, along with higher education,” he said. “Publicly funded K-12 and acute care facilities are lagging.”

Ganley said one of the major innovations/trends shaping the market in 2014 is the combination of carpet and hard surfaces. This blend, he said, “can increase long-term appearance retention through the installation of hard surfaces in high-traffic areas of a project, transitioning beautifully to carpet in open areas of a floor plan.”

As modular carpet continues to grow and take share from broadloom—it now represents about 50% of the commercial market—executives said there is increasing interest in different size formats and shapes. Additionally, there is “a fresh interest in innovative yarn processing to create unique textures and visuals,” Ganley said.

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