2015 expected to pick up after sluggish, underwhelming 2014

Home Inside FCNews 2015 expected to pick up after sluggish, underwhelming 2014

December 8/15, 2014; Volume 28/Number 12

By Ken Ryan

Some flooring executives are using the phrase “slow and steady wins the race” in reference to the improving economy with hopes that 2015 will be a victory for the flooring industry in the face of a weaker-than-expected 2014.

Ed Duncan President, Mannington Residential

Mannington’s forecast for the industry in 2015 is for low single-digit growth of around 3% to 5%. We expect residential remodeling to maintain its current modest growth level and single-family new home starts to grow approximately 8% to 10% year over year.

We see modest growth across all key segments—not dramatic growth. Specifically, slow but steady improvement that’s driven by general demographics and economic activity. But for 2015 we don’t see there being a significant change.

Mannington’s own forecast is always to outperform the industry. We have a lot of new initiatives we think will fuel that performance, which will be introduced at Surfaces.

2015 will be a big year for Mannington. We continue the transition to domestically produced LVT as our new facility in Madison, Ga., comes online. In addition, we have a new lineup of products in every category that will be unveiled in January. And last but not least, we are gearing up for Mannington’s Centennial, which we’ll celebrate at the end of 2015 and through 2016.

Bruce Zwicker CEO, Haines

No one knows what the demand for flooring will be next year. All of us were fooled last fall when the unanimous 2014 growth rate was another 7% to 8%, just like 2013. But we have been disappointed this year. In 2014 market demand grew about 3% and supply perhaps as much as 5%. Inventory in the pipeline increased but not to excessive levels, and manufacturers had to moderate production rates to accommodate slower demand.

In the first quarter of 2015 we will beat the very poor Q1 2014 comps. After that, each quarter’s demand in 2015 will be equal to or slightly above the corresponding quarter of 2014. If those assumptions are correct, then flooring demand in 2015 will increase about 4% to 5%.

For Haines, we will forecast a budget increase of about 4% to 5%, more or less market growth. We expect to gain share but think the demand forecast for next year is not certain. Therefore, we will hedge our bets against the possibility of another disappointing year and budget sales equal to market and hope to beat our budget.

We think the growth will come from all three demand segments with new residential the strongest and both commercial and residential remodeling more modest.

We are excited about the new dedicated Armstrong division. We now have a sales and marketing team that does nothing but work hard to bring to our customers the best that Armstrong has to offer.

We have also established the Haines supplies division, ranging from Pennsylvania to Florida. This is an emerging large supplies business, so we need to figure out the best way to service our customers and bring that model to all 26 supplies centers.

Tom Lape President, Mohawk Residential

We see 2015 as a positive year for the floor covering industry for units and dollars. It would be fair to say 2014 did not pan out how we thought it would from an overall demand standpoint, but we’re optimistic for 2015.

The floor covering industry gets good benefit from any existing home sales. Existing home sales were up anywhere from 3.5% to 5% in 2013, and were down 3.5% in 2014. That is a major flip.

As we look forward to 2015, we see consumer confidence continuing to do well along with favorable trends on interest rates and employment. The mood is still optimistic and the fundamentals look solid.

Single-family home sales still have not reached the halfway point of where it was at its peak in 2006. We expect another positive year, but we still have a ways to go to reach the midway point. We’re seeing more demand for multi-family based on shifts in demographics, and that’s good for flooring.

On the commercial side, we’re bullish on Main Street; we see that as a net contributor to the business. We see more demand from modular carpet tile, and we have made substantial upgrades to that line, as well as the addition of a comprehensive LVT line that our Main Street reps will carry. We feel Main Street will continue to outperform residential in 2015.

In early 2014 we separated our business from a distribution standpoint. We took our multi-family and builder sales force and separated them out to drive more of our specified business. We also consolidated hard and soft surface products to our builder and multi-family segments, and that has generated a great deal of specified work.

On the product side, Continuum, our patented polyester process, continues to perform well, and we will continue to expand this offering.

SmartStrand is our coups de grâce, and we expect 2015 to be our biggest year ever for SmartStrand, with a number of styles and constructions, new fiber systems and our SmartStrand Forever Clean product, which will be the story for 2015.

Randy Merritt President, Shaw Industries

The economic reports we follow indicate that 2015 construction spending will be strong and household formation is on the rise, which is a positive signal for the flooring industry.

For Shaw, the capital investments we have announced over the past two years reflect growing market demand for carpet tile, LVT and engineered hardwood.

LVT continues to be an industry growth leader, and in the commercial space carpet tile will continue to dominate. We expect continued decline in the use of broadloom in commercial settings, with the exception of the hospitality sector.

In 2015 and beyond, success will be driven by continuing to innovate to develop products that meet our customers’ preferences in terms of both value and style. We will also look for ways to be nimble in order to respond to the increased desire for customization and the increased pace of changing customer demands. We’ll continue to offer innovative products and services to meet our customers’ needs.

Next year we will see the realization of many of our manufacturing investments, including the completion of our engineered hardwood plant expansion, our new LVT manufacturing plant in Ringgold, Ga., and the opening of Evergreen Ringgold, the latest addition to our diverse recycling portfolio.

Among our array of services, we’ll continue to provide robust dealer training and services to support their success. The market will continue to evolve, and we’re committed to driving innovation into the business to ensure Shaw and its retailers continue to thrive.

Donald Maier CEO, Armstrong Flooring Products

We think opportunities lie in having a fully integrated, vibrant line when remodel comes back. Having products for different construction types, different needs and different design tastes is key to winning in the market. The challenge is in educating consumers and salespeople, helping them understand the full value of their options.

Many homeowners prefer hard surface flooring because it is seen as being more durable, easier to clean and better for indoor air quality than soft surface. Vinyl flooring will continue to be popular because of its low cost, durability and minimal maintenance. We are continually focused on delivering leading edge designs and innovations to differentiate our products. However, we do believe that vinyl flooring will see below-average growth due to ongoing competition from other hard surface flooring materials.

I also think we are stacking up strong in innovation across the portfolio, whether it’s in sheet vinyl or our Alterna products, wood offerings or laminates.

Regarding 2015, business is dynamic, and it’s important we stay agile enough to respond to any change or new opportunities that present themselves. We are excited about the growth in our LVT business, both in the residential and commercial segments. We are looking forward to the opening of our LVT plant in Lancaster, Pa., next year. With an investment of over $40 million in a plant expansion and an LVT line of our own, we can serve the North American market—where industry sales for luxury vinyl tile are growing at a double-digit clip—from Lancaster.

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