Industry Stats for 2014
June 29; Volume 30/Number 1
While the flooring industry continues its recovery from the prolonged recession, the satisfying gains it posted in 2013 in value and volume slowed somewhat in 2014. A harsh winter that greatly hindered first quarter sales, coupled with inconsistent new home construction throughout the year (single-family housing starts were 11% lower than initially forecasted), left the industry with growth of 3.6% in dollars and 1.8% in volume compared to the respective 5.5% and 3.8% growth in 2013.
When the dust settled, floor covering sales in 2014 totaled $19.599 billion and 17.956 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 fifth consecutive year of dollar growth and third straight year of volume increases. On an even more positive note, the average price per square foot of all flooring was $1.09 in 2014, up about two cents from 2013. The average selling price is also up significantly from 2009, when it was $0.96.
To put things in further perspective, floor covering sales in 2014 were at its highest level since 2008’s $19.743 billion and were up 21.1% from 2009, when the industry bottomed out at $16.189 billion.
The good news doesn’t end there. More floor covering was sold last year in the U.S. than in any year since 2008. Unit growth is up 7.3% 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. Some numbers from years past have been changed slightly to reflect updated information.)
Also for the third consecutive year, every floor covering category showed growth in both dollars and units with the resilient category continuing to be the locomotive powering the industry. Within resilient, luxury vinyl tile has been the catalyst for this explosive increase.
In 2014, resilient posted the largest percentage gain of any flooring category, rising 8.4% to $2.392 billion from $2.206 billion in 2013. Since 2009, the category has increased a stunning 36.6% and is now at its dollar high point in recent history.
Resilient now accounts for 12.2% of the total flooring market in dollars and 15.1% in volume after a 3.8% rise in units to 2.69 billion square feet. In 2013 resilient held an 11.7% share, up from 11.3% in 2012 and 10.8% in 2008. Interestingly, its market share in volume has stayed around 15% for the last seven years. That suggests resilient’s average price point increased by virtue of the migration from sheet to LVT.
FCNews research reveals how LVT is driving category growth. From nearly $750 million in 2012 to $948 million in 2013 and $1.142 billion in 2014, LVT rose 52.3% in two years. It also carries with it a premium price tag as it comprises 47.7% of the category’s dollars but only 26.4% of its volume. To illustrate its growth, those numbers were 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 2014. Residential LVT saw a 14.1% increase in square footage from 392.2 million in 2013 to 451.5 million, making up 55.2% of the LVT market in dollars and 63.7% in volume. The commercial market rose from 194 million square feet to 257 million, a 32.5% increase. While residential brought in more dollars—$630.5 million—last year, commercial LVT posted a bigger percentage increase, rising 23.6% from $413.75 million in 2013 to $511.25 million in ’14.
The versatility of luxury vinyl—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 that was 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. But in recent years this perception has changed.
“Consumers and retailers quickly understood that the product was a natural fit for wet areas because of its inherent water-resistant properties,” said Ed Duncan, Mannington’s president of residential business, “but they also started looking at LVT as a product that was easily moved into a lot of other spaces because of its various performance attributes. The ability to create a product that mimics virtually every hard surface type is what really drove LVT into more spaces.”
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 hesitation of the commercial market of using a floating product.
As LVT grows, it is taking share from other resilient categories, especially vinyl composition tile (VCT), but sheet vinyl as well. Sheet vinyl—both residential and commercial—was down 4.5% in dollars in 2014 to $756 million from 2013’s $791 million. The commercial market took the big hit, declining 13.9% in dollars from $254.24 million in 2013 to $219 million last year. The residential segment was flat at $537 million (compared to $537.2 million in 2013). Sheet remains the volume leader in residential resilient sales with 60.2% of the market, but comprises only 43.2% in dollars. LVT is now at 50.7%
Despite less than robust numbers, sheet vinyl remains a viable product within the resilient category. Some executives, including Paul Murfin, co-CEO of IVC US, call sheet “the single best value product in the industry.”
Murfin said sheet provides a particularly compelling option for younger consumers who want the look of a really good floor without the price tag associated with it. As he put it, “People don’t know it is sheet vinyl, they just see a great looking floor.”
Within sheet, glass-backed is growing at the expense of felt, and that trend is expected to continue. Experts say some of the shift toward glass-backed is because of ease of installation, as it is demonstrably easier for floor layers to work with glass-backed sheet vinyl, especially in smaller areas—particularly in new home construction—than it is felt. Other factors driving fiberglass are cushioned comfort underfoot, ease of repair and affordable price points. FCNews analyses suggest fiberglass now constitutes more than 70% of the sheet vinyl market in terms of dollars and over 60% in terms of volume.
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 bank.
There may be no stopping the trend away from soft surface to hard surface flooring. Where carpet traditionally resided (hotels, bedrooms), LVT and other hard surface products are now being installed.
Some executives say it is because carpet is not as highly desired as LVT, or is not the aspirational product hardwood is. There is tangible evidence of this shift in the numbers. As recent as 2010 carpet and rugs commanded 66.2% of the flooring market in volume; in 2014 that number was 62.15%.
Which is not to suggest carpet is going away any time soon or isn’t still a major segment of the industry; indeed, it still represents a majority of the market at 44.9%. In 2014 residential sales fell an estimated 0.6%; volume was down 0.2%. Estimates for commercial sales showed an increase of 3.5% in sales to $3.88 billion, or 44% of total carpet sales. Rugs helped the overall soft surface number with a 4% increase; carpet and rugs now comprise 57.2% of industry dollars vs. 61.2% in 2010.
On the contract side, the corporate segment—which accounts for 50% of specified commercial—experienced a strong second half. This was in part because of an improved jobs market, which meant more corporations and firms were investing in their workspaces to attract top talent.
A shift in demographics is also impacting carpet. Senior living, which can be classified as both health care and multi-family, is a particularly active segment that offers tremendous opportunity now and in the future as an aging population naturally prefers the softer flooring surface.
Mixed-use development also presents a prime opportunity for the foreseeable future with increased urbanization trends and both residential and commercial flooring needs. That demand will continue to spur new development as well as the redevelopment of existing properties.
On the product side, carpet tile continues to grow as a percentage of the business and now accounts for 52% of the mix on the commercial side; in 2014 modular carpet trended toward higher priced products, which helped boost overall sales even while units were essentially flat.
From a design trend perspective, shapes other than the classic carpet tile square trended in 2014, with the introduction of hexagons, rectangles and facet or rhombus shapes, presenting endless opportunities for the A&D community.
In terms of fiber, nylon’s share in residential carpet has been trending down; it was estimated to be 40% in 2012, 31% in 2013 and around 29% in 2014, although some estimates are a bit higher. The strong growth in multi-family helped fuel the trend as facility managers opted for less expensive carpet since replacement cycles are 35% to 50% higher than those of single-family homes. PET’s biggest benefit, experts say, is its value proposition due to the lower raw material cost compared to nylon. As such, polyester continues to grow, especially the solution-dyed component.
An encouraging note for the carpet industry is that the pace of technological innovation in the last five years is unlike anything seen in the previous 20, executives said. Whereas chemical companies such as BASF and DuPont were the fiber innovators in the past, today’s major mills are driving design innovation through the use of new technology and machinery that can create uniquely differentiated patterns, twists and colors.
Stain and soil resistance protection that is incorporated into carpet fiber continues to play an important role. Some of the newest entries into the market include moisture resistance backing that provides greater assurances for homeowners worried about clean up.
A return to slightly higher price points and better goods helped the area rugs category increase 4% in 2014, an increase of 1.7% over the previous year. An uptick in new home development and remodels, and consumers’ willingness to spend on home accessories, benefited the rug segment in 2014.
“Stabilization and regrowth” was the headline for the hardwood category in 2014. While not sexy like LVT, hardwood has been on a slow, steady growth path since ebbing in 2007 during the Great Recession. After hardwood sales reached its high in 2006, it took until 2013 for the market to recover to near 2008 levels.
And while 2014’s sales in hardwood flooring grew 7% to $1.943 billion, and 6.1% in units to about 770 million square feet, it was still the second best year since 2007 in terms of growth, trailing only last year’s 10.7% increase. More so than just the numbers, industry executives are pleased the segment is on firmer, more stable footing than it has been for some time.
Dollar growth outpaced units in 2014 largely because of price appreciation in solid wood driven by the run-up in lumber that led to multiple price increases. The industry continued to realize price appreciation for the first eight months of the year before leveling off. That would explain dollar growth outpacing units.
Stability in raw material costs, especially in the second half, was a major story in 2014. The availability of lumber and veneer improved considerably as the year progressed to the point where supply adequately met demand. With raw material costs in check, hardwood suppliers could turn their attention from raising prices to selling more products.
Were it not for a tough first quarter in 2014, largely attributed to the harsh winter weather, hardwood sales in percentage growth may have topped 2013’s numbers. Another detriment was housing starts, which proved more sluggish than expected.
“Everyone was thinking about a breakout year, and that simply did not materialize affecting overall growth for the year,” said Luc Robitaille, vice president of marketing at Boa-Franc, makers of the Mirage brand.
As it was, the 7% increase in sales and 6.1% bump in units amid improving economic conditions gave executives reason to believe the recovery is here to stay.
Michael Martin, president and CEO of the National Wood Flooring Association (NWFA), said most of the important data was trending upward. “Single-family construction was pretty good. On the retail side, mid- to upper-end hardwood saw a resurgence in demand, and there is also still some pent-up demand out there that we saw in 2014.”
Hardwood suppliers that source domestically—including U.S. and Canadian manufacturers—are seeing the effects of the growing Made in the USA movement (or for Mirage, Mercier and several others, the pull of Canadian quality). Executives are finding that not only do consumers feel more confident trusting products produced by American manufacturers under U.S. regulations, there has also been a renewed pride in purposefully supporting brands that provide American jobs.
In addition, most retailers and distributors are maintaining lower levels of inventory in response to the tightening overall economic conditions. These lower inventory levels require more rapid service; domestically made products are capable of filling those quick-turn requests better than most imports, and this trend continued during 2014.
Another trend that continued was the movement toward engineered hardwood from solid. Engineered picked up at least 1 percentage point—some would argue a bit more than that—and now commands about 54% of the market. Executives say engineered is growing in demand because it offers numerous options at affordable prices with a design aesthetic that resonates with consumers, including wide planks.
Hardwood flooring continues to trend toward wider, longer planks, playing into engineered’s wheelhouse. As Don Finkell, CEO of American OEM put it, “Solids don’t do wide well.”
Although the category has been under pressure from LVT, industry experts agree the intensity of the threat has finally died down and laminate remained relatively flat throughout 2014. FCNews research revealed that laminate was relatively stable with slight increases in both volume and dollars.
For the third consecutive year, laminate showed gains—1.1% in sales to $1.135 billion from $1.123 billion in 2013; and 0.6% in units to 1.066 billion from 1.060 billion square feet in 2013. While 2013 results foreshadowed some price stability, last year’s results showed an increase in average selling price for the first time after years of decline to $1.06 per square foot—back to where it was in 2012.
The consensus among industry leaders is that the commoditization of laminate pricing has resulted in more of the business going to the home centers; where specialty retailers have made their mark is in the mid- to higher-end products that are 8 to 12 mil with distinctive wood-like characteristics and features. Specialty retail accounts for an estimated 30% of the laminate business, with the rest found in home centers and Lumber Liquidators.
Laminate remains very much a residential replacement product, however the category did see some growth in the new construction market, coming in at 10%, up from 8% in 2013. With the help of advanced digital printing, manufacturers have been able to develop laminate products that provide realistic, at times exotic, visuals and replicate natural textures of hardwood. This R&D ability creates a “wonderful opportunity for laminate to encroach upon hardwood in the builder segment,” said Steve Roan, sales and marketing director, North America, Beaulieu Flooring Solutions USA.
Laminate is also making small strides in penetrating the builder segment; thicker, premium (namely 12 mil) products have become a more appealing alternative to higher priced hardwood flooring.
At its core, laminate offers numerous performance benefits, and as long as it does so it will remain an enduring presence in the floor covering market. “Laminate is still the most scratch-resistant flooring surface outside of concrete,” Mannington’s Natkin said. “Secondly, NALFA certified are some of the greenest products there are. The one Achilles heel is moisture, and we’re working on that. The laminate category has good long-term viability.”
As much as any category, ceramic is tied to housing starts, which did not match 2013’s 18% increase, the best year for builders since 2007. In addition, ceramic is closely tied to new home sales, which also did not live up to 2013’s highest level since 2008.
Still, ceramic sales in dollars were up 6.2% in 2014 to $2.38 billion, although volume was relatively flat, up 0.5% from 1.98 billion square feet to 1.99 billion feet. Ceramic now commands a 12.1% market share in terms of dollars and an 11.2% share in volume. This is up from 9.8% and 7.6% in 2009.
However, ceramic’s leap comes with a caveat. Nearly 70% of all ceramic tile sold in the U.S. is imported, and the product’s value is calculated at point of entry into the U.S. In other words, it is recorded when it lands on U.S. soil. So, much of ceramic tile’s increase was attributed to suppliers beefing up their inventory levels and not reaching first point of sale.
Italy, China, and Mexico—in that order—represent more than 75% of the dollar value of ceramic tile imports into the U.S. in terms of dollars. Because of the many types of ceramic tile, nearly all U.S. manufacturers import product to supplement their domestically produced product. In terms of units, Mexico and China lead the way as much of the lower-priced products come from south of the border.