Resilient: State of the industry- LVT remains star of the show, no end in sight

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Aug. 3/10; Volume 30/Number 4 

By Jenna Lippin

Continuing on a growth trajectory of 8.5% in 2013 and 8.4% last year, the resilient category is showing no signs of slowing in 2015. But the growth has not been limited to the last two years. The category has, in fact, risen 36.6% in value over the last five years.

Overall, industry experts see resilient up low- to mid-single digits for this year, numbers that would certainly be higher if not for a slow start caused by a debilitating winter.

LVT continues to drive the category, accounting for 27% of resilient’s volume last year and increasing 20.3% in sales from 2013 to 2014. As has been the case for the last few years, executives pegged LVT growth in the first half of 2015 at a higher rate than the resilient category as a whole. “We are still seeing double-digit growth in LVT in 2015,” said John Wu, president and CEO of Novalis Innovative Flooring. “More and more consumers are realizing what a great product LVT is; it is versatile and can be installed anywhere with various methods, and it’s easy to maintain.”

Russ Rogg, president, Metroflor, said LVT is “unquestionably the hottest category in the industry,” which he projects to be growing this year at a 17% to 18% clip. “LVT is a residential product, a commercial product, a DIY and professional installed product—all features that help give it a broader market appeal than other hard surface flooring options.”

Dan Natkin, senior director of residential products at Mannington, agreed with Rogg, although his growth projections were more conservative. “Overall, I would say [resilient is] up low-single digits with the LVT market probably approaching 10%. LVT is continuing to grow at a phenomenal pace, taking share from carpet as well as some other hard surface categories. We see a lot of activity [for resilient overall] in multi-family new home construction, where both sheet vinyl and LVT play very strongly.”

Multi-family is seemingly providing a surge to resilient growth. However, most executives noted the category is thriving across the board. “Multi-family new construction and replacement, and commercial continue to drive growth,” said Joe Bondi, vice president, residential, Armstrong Floor Products North America. “The U.S. wholesale vinyl floor market is up mid-single digits on a square footage basis and high single digits in terms of dollars. The spikes are coming from fiberglass-backed sheet as well as LVT,” he said.

According to Natkin, multi-family and new home construction make up the biggest piece of the resilient pie as “people have been sitting on remodel dollars for so long, we’re starting to see turnover a little bit now. Over the next 10 years the number of rentals is going to increase dramatically as new homebuyer numbers decline. This really feeds into LVT and resilient sheet.”

Jonathan Train, president and CEO of EarthWerks, noted the appeal of LVT throughout various channels. “Across all sectors, many designers, consumers and various other end users would never have considered LVT as an option. But with so many major flooring companies now offering it, it has elevated its exposure, and people have a better understanding of its value and benefits.”

With this widespread use, LVT is continuing to take share from both soft and other hard surface products. “For reasons…such as value, aesthetics, durability and easy care and maintenance, it is naturally favored over carpet and many hard surface alternatives, meaning LVT will continue to take share from wood, laminate and, in some instances, ceramic tile,” Metroflor’s Rogg said. In terms of application, property management is “clearly an area that is fueling growth,” he added.

Last year several major manufacturers announced the opening or construction of LVT/resilient plants in the U.S., which some expected to affect the market in the face of lower-priced Chinese imports. Experts agree the pressure still remains, but some feel that influence is only felt on certain products.

“It’s more on the commodity-designed products,” said Michael Raskin, president of Raskin Industries. “There is a place for lower-priced products if you can produce them correctly and understand which markets to use them.”

Natkin added that the lower-priced Chinese imports are, in fact, affecting business, but “it depends which side of the market. The Chinese have almost no place in the resilient sheet market, but they definitely continue to affect LVT. We continue to see new emergent price points that are starting to hit the floor of how low they can go.”

According to Rogg, more impact from imported LVT was felt in 2014 than this year so far. “As the category exploded from a growth perspective, it also exploded relative to the overwhelming number of companies that began to offer LVT as part of their portfolios. When these LVT [options] were added, it was often at extremely low prices in an attempt to gain a foothold as they sought market share. To a degree these attempts were successful in 2014, and the category became more diluted with more companies and brands claiming their slice of the pie.”

This year has seen a little bit of turnaround, as those selling and using these lower-grade products have experienced their true quality. “What we have found in 2015 is that many of those efforts were short lived,” Rogg continued. “Yes, the products are still available, and they’re still available at low prices. But in many cases contractors and retailers have not had good experiences. They are returning to trusted, reliable brands of LVT with a history of good performance and availability.”

Composites: A game changer?

Also coming into play in the last six to eight months is the rise of composite products, or WPC, or EVP as some choose to call it. While this offshoot category is still in its infancy, it is certainly showing promise. A number of resilient players are getting involved, with most claiming to have created categories all their own.

Piet Dossche, who is said to have led the composite movement with the development of USFloors’ COREtec product, said the appeal of the new category comes from its strength and rigidity. “This not only makes for a strong click locking profile, but it hides subfloor imperfections that in a solid, glue down or floating LVT will telegraph and be visible over time. Composite constructions can be installed directly over tiles without having to fill the grout lines.”

Dossche predicts a “major shift” in solid floating LVT “with composite cores eventually being the largest share of this segment. The growth of composite LVT products will be a repeat of what we saw when laminate flooring came into the market and will grow into a $1 billion flooring category all by itself.”

Natkin agreed that composite products will fit with other LVT on the market, thus becoming an upgrade installation option more than anything else. “I think it will go through growing pains—particularly from a quality perspective—not unlike any other category. It has definitely carved out a place in the market and has taken a nip out of laminate and LVT. I look at it more of an installation option than anything else; you have basic glue down LVT, a step up to click LVT, and WPC or EVP [enhanced vinyl plank] is really a third [choice]. If a subfloor is troublesome and not the most level or you have concerns about telegraphing, it’s a nice product to use.”

Metroflor’s Rogg sees “great growth potential” in WPC with plans to release its own composite platform called Structural LVT this fall. The company seeks to round out its floating LVT offerings with the Engage Genesis product. “If positioned correctly from a price and performance perspective, we will be able to meet any and all possible product needs when a floating LVT is considered.”

State of sheet

The sheet side of the business is essentially as flat through the first half of 2015 as it was in 2014. There are certain applications where it remains viable, particularly in multi-family and the builder market on the residential side. In commercial it maintains a strong standing in health care.

“We’re seeing a little resurgence [of sheet], particularly on the glass side of the business,” Natkin said. “People said sheet is going the way of the dodo, but it’s not really doing that; we’re seeing a good leveling off of the business. It really goes in cycles, but as people move into that remodeling time of year, we’re seeing the shift of felt to fiberglass transition happening at a more accelerated pace than we anticipated.”

Paul Murfin, co-CEO of IVC US, said challenges for sheet products are at the upper-end price points where they start to compete with entry-level LVT. “Overall I would say the market is essentially flat, with softness in retail and commercial offset by strong performance in property management and the builder market.”

He also noted the continued strength in the shift to fiberglass, with felt really only staying strong in the single-family builder market. “I think there are ways we can adapt to become more engaged on glass side there as well.”

According to Bondi, sheet will continue to attract those customers who are aware of the category’s benefits and see a certain value in the product. “The market dynamic on the residential side is not really about structure—felt vs. fiberglass—but rather about preferences for glue down vs. loose lay installation methods. [Glue down maintains] popularity in certain regions and applications.”

In the commercial market, sheet is prominent in the environments where it is essentially necessary, particularly health care due to ATSM guidelines. “Commercial sheet, homogeneous and heterogeneous grouped together, is doing really well,” said David Sheehan, vice president, commercial hard surface, Mannington. “It’s doing much better than it was last year, which from the beginning into the third quarter we saw a bit of a slowdown as that category is 90% health care. If there is any slowdown in health care spending it’s going to impact the category. But just around the fourth quarter people realized the Affordable Care Act wasn’t going to affect us as much as we thought, so they redeployed capital to do some renovation work. Then there was some movement in commercial sheet, which has continued into this year.”

Dominic Rice, vice president and general manager, commercial, Armstrong Floor Products North America, also noted sheet goods are currently strongest in health care. “They are holding their position in that segment as they best meet the performance requirements of, for instance, sterile environments.”

The commercial climate

Similar to residential, LVT continues to be the overall driving force behind commercial activity thus far in 2015. Health care, retail and education remain relevant segments in this corner of the market, as are hospitality and some corporate settings. In most spaces LVT is, in fact, taking share from both sheet and VCT.

“LVT continues to take share from basically every other category,” said David Thoresen, senior vice president, commercial business, Mohawk Industries. “Building owners like it as a solution and visuals are getting better and better. There is not a wood floor out there that can’t be replaced by LVT. More specifically, people are really migrating to loose lay LVT. The category has a long span of growth ahead.”

Heightened activity in education, Thoresen said, is typical for summer months as renovation projects often take place while school is out. However, he estimates the numbers in that segment now are in line with those from January. “Education starts in February and goes all the way through August and September,” he noted.

Mixed use is also significant for the commercial resilient market, which includes condominiums built above retail stores and restaurants that have started going up all over the country. “It seems to be a lot bigger than it ever was in the past,” Thoreson said. “We are benefitting from that with a variety of products. It’s nice to watch that emerge.”

While health care is a strong segment for sheet vinyl, Rogg explained that area of the business is still relevant for LVT. “LVT can accommodate both ‘warm/home-like’ environments or, in contrast, bright and robust visuals. LVT is preferred for its durability, practicality and good indoor air quality characteristics.”

According to Rice, VCT still holds significant share on the commercial side, but its growth rate is lower than the rest of the market due to the LVT surge. “Tile is bigger than sheet in the commercial market, and that’s LVT and VCT combined. LVT is making gains in every market sector, offering plenty of design appeal, but just as important is its maintenance profile.”

In addressing this continued shift of commercial sheet to commercial LVT, Sheehan said it really depends on the end user and his/her preferences, in addition to the project at hand. “There are some folks who become more budget conscious, who want the look of LVT or look of wood, but LVT may be priced slightly above what they want. Sheet may be the better value proposition for them. It really depends on what the customer views as the most important attributes.”

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