June 5/12, 2017: Volume 31, Issue 26
By Ken Ryan
Not too hot that it causes inflation and not too cold that it supports a recession. Economists refer to this phenomenon as the “Goldilocks” economy. In May, for example, a record 34% of respondents to a Bank of America Merrill Lynch Fund Manager Survey described the economy in those terms.
By some measure, Goldilocks is what you want because it is predictable. Viewed another way, it can be considered underwhelming. To be sure, there are good economic signs. The unemployment rate is as low as it has been since 2001; durable goods orders are rising, which equals a growing economy; and the stock market is stable, which is a healthy sign. Conversely, gross domestic product (GDP) growth of 1.2% indicates sluggish movement. In a healthy economy, GDP growth should be around 2-3%. During the month of May, 138,000 jobs were created. A healthy economy should generate 150,000 jobs on average.
FCNews surveyed flooring retailers to ascertain what is happening in their markets.
“Goldilocks seems very fitting to describe the business here at the Rug Gallery,” said Sam Presnell, owner of the Cincinnati-based store. “We had a soft first quarter and a good, above-goal last two months. We are up in traffic the last two months and selling better quality goods. I’m feeling insecure and am cautious in my buying at this point.”
Foulk’s Flooring America, Meadville, Pa., is another dealer seeing an uptick in residential foot traffic and a trend toward better goods. “A big surge has been in walk-in showers; as the baby boomers age we see people replacing bathtubs with walk-in showers and all the design capabilities that go along with that,” said Mike Foulk, president. “Our commercial work is surging—both Main Street and contract are extremely busy. We are as busy as we can be with the available installers.”
Good vibes can also be felt in San Antonio, where Billy Mahone III, manager of Atlas Floors Carpet One, reports “a general sense of optimism. Retail traffic and sales have been up, so we are doing our best to take advantage of this renewed sense of confidence and close as much business as possible.”
However, there are some flooring dealers who report somewhat disappointing numbers, or at the very least inconsistent sales month-to-month or quarter-to-quarter. As Phil Koufidakis, owner of Baker Bros., Phoenix, explained, “As usual the economy is hard to predict. Oftentimes at a 20,000-foot level everyone says how great it is, but it doesn’t always translate to the street. Q1 and April were good; May softened. So…we find it here to be middling-plus so far this year and we are mostly bullish on the rest of the year. That either makes me an optimist or an idiot.”
David Snedeker, division merchandise manager-flooring, Nebraska Furniture Mart, called 2017 “underwhelming” to this point. “While we are up single digits for the year, it has yet to meet the expectations we had coming into 2017. Hopefully the second half will be more robust, and the industry can enjoy a bigger slice of customer demand.”
Back on the East Coast, a mild spring gave some retailers reason to believe 2017 might be a banner year. “In Q2 our business was not as robust for what we forecast as the spring broke early due to the mild winter in our market,” said Brian Witkin, executive vice president of sales for Cherry Hill, N.J.-based Avalon Flooring, with 14 locations in three Mid-Atlantic states. “We are working smarter to sell the entire home to provide a one-stop shopping experience leveraging the large breadth of products we carry.”
Hanover, Pa.-based Charles F. Zeigler & Sons got off to a relatively hot start before business cooled off at the end of April. Not to worry, said Bill Zeigler, co-owner, noting, “Our area is usually immune to the extreme conditions.”
Favorable business conditions have been shining brightly on some dealers in the Sunshine State. Montgomery’s CarpetsPlus, with two locations in the Sarasota, Fla., market has enjoyed a 6% increase in sales over last year. “We are in one of the most desirable areas to live and we are experiencing tremendous growth right now,” said Missy Montgomery, co-owner. (Sarasota, she noted, will be the new winter residence of the Atlanta Braves, and 20,000 new homes are expected to be built in her market over the next 10 years.) “This is the slower time of the season for us because the snowbirds leave. However, that being said, the year-round residents get things done now.”
For John Taylor, owner of Taylor Carpet One Floor & Home, Fort Myers, Fla., sales in 2017 to date have exceeded the previous two years. “We seem to be seeing larger jobs coming through as well as better opportunities in the commercial side of the business.” About the only thing holding Taylor’s business back is the paucity of installation labor, which he said has impeded his ability to grow. “We have, however, seen a number of quality people applying for sales and other jobs, which I attribute to people moving south to our area.”