Resilient: State of the Industry 2020

HomeCategoriesResilient: State of the Industry 2020

Sales growth persists despite stumbling blocks

By Megan Salzano

Mohawk’s Pergo Extreme features higher-end wood and stone-look visuals along with dent-free technology.

This year began with the resilient category poised for another 12 months of steady growth amid its meteoric rise. Resilient flooring remains the fastest growing flooring category in the industry, and 2019 again saw it dominate its competitors. FCNews research put the category at $5.433 billion in sales in 2019, an industry-leading 10.5% increase over 2018’s $4.916 billion.

As such, 2020 was expected to see similar gains as its predecessor, and suppliers agree 2020 ushered in a vibrant first quarter. “We started the year with a very strong first quarter, carrying over the positive momentum we had built in 2019,” said Noah Fulton, vice president of business strategy, Karndean Designflooring.

However, not even the category’s continued popularity and growing demand could shield it from the calamity of events that impacted 2020. The most notable was no doubt the onset of COVID-19. In the months of March-August, 2020 was plagued by uncertainty and hardship brought on by the pandemic—the lasting effects of which are likely to continue into 2021 and beyond. If that wasn’t enough, the category was hit on Aug. 9 when the Section 301 tariffs on Chinese-made resilient flooring products went back into full effect following a year of exemption for certain category subsegments.

“There is no denying 2020 has been a year like no other,” said Steve Ehrlich, vice president of sales and marketing, Novalis.

Flooring manufacturers agree, a slowdown during the middle of the year due to the pandemic was apparent. “COVID-19 has slowed the economy substantially this year, and we believe that as of March the flooring business began dropping as much as 35% each month,” said Dave Thoresen, senior vice president of product and innovation, Armstrong Flooring. “We now estimate that year-to-date the number represents a 20%-30% drop in overall business dollars.”

However, vendors note that even with the slowdown, the category soldiered on. “While there was an initial downturn in overall demand, the resilient category has remained strong and very important to the market,” said James Fleckner, product manager, Tarkett North America.

Shaw’s Floorté Elite series features a waterproof, PVC-free mineral core and a 5-year residential scratch warranty.

Suppliers agree the category not only held strong but experienced growth—albeit at a slower rate than was previously expected. “Although the COVID-19 pandemic has certainly impacted previous growth expectations for the category, overall, we are up for the year,” said Jeff Francis, director of resilient category management, Shaw Floors. “Trends remain in resilient’s favor as this category continues to perform in the market.”

While category leaders agree the full fallout of this year’s events remains to be seen, most are optimistic about the final four months of 2020 and resilient’s rebound potential. “We recognize that it is going to take time to get back to pre-pandemic levels, but we are already starting to see more activity as parts of the country begin to open back up, which we hope continues throughout the rest of the year,” said Bill Anderson, CEO, Karndean Designflooring.

Pandemic pressures meet tariff troubles

Shaw Floors’ Francis said it best when he told FCNews, “The two main challenges facing resilient this year are tariffs and the shutdowns caused by COVID-19. These disruptions to the market will continue to cause issues that will need attention in the coming months.”

Armstrong’s Empower rigid core line features the company’s Diamond 10 Technology.

It’s no doubt the pandemic has been the No. 1 challenge for the flooring industry in 2020. However, what has become somewhat surprising is the flooring industry’s ability to rebound from the downturn. When it comes to the resilient category in particular, many suppliers assert it may have fared better than others in its ability to recovery.

“I would say for the first half of the year the category is slightly down, but I see resilient recovering quickly and recovering faster than some of the other floor covering segments out there,” said Ed Sanchez, vice president product management for Mohawk Industries.

Sanchez also noted the positive indications of pent-up demand. “You always wonder whether that demand goes away or becomes pent up,” he said. “Indications across the industry show it’s pent up, and we’re going to see it bolster the industry in the back half of the year.”

As to why the category remains so viable amid such a chaotic year, vendors cite myriad explanations. Its performance, for example, has much to do with its continued resiliency. “The driving force behind the resilient rebound is the fact that products in this category provide reliable performance that distributors, dealers, designers and installers depend on to create great spaces,” Tarkett’s Fleckner explained.

Ana Torrence, hard surface category manager, Engineered Floors, noted the category’s new technologies as key to its resurgence. “Advancements in 3D printing have made a huge impact on what we are able to offer the customer,” she explained. “Many households love the look and feel of real wood, but do not want to deal with the upkeep and maintenance. These new 3D printing techniques allow us to offer a product that not only leads in toughness and performance, but also provides an authentic aesthetic that can only be compared to the look of actual wood floors.”

An unexpected boon to the industry are consumer habits that took shape during the lockdown. “[Consumers] are looking around their current spaces and craving a refresh,” Novalis’ Ehrlich said. “With extracurricular activities and vacations canceled, many of our customers also have more time than ever before. They are tackling those home renovation projects that have been on the back burner.”

Consumers’ focus on value post pandemic has also lifted up the category. “I think as America looks at its pocketbook, they’re very focused on value,” Mohawk’s Sanchez explained. “Value isn’t just price, it’s what you get for your dollar. I think more than ever you have people looking at their home as an investment, and I think the resilient category is reaping those benefits.”

Novalis’ Maybree collection features 16 x 32 estate-sized tile with NovaShield patented coating.

Even though the category is fighting back against various shutdowns, an economic downturn and widespread uncertainty caused by the pandemic, it’s not done fending off hardship in 2020. In the words of Mohawk’s Sanchez, “As if 2020 couldn’t become more interesting, now we have the tariffs kicking in.”

Prior to the COVID-19 pandemic, the 25% tariff on Chinese-imported products had been the talk of the town, grabbing headlines and prompting shifts across manufacturing, distribution and even retail. While it can no longer claim to be the main thorn in the industry’s side, there’s no denying tariffs will again impact the industry and the resilient category in particular (see related story).

The exclusion from the tariff for some vinyl flooring, such as LVT, was lifted in early August. Industry experts agree, the timing—to say the least—is unfavorable. “We’ve gone through various ranges of tariffs in the past, and we have some precedents on how consumer demand behaves with the current rate of tariffs,” said Sam Kim, senior vice president, national product, MSI. “One challenge this time is we are dealing with an unprecedented pandemic, with uncertainties in the economic future.”

Shaw Floors’ Francis acknowledged that tariffs will most likely raise costs again. “Which, in turn, will raise prices to customers in the long term,” he noted. “We believe this is a negative for the industry and petitioned against it last year, specifically addressing how it negatively impacts our customers and, ultimately, consumers.”

Despite the potential challenges the tariffs may pose, suppliers are optimistic about the category’s ability to weather this storm, too. “If 2019 performance is any indication, LVT will continue to grow and thrive despite the tariffs, and we would expect to see similar results in 2020,” Karndean’s Fulton stated.

Domestic advantage

Mannington’s Parisian Oak features subtle saw marks, realistic wood-filled knots, a refined surface texture and painted bevels.

With challenges sourcing from China broadening, domestic production seems a logical alternative given its strong benefits. Jimmy Tuley, vice president residential resilient business, Mannington Mills, pointed to the slowdown in growth the tariffs caused in 2019 but the benefits domestic manufacturing brings.

“Overall, the category would have posted strong double-digit growth had the tariffs not been imposed,” he explained. “That said, Mannington’s commitment to domestic manufacturing has helped to mitigate this impact on our business. With the exemption ending, there has been more time for both domestic manufacturing and out-of-China sites to develop, and I think this tariff will have less impact than the last time.”

Mohawk’s Sanchez concurred, adding, “Having U.S. manufacturing capability in sheet, flexible LVT and rigid click is great because you have the benefits of being able to have heighened control over your quality, direct control of design elements, control of raw material flow and very short supply chains. It’s a much shorter trip from Dalton to any U.S. dealer than it is from the port of Shanghai. We are able to be much quicker based on our customer’s needs.”

While domestic manufacturers continue to drive innovation stateside, others are looking to add the Made in America label to their portfolios. Novalis is the latest example of a flooring manufacturer bringing its resilient production stateside. The company remains on track to bring rigid core production online in the third quarter of 2020, making it one of only a handful of manufacturers with domestic rigid core capability by 2021. “Speed to market is the biggest advantage in any decision to open a new location,” Ehrlich told FCNews.

SPC leads the pack

MSI’s Everlife features CrystaLux technology, a proprietary innovation in wear layer performance.

Last year, the industry witnessed the growing dominance of the resilient category’s SPC subsegment and especially that over its sister subsegments, WPC in particular. According to recent FCNews research, in one year the SPC/rigid core subsegment doubled in terms of volume (reaching 667.5 million square feet) and more than doubled in terms of dollars (reaching $1.126 billion). Meanwhile, WPC dropped 17.5% and 15% in dollars and volume, respectively.

This year was no different, and suppliers agree SPC continues to lead the pack. “SPC has been the darling of the residential side of the business,” Armstrong’s Thoresen said. “It allows for better cost and indent resistance vs. WPC, and it has a very solid wear and waterproof story vs. flexible LVT.”

Mohawk’s Sanchez agreed SPC is the superior product and noted the impact of its growing design benefits vs. WPC’s glaring pain points—not only for the consumer but for the specialty dealer as well. “Consumers are spending more time at home and are looking for something that is both beautiful and drives resale value,” he explained. “Couple that with indentation claims tied to WPC that dealers are now dealing with; I think this is only going to continue to drive a shift toward SPC as we go forward.”

The pandemic, MSI’s Kim added, also put SPC in the spotlight. “I believe the pandemic has accelerated the shift to SPC at a faster rate than ever,” he said. “All the great virtues of SPC have elevated the growth of this category further, while the downfalls of other types of flooring have accelerated their decline. This pandemic has also highlighted the importance of value, but also, the importance of purchasing from a reputable brand that is here to stay.”

Sheet still shines

Suppliers agree, resilient sheet has found its place in the market and bounced back well amid pandemic concerns. Whether for residential segments such as multi-family or commercial spaces like health care, sheet remains not only viable but is poised for growth as end users put a greater focus on health and hygiene.

“Looking forward in sheet, we expect the demand to increase, as more focus is placed on products that are easy to clean without seams to harbor pathogens,” said Jeff Robinette, senior product manager, Tarkett North America. “Particularly in health care, where being able to sanitize is even more critical, we believe the demand will continue to grow over the next several years.”

Armstrong’s Thoresen agreed health care will keep sheet viable in the commercial sector for the foreseeable future. He added, “Residentially, we have a large jump in business this year through home centers. The designs coming out are better than ever, and it will continue to be a great value product that is extremely durable and has great scratch resistance.”

Mohawk’s Sanchez concurred, noting sheet’s in-demand performance features. “Sheet is the first and the only completely waterproof flooring solution out there—sheet is amazing,” he said. “It hits a price point that makes a lot of sense for a lot of consumers. We’ve been really pleased with it. It came back early and came back strong.”

Residential responds

It’s no surprise that the residential segment took the biggest hit during the middle of the year as specialty flooring retailers across the country were forced to close due to various lockdown measures. The ability of home centers and clubs—and even that of some specialty dealers that service several retail segments—to remain open as essential businesses was its saving grace. Each segment of the residential market did, how- ever, experience the hardship differently.

Specialty retail, for example, was the hardest hit. However, suppliers agree retail hit back. “Some retailers have done a great job at making customers feel more comfortable by providing appointments that allow for social distancing,” Mannington’s Tuley said. “Business has been improving each and every week. Even during states’ shutdowns, we found that the retailers were very innovative in keeping in touch with customers through virtual tools and curbside pick-up options.”

Within the retail segment, home centers and clubs fared “Home centers and clubs were essential businesses and had success when other parts of the industry were seeing the downturn,” Mohawk’s Sanchez said.

Armstrong’s Thoresen noted that some resilient subsegments may have benefitted from the success of home centers. “We believe the decline in business has impacted every category of flooring. Meanwhile, LVT and residential sheet may be better off due to exceptional growth in the home centers.”

When it comes to the builder segment, Thoresen said it was delayed in feeling the impacts of COVID-19 due to a backlog of new home construction—but once that backlog was cleared, the segment was also impacted. “Shaw’s builder business is bouncing back faster than we projected, which is a good sign for the overall economy,” he added. “Multi-family will continue to be challenging, as this segment will likely be hit the hardest in residential.”

*For the full story, see the Aug. 24 issue of FCNews.

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August 24, 2020

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