The sky is not falling. That’s a message one flooring executive had to say about 2023. Yes, the early forecast for 2023—especially Q1—calls for continued inflationary pressures and high interest rates to suppress retail for the first few months. However, there is a positive side to this. Given the significant undersupply of homes, the aging of tens of millions of homes and homeowners likely to stay put because of higher mortgage rates, there will be more opportunities for remodeling/renovation work, experts say. And that’s before the single-family builder market rebounds.
The industry in the first half of 2023 is going to be flat to down 5% compared to last year’s period, with the second half [of 2023] being better than the 2022 second half. The first half of this year was extraordinarily strong.
Single-family builder will slow as you get into the second quarter but commercial continues its strength; multi-family is rock solid.
The industry slowed as 2022 progressed. People were increasingly going back to work, inflation and interest rates were going up, supply chains began to improve and ships coming from Asia and Europe got here faster. So, we had a slowing of consumer [demand] and speeding up of supply chains. As a result, we had over-inventory that everyone had to adjust to. Our business going into 2023 has the right amount of inventory to service the business. We’ve made our adjustments to what we feel the future is going to be.
As for greatest opportunities, multi-family will remain strong. Listen, everybody needs a place to live whether it’s a place to own or rent. Unlike the downturn of 2008—when there were too many homes—today there is a shortage of 4 million to 5 million single-family homes. On the remodel side, the sweet spot of remodeling a home is when a home is 20-40 years old. Typically, in America there are 20 million to 21 million homes in that age group at one time. Starting next year, the number of homes in that pool needing an extreme makeover will increase 20%.
So, while the next five to six months is a question mark, we’re very bullish on the next five to six years.
chief operating officer,
For 2023 the toughest quarter for the industry to comp will be the first quarter. In the first quarter of 2022, there was no war in Ukraine and no higher gas and energy prices. Inflation was still relatively low and was considered “temporary.” The world changed in Q2 2022 and has depressed business levels in the flooring industry.
Overall, we will end up down low- to mid-single digits with the biggest year-over-year decline occurring in Q1. Within the segments, single-family builder and retail will be challenged, while the multi-family business will be better by comparison.
The drivers for the industry are interest rates for single-family, with consumer confidence and discretionary dollars being drivers for retail. The stock market is a related indicator as it declines—consumers feel “less wealthy” when they see declines in their 401(k).
By all estimates, 2023 is lining up to be a challenging year from an economic standpoint. Consumer confidence is relatively low, and with inflation putting pressure on discretionary dollars, retail flooring sales could be a challenge.
Commercial continues to be better than residential, but forecasts suggest some slowing in the second half.
Despite a sluggish economy, unemployment remains relatively low. This suggests labor shortages will continue to be a problem in 2023. We have consistently demonstrated reliable service through the pandemic and when the industry had labor shortages in 2022. We will continue to work hard to service our customers in 2023.
The economic environment suggests consumers will be very careful on how they spend their discretionary dollars.
Looking ahead to 2023, Mannington expects the industry as a whole to be flat in units and down in the mid-single digits in terms of dollars. The main driver we see for this is deflation—seeing lower costs on imported goods from Asia and that being passed through to the consumer. Overall, Mannington expects to outperform the market with modest single-digit growth in 2023.
The industry’s biggest challenge will be managing the implications of deflation and handling lower volumes over the next six to nine months while the housing market softens.
However, tremendous opportunities remain for long-term growth in residential flooring due to the dramatic undersupply of homes, aging housing stock and a large demographic within the population looking for homes. Moving forward, it is important to continue investing in product development, staying close to evolving home trends and providing meaningful innovation, differentiation and value for the consumer.
Our major initiatives for 2023 are driving sustained and consistent investments in all core facets of our business. We are excited to launch new products in all key categories as we focus on meaningful innovation, differentiation and building strong value propositions for our consumers.
We have made a significant investment in a deep dive exploration of the Mannington Residential branding and website. We brought in the best advisors and agencies to keep our fingers on the pulse of what connects with our consumers and are excited by the results.
president of residential sales,
We’re going to see a bit of a slowdown in 2023 driven by the builder segment and higher mortgage rates. Depending on what part of the country you live in, builder could be down 10% to 30%. At the same time, when builder slows down multi-family usually improves, although it doesn’t quite offset builder.
If you are a flooring dealer, there’s good news: 50% of the 130 million homes are at least 40 years old. When you look at it, there will be very large pent-up demand [for renovations]. Another thing is that home prices, although they have subsided, over the last few years have increased 30%—that’s trillions of dollars of equity people have. So, there’s still some good economic data out there. Renovation for homes will still be at a high level as you look out over the next three to five years.
The biggest challenge facing the industry will be management of inventories across all the channels. We’re primarily domestic production. We can ramp up or ramp down, we can help our customers with that with just-in-time inventory.
We’re still doing a lot of innovation in the waterproof wood looks. We have a large portfolio of waterproof products—RevWood, LVT, UltraWood—it’s still a big opportunity for us even if the market shrinks a little bit.
As for initiatives, we have another plant (RevWood) coming on board that will add more capacity. RevWood has been very strong in both retail and in the builder market.
Coming soon is RevWood Signature, which will be innovative with better, deeper looks. And there’s new technology with better embossing coming for dealers. In carpet, we’ll see innovative looks at the high end, especially the Karastan line.
Next year is setting up to be challenging, but we believe there are still many opportunities. The macro-economic factors—including interest rates, inflation, etc.—are definitely dampening the prospects for all products related to home improvement. That said, employment remains strong as does home equity.
As a country we are still way behind as it relates to housing; however, we remain extremely optimistic about flooring for the long term. Overall, we believe the flooring industry will have positive growth in 2023. This is after very strong pandemic-related years. And we remain very optimistic about MSI. Our customers are leaders in the industry and together we will partner to deliver inspiration and on-trend products.
As for the biggest challenge facing the industry, we are coming off numerous industry issues—including trade wars, inflation, lack of labor, supply chain obstacles and now high interest rates. The overall industry has become very volatile and dynamic, making it very difficult to invest with this kind of volatility. The consumer has remained relatively strong so it’s incumbent upon the industry to continue to find ways to invest in the consumer.
Flooring has so much opportunity available to it. There are so many new surfaces that account for billions of square feet that our products can now cover. We need to help the consumer understand the benefits of doing this and convince them it is an investment and not an expense to improve all of these surfaces.
MSI is working on many initiatives. We are continuing our geographical expansion in order to be as close to our retailer/dealer customers as possible. In addition, our product lines are growing. We will be entering the engineered wood category along with artificial turf.
executive vice president,
My overall outlook for 2023 is largely optimistic for the flooring industry despite continued inflationary headwinds. Most expert analysts see inflation easing as we press into mid 2023, although it will take a little longer to unwind than normal. Labor shortages will continue to present a challenge and Shaw will continue to partner with organizations like FCEF to attract and train more qualified installers.
I remain optimistic because this inflationary situation creates a favorable environment for renovation. And I have faith in the ingenuity and entrepreneurial spirit of our specialty retail partners. As homeowners look to renovate, Shaw will work alongside independent retailers to drive demand for our products. We must educate consumers on how flooring transforms their space and inspire them to invest in flooring over other home finishes.
Shaw has some exciting innovations on the horizon in 2023. First and foremost is our commitment to carpet. We’re investing heavily in our Anso fiber brand and soft surface design innovations, with the largest single investment in carpet in the history of our industry. We’ll also continue to drive rigid core innovation through our premium COREtec offerings, as well as streamline the accessories ordering process through Shaw’s totalworx portfolio. ‘United We Thrive’ is the theme of Shaw’s 2023 market season because we believe our future is connected, and I look forward to building upon our shared success.
Shaw is laser focused on the customer in 2023 with innovative products and programs that allow us to quickly meet market demands. Speed and agility will be key as well as creating continued demand through compelling product storytelling.
The rediscovery of our Anso Colorwall will be a big initiative in 2023, along with the promotion of our Pet Perfect offerings from Shaw Floors and Anderson Tuftex. COREtec has several exciting initiatives as well.