Nearly two months into what many predicted would be a lean year for the flooring industry has instead been something of a pleasant surprise as flooring dealers report results have mostly surpassed forecasts.
“So far, so good in 2023,” Adam Joss, president/owner of The Vertical Connection Carpet One in Columbia, Md., told Floor Covering News. “The year is off to a better start than expected. We’re seeing good activity in traffic, sales and order sizes. If current activity continues, 2023 will be a very good year.”
Joss’ optimism was shared by other flooring dealers who have been gratified by the encouraging start. “Traffic so far this year has been constant and plentiful,” said Joe Elder, manager at Hiller’s Flooring America, Rochester, Minn. “January was our biggest January since 2012, when we started tracking, and February is rolling forward just as fast. I have high hopes for the rest of the year if this start is any indication.”
There is solid economic data to support the anecdotal evidence. Real gross domestic product (GDP) increased at an annual rate of 2.9% in the fourth quarter of 2022, after increasing 3.2% in the third quarter. What’s more, the government reported retail sales jumped 2.3% in January, the largest one-month increase since March 2021.
“It is easy to feel optimistic for ‘23 given the pace at which the year has begun,” said John Bretzloff, manager, Barefoot Flooring, Castle Hayne, N.C. “The tangible results we are seeing trump the narrative in the news and what various financial sectors are reporting. It remains to be seen if it will last, but we remain optimistic about 2023.”
Some dealers suggested the winter markets—including Mohawk’s Edge Summit, the Shaw Flooring Network conference and Surfaces—infused the industry with a jolt of positive energy. “I came away from the Shaw and Mohawk conventions with a real sense of optimism for 2023,” said Craig Phillips, president/CEO, The Flooring Edge, Akron, Ohio. “Dealers seemed to be happy to be back at the conventions after the layoff for COVID-19. I think that drove the upbeat vibes.”
Phillips said January 2023 marked the first increase in retail written business for his stores in many months. Meanwhile, Frazier’s Carpet One Floor & Home, Knoxville, Tenn., just completed its best January ever, and Kevin Frazier, owner, is forecasting 7% growth over 2022—a record year for the business. “We are bullish, not wildly bullish, but bullish,” he said.
Businesses with a heavy presence in the builder segment are expecting activity to slow as the year progresses and borrowing costs and inflation take a toll on new home sales. As Don Cantor, president of Lake Chelan Interiors, Chelan, Wash., explained, “All the companies that are heavily invested in new construction have budgeted for a down year of 20%-30%. The companies that are diversified are shifting more focus to custom homes, remodel and commercial work. It all depends on what part of the country you are in, what the income level is in your area and what the real estate market is doing in your area. Many of the retailers that I have talked to are welcoming a little slowdown so they can reset for the next big boom and concentrate more on systems and profits instead of volume moving forward.”
Observers say those retailers who are well diversified in their business stand the best chance of succeeding in 2023 given the softness in certain markets. “2023 will be a good year for those willing to be innovative and work hard to capture the consumer’s dollars,” said Carlton Billingsley, owner of Floors and More, Benton, Ark. “I sense units will be down but bottom lines are healthy due to the rise of COGS (cost of goods sold) and savvy retailers’ continuation of bottom-line adjustments.”
Returning to ‘normal’
For some flooring dealers, even a down 2023 could be viewed positively when compared with the COVID-19-driven years of 2021/22, which were enhanced artificially by stimulus money. A case in point is Murray Floor & Window Coverings, Billings, Mont., which saw sales for December 2022/January 2023 fall 115%. However, Kevin Murray, owner, is not concerned. “Title companies are very slow right now and typically we don’t see a high volume of closing in our winter months,” he said. “I am optimistic about the year, and I believe we’ll see a shift toward more remodeling and residential replacement projects. If we end up 15% down for the entire year, it will still be a good year. We’ve been preparing for a market correction, so we’ll adapt accordingly.”
Eric Langan, president/owner of Carpetland USA (The Langan Group), Davenport, Iowa, said he sees 2023 as a year when the flooring industry returns to a sense of normalcy after “riding a hot hand” over the last few years. “I don’t think it will be a bad year,” he said. “Business will be out there in 2023, but it will have to be earned. It won’t come as easily as it has over the past few years.”
As always, success varies by market location. In Southwest Florida, for example, retailers are poised for a big year in the wake of Hurricane Ian, which devastated homes with its Category 4 storm surge last fall. “The dynamics of our business changed when Hurricane Ian came through Fort Myers,” said John Taylor, owner of Taylor Carpet One Floor & Home, Fort Myers. “Prior to Sept. 28, we were feeling a slowdown as many others in our area as well as the country. Business has been strong ever since. I suspect we will be busy for at least the next couple of years and possibly beyond.”