Flooring retailers express optimism heading into second quarter

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flooring retailersFlooring retailers are recalibrating their near-term projections as the anticipated slowdown in 2023 has yet to materialize or has been less impactful thus far. As the second quarter begins, dealers are reporting that for the most part business activity has kept pace with previous quarters and, in some instances, has accelerated.

“As an organization, we are more optimistic about 2023 as a whole now—after Q1—than we were going into the year,” said Casey Dillabaugh, president of Boise, Idaho-based Dillabaugh’s Flooring America, echoing a sentiment shared by others.

Retailer fears of a 2023 drop-off dates to the second half of last year, when the rate of inflation was soaring to 40-year highs—peaking at 9.06% at the end of June. And while inflation levels have fallen (4.98% as of April 12, as measured by the Consumer Price Index), it remains historically well above average; and yet, some studies are showing that consumers are unfazed by rising prices.

In fact, many retailers are seeing an uptick in their top-line sales. “January and February started off with slower traffic than normal, but consumer attitudes were still positive,” said Sam O’Krent, president of O’Krent Floors, San Antonio. “This led to March being incredibly strong with retail sales up over 20% for the quarter—and we were up 8% when compared to 2021. We are cautiously optimistic heading into Q2.”

Cautious optimism most accurately depicts the mood for many flooring retailers in the industry. While there remain challenges (i.e., lagging consumer confidence, fears of recession), there are reasons for encouragement (homeowner equity is at the highest level in several decades and millions of aging homes require repair/renovations).

Among the regions where housing activity remains brisk is the Southeast, and flooring retailers there continue to benefit as a result. “We are up about 15% in Q1, so that is a little more than we were expecting—always a good surprise,” said Brian McCarver, owner of Brian’s Flooring & Design, Birmingham, Ala. “We have upped our advertising budget and are doing some radio and geofencing through our web provider to drive business.”

In its 65-year history, Myers Carpet Company (locations in Dalton, Atlanta, Nashville) never had a better year than it did in 2022, and that momentum has carried over into Q1 2023. “Our first quarter was as solid and successful as last year,” said Rick Myers, owner. “We can see no reason for any decline.”

flooring retailersLike other successful flooring retailers, Dillabaugh’s is diversified in its business segment, which has allowed it to compensate for slow periods in certain segments like retail. As he explained, “Retail traffic is down substantially; however, sales are not. In the builder sector, we’re starting to see the custom home builders that tightened their strings in Q3 last year start to loosen a little while the national guys are starting to now slow down a bit. Commercial and multifamily remain strong. As with any market, things are cyclical and that’s why we look at 2022 as an anomaly; absolutely everything in the first half of last year was on fire.”

Eric Mondragon, hard surface buyer for Salt Lake City-based RC Willey Home Furnishings, with 10 locations, is comparing his 2023 numbers to 2019, the last full year before COVID-19, as a fairer comparison. “We ended Q1 ’23 down approximately 10% vs. 2019 but margin increased by about 2%—so that was good. The biggest surprise is the resurgence of laminate and upper-end WPC. Customers are not looking for just entry-level products and now that we are seeing some price reductions—mainly on LVP—customers are seeing the value in the upper-end products.”

While 2022-23 ranks as one of the 10 snowiest winters in Minnesota history, the bad weather did not prevent Alexandria-based Arnquist CarpetsPlus Colortile from having a strong start to the year. “Q1 ended better than we expected,” said co-owner, Adam Arnquist. “Last fall, when we learned the interest rates would climb higher in an attempt to curb inflation, we anticipated a softer first quarter. However, we are happy with Q1. Store traffic has been good on the retail side and our commercial team has been busy with projects kicking off in Q2.”

For Sarmazian Brothers Flooring in Waterloo, Ontario, Canada, its Q1 written sales (POs in the system) were flat but delivered sales (paid and completed jobs) were up 15%. “We are busy installing work already in the books,” said Raffi Sarmazian, co-owner. “Retail traffic was moderate, but I am optimistic business will pick up in the spring as it usually does and since interest rates seem to be stabilizing.”

Commercial business, which suffered immeasurably in the months following the pandemic, continues to rebound across many segments. “Commercial remains strong especially in the medical field,” said Mike Foulk, president of Foulk’s Flooring America, Meadville, Pa. “Our first quarter was good and better than expected.”

For Carpetland USA, with locations in Illinois and Wisconsin, commercial played a key role as well, according to Kevin Rose, president. “The commercial sector in the Wisconsin region was up from 2022,” he said. “The healthcare industry is starting to move again.”

Commercial remains a bedrock for Burlington, Mass.-based A.J. Rose Carpets & Flooring, according to Sam Locher, vice president of business development & marketing. In addition, the three-store business got a boost from retail, with traffic increasing in the second half of the quarter.

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April 10/17, 2023

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