When the page turned from 2022 to 2023, flooring retailers were approaching these next 12 months with trepidation. Many had come off their best two years but witnessed a slowdown in the fourth quarter. As well, inflation and interest rates were high, new home starts were low and the mainstream media was doing what it does best: sing the doom and gloom tune with the word recession in every chorus.
So with a third of the year in the rear view mirror, how are we doing? Who better to ask than some National Floorcovering Alliance members, many of whom I surveyed at their recent conference in St. Kitts. While NFA members tend to be bigger and better capitalized than the average flooring dealer, they face the same issues as every retailer. The result: Not surprisingly, things are better out there than the newscasts would lead you to believe.
Take O’Krent Floors in San Antonio, where Sam and Margie O’Krent told me the highlight of the year thus far was its Step into Spring sale. The hugely successful four-day extravaganza returned to its spring time frame for the first time since the pandemic. “It took us from being down year over year to being up from 2022, and the sale was better than 2019,” Sam O’Krent said. Why? “There is still demand out there. People are being cautious with how they are spending their money, so you have to give them a reason to spend.”
The biggest challenge for O’Krent? Fear of the unknown. “The only thing that fixes that is time.”
Down in Jackson, Miss., at Jimmy Lyles Flooring Gallery, business is great, according to Miller McNamara, who purchased the company from T.J. Anderson about a year ago. “January is January, but February and March were incredible; we saw a lot of growth.” The drivers? Commercial business and marketing. “Commercial sales have been fantastic. This is all negotiated work; we’re not doing any bid work. We also doing a lot of marketing that’s driving customers to the store; 88,000 people pass us every day, so we painted the building and put up new signage. We’re also doing a lot of in-store meetings with homebuilder associations and ASID.”
The challenge? People. “The trick is trying to figure out the right person and actually get someone in the door.”
The mainstream media may want you to believe things are bad out there, but don’t tell that to former NFA president Jason McSwain, president of McSwain’s Carpet and Flooring in Cincinnati, who told me he had his best first quarter in the last five years. Why? “Being intentional to find new customers. We did some home and garden shows and got aggressive in advertising. We connected with 200-plus consumers who are doing projects. We got a lot of installations from that.”
For others, business may be down but margins are up. That’s the order of the day for Flooring 101, which operates primarily in Ventura County, Calif. Jimmy Poulos, owner, said business over the first four months is down around 9% but margins are up 4.5%, which has made up for the loss of sales. What is impressive is business is down only 9% despite what Poulos estimates to be 25% less traffic coming into the showroom. “So our job is to do a better job of closing the ones who come in. The salesmen have to become hungry. They have to work a little harder. The closing ratio has to improve.”
Southern California experienced significant rain this winter, which certainly kept more people indoors. But Poulos blames inflation and the media for the decline in traffic. “The news is always negative: the war in Ukraine. Politics. Taxes. The country is divided. Everyone is insecure for their jobs and the future of their families. And inflation is much larger than they claim. You go to the grocery store with $100 and walk out with stuff you used to buy for $50.”
Like Flooring 101, business is down from first-quarter 2022 but margins are up at Custom Carpet Center in Buffalo, N.Y. Jay McDonnell, co-owner, noted that business is well up from 2019, the last normal year, “and margins are up because we weren’t able to pass along increases fast enough in the year where we did all the volume. We’re finding that with prices dropping it’s a lot easier. You don’t necessarily have to take every one of those advantage points away and have it show up on your sales floor as a lower price. The people that are buying are less concerned about that extra dime.”
The bright spots? Builder and commercial. Although Custom Carpet’s builder business is down from last year, it’s still better than McDonnell thought it would be. “Builder has been better because I think people were very fearful in the mystery of when interest rates were going to stop going up. Even now you can get a 30-year [mortgage] for 6.25% or something. Although it’s higher than the 3.75% you would’ve paid two years ago, it’s still historically low. I think people were fearful that mortgage rates were going to go to 10%, 12% or whatever. The other thing that factors into builder is people got so much more when they were selling their existing homes, and I think that’s a pretty good hedge against the extra you’re going to pay in your mortgage interest. And let’s face it, what’s going to happen in the next three to five years as rates start going in the other direction and people start refinancing again? It’s a fairly plannable course of what’s going to happen.
As for commercial, McDonnell said he planted a lot of seeds over the last three years. “From the time everything was shut down for COVID-19, commercial had not really come back. It took a lot longer than either retail or builder. And commercial is back now, and I think this will bode well for us for the rest of ’23 and probably into ’24 and maybe even ’25.”