Six months ago, fresh off another stellar sales year, flooring retailers privately worried that the good times were about to expire, citing a rather dire 2023 forecast that warned of continued high inflation, consumer pessimism and a pending downturn. In fact, many CEOs, investors and economists circled 2023 as the year when a recession would hit the American economy.
But here we are—more than halfway through 2023—and the proverbial shoe has yet to drop. Instead, the economy has remained quite resilient over the past year; consumers have continued to spend and the job market remains robust, with employers adding 339,000 jobs in May—more than the U.S. economy added in any single month since 2019.
The not-so-gloomy first half was reflected in numbers reported by most flooring dealers. While perhaps not spectacular, it was mostly good enough, and there is cautious optimism that the second half of ’23 will yield similar results.
“I am optimistic about sales continuing to be strong in the second half as the first half has been good,” said Bob Gaither, owner of Quality Carpet & Flooring, Akron, Ohio. “The housing market in the Akron area is still strong, and I also do a good business with flippers and people fixing up their homes to sell.”
Typhannie Harker, owner of Carpeting by Mike in Somerset, Wis., also said she expects business to pick up in the second half. “Now that our government has come to agreement [on the debt ceiling], I believe the customer will get more comfortable with spending money again on home improvements,” she said. “Typically, the last half of the year we see an exponential increase in sales compared to the first half.”
The consensus among dealers is that retail traffic was slower in the first half compared with the year-ago period. However, average tickets trended higher. That was the case for Ted’s Floors & Beyond, Anniston, Ala. “Walk-in traffic has not been the best the first half of the year, but because we are continuing to write up much bigger invoices than in years’ past, we have had a very good first half of 2023,” said Ted Gregerson, president. “We are cautiously optimistic regarding the third and fourth quarters this year.”
Based on the way May finished and June begun, Frazier’s Carpet One Floor & Home in Knoxville, Tenn., is hopeful that Q3 and Q4 will stay on an even plane. “Maybe not up from last year’s ‘best year ever,’ but hopefully not down any more than 2%-4%,” said Kevin Frazier, president. “We are no longer bracing for recession in the Southeast; we anticipate ‘flat-ish’ conditions.”
For some, flat is good when compared with the record-setting years of 2021 and 2022, which were fueled by the pandemic when scores of Americans stayed home and spent money on home improvements.
Some flooring retailers are still seeing growth opportunities in their markets, long past the pandemic-infused rally. “We are looking good for the third quarter,” said Don Cantor, owner of Lake Chelan Interiors, Chelan, Wash., which does extensive business for well-to-do clients seeking vacation homes.
Still, retailers cautioned there are many uncertainties going on in the world, and in our country, that could factor into second-half results. “It’s as hard as ever to predict what’s going to happen,” said Adam Joss, owner of Columbia, Md.-based The Vertical Connection Carpet One. “On one hand, comps will be easier in the back half of the year. On the other, we’re just now seeing business activity soften. Is it temporary? Seasonal? A sign of a greater downward trend? We’re just not certain what the future holds.”
Inflationary pressure is one potential hindrance to the second half, executives say. So are mortgage rates, where a 30-year-fixed hovers around or just above 7%, keeping many would-be buyers on the sidelines. However, there is an upside to that scenario, according to Cathy Buchanan, owner of Independent Carpet One Floor & Home, Westland, Mich. “Homeowners will prefer to stay put or need to stay put rather than investing in a new home [with the higher rates] so that means redecorating may be their avenue,” she said. “Hopefully business will pick up as a result. Those customers who are buying are purchasing large-ticket items with larger average sales. We just need to make sure we capture them before shopping elsewhere.”
Converting potential customers is a challenge for all flooring retailers when retail traffic slows, as is the case today. “The biggest challenge we face is finding the best advertising avenue that will get consumers to think about investing in their home,” said Eric Mondragon, hard surface flooring buyer for RC Willey, Salt Lake City. “We missed out on some of the ‘Spring Cleaning Selling Season’ because it was still snowing in May. So, when the weather finally lifted, consumers headed outdoors to get their yards cleaned up and gardens planted, which was later than normal. We are projecting to be flat in Q3. The fourth quarter will be compared to 2022, which is when business started going back to normal. If we continue at the current pace, we will be looking for a 3%-5% increase for the second half of the year.”
Challenges/opportunities ahead
With showroom traffic down, dealers are finding solace in other segments of the market, including Main Street commercial. “Our Main Street business has been very good in 2023,” Ted’s Floors & Beyond’s Gregerson said. “We believe it is because businesses who were not sure how things were going to be during the pandemic years held off from making improvements to their business. They seem to be a little more confident now and are more willing to spend money to make improvements.”
Others are seeing a nice uptick in their builder business, which dovetails with an increase in builder confidence as reported by the National Association of Home Builders (NAHB). “Builder has been something of a pleasant surprise,” Frazier’s Carpet One’s Frazier said. “Builder is our come-from-behind dark horse at the moment.”
Casey Dillabaugh, owner of Dillabaugh’s Flooring America, Boise, Idaho, said he expects the third quarter to be “stronger than the first two” primarily from the new residential construction sector. “Builders have only been able to sit idle for so long and consumer demand is pressing.”
