June 10/17, 2019: Volume 34, Issue 26
By Ken Ryan
Flooring retailers had to wade through some choppy waters in the midst of a first half marked by extreme weather conditions, 25% tariffs on Chinese imports and threats of tariffs on Mexico. And yet, despite unpredictable swings in business from month to month, several dealers reported surprisingly strong results.
“If I had to come up with one word to describe the first half of 2019, it would be enigmatic,” said Steve Weisberg, president of Crest Flooring, Allentown, Pa.
His sentiment was shared by Tim McSherry, president of Carpet Gallery Floors, Hagerstown, Md., who observed, “It has been an up-and-down year. Traffic would be busy one month and slow the next.”
John Taylor, owner of Taylor Carpet One Floor & Home, Fort Myers, Fla., added: “We’ve had periods in the first six months that were down drastically and ones that were up drastically. It seems to take the consumer longer to make the purchase decision, which affects everything.”
The majority of dealers polled by FCNews rated their first half as equal to or better than the same period a year ago. Some were quite stunned with the results. Cathy Buchanan, owner of Independent Carpet One Floor & Home, Westland, Mich., had concerns after GM announced the closing of four automotive plants in Michigan and letting thousands of employees go. “I thought it was going to affect our numbers for the first half of 2019,” she said. “On the contrary, we are having a stellar first half—up 12.52%— and I owe it to advertising both traditionally and digitally.”
Independent Carpet One is not alone in registering double-digit increases. Business at both of Craig Phillips’ Ohio locations (Barrington Carpet & Flooring Design and Carpet Country) are up low double digits year over year despite being in a state that was also impacted by the GM closings.
The degree to which the first half was characterized by strength, stability and growth surprised Kevin Frazier, owner of Frazier’s Carpet One Floor & Home, Knoxville, Tenn. “I was anticipating the first half would give our company small growth; instead, we have experienced 9% growth. I was anticipating 2019 would be a fine year, but it has to this point been one of our two best ever in 66 years.”
Even in sections of the Midwest hard hit by the cold and snow this past winter, business activity proved resolute. Case in point is DeGraaf Interiors, Grand Rapids, Mich., which experienced a slow start due to unrelenting frozen conditions that closed schools for a record number of days. “Overall, as our numbers stand the majority of those who remained inside made their way out in March, and the pent-up demand had us scrambling to get jobs measured and installed the past three months,” said Deb DeGraaf, co-owner.
The snowiest winter in Rochester, Minn., history couldn’t prevent Hiller’s Flooring America from chalking up solid gains in the first half. Even more surprising is carpet accounted for 72% of store sales. “Carpet is very much alive and well—at least in Minnesota,” said Rob Elder, co-owner.
Positive results did not come without a lot of effort as many dealers see an overall slowdown in the offing. “We have seen growth; however, the overall pace seems to be slowing,” said Palmer Johnson, vice president, Johnson Carpet One Floor & Home, Tulsa, Okla. “While consumer confidence remains relatively high, there seems to be a growing expectation that a downturn may occur within the next 12 months.”
One Southeastern U.S. retailer may have already encountered the impending downturn to which other retailers allude. “It’s like we never had the spring surge from the winter doldrums,” the dealer said. “Traffic is off, sales are off and clients are going with products (and installers) they are saying they know aren’t the quality of what we are offering, but they ‘hope will be OK.’”
The tariff factorThe biggest surprise of the first half may be that the tariffs have had virtually no negative impact on business, according to dealers. It was during the first half that President Trump announced a hike on goods imported from China to 25% from 10%, with the increase taking effect in mid-June. For the most part, the specter of tariffs created some uncertainty and confusion in the market but no real harm to the LVT category, retailers said.
In some instances, the threat seemed to create a sense of urgency that produced a sales increase. DeGraaf acknowledged that while the tariffs have continued to add a level of uncertainty, “It does not seem to have impacted the retail consumer in our market all that much. Even as of today we do not know when, or if, this second round of tariffs will actually hit and stick.”
John Taylor at Taylor Carpet One said he has used tariffs as a closing tool with overall good results. “We also have taken the same approach as we did on the previous tariff—that this is simply an across-the-board price increase on these particular products.”
Crest Flooring’s Weisberg credited suppliers with easing the potential margin impact, explaining, “The 15% additional tariff amounted to 7%-8% from our suppliers. Therefore, we have yet to see a substantial falloff in sales with LVT.”
The tariff issue is being handled differently depending on the vendor, according to Billy Ward, owner, Artistic Finishes Carpet One Floor & Home, Lancaster, Calif. “Some vendors have taken advantage by raising prices on existing inventory while others have said they would absorb a portion or have given us a date of when they would raise prices.”