December 10/17, 2018: Volume 34, Issue 14
By Ken Ryan
After a mostly stellar 2018, flooring executives are hoping for a repeat performance in 2019 on the strength of a still percolating economy and continued innovation in hot product categories such as LVT/WPC/rigid core. Amidst the good times, however, are caution flags in the form of ongoing inflationary challenges —both for raw materials and transportation—and the uncertainty of tariffs on imported goods from China.
Don Maier, CEO, Armstrong
For the hard surface flooring industry, the stage is set for continued growth, driven by the ongoing increase in LVT and especially by the rising popularity of rigid core products. Armstrong Flooring is well positioned to capitalize on this market surge with the increase in our domestic LVT production capacity for both the residential and commercial markets.
Residentially, LVT continues to enjoy strong growth. Specialty retail salespeople love LVT because it offers such tangible benefits to consumers, including incredibly realistic designs, ease of maintenance, superior performance characteristics and installation options. Multilayer flooring also is affecting the evolution and innovation in the broader LVT and resilient categories.
Having recently announced plans to focus our company on resilient flooring products and sell our wood flooring business at the end of 2018, I believe our company will be even stronger and more agile.
At the same time, ongoing inflation challenges, both for raw materials and transportation, continue to impact the industry. Another ongoing issue in the industry is the shortage of experienced installers, and this is only intensified by low unemployment rates.
The greatest opportunities for Armstrong Flooring lie in driving even more innovation and differentiation into our products. We continue to focus on LVT and converting our existing manufacturing assets to increase our domestic capacity. For example, we were able to repurpose a portion of our Stillwater, Okla., plant to increase our domestic LVT production capacity. Adapting existing assets offers a number of advantages compared to building a completely new facility, including lower capital investment, faster ramp-up time and better capacity utilization across our resilient business. We’re currently employing a similar strategy to explore domestic production of rigid core flooring.
We are committed to providing a seamless transition for our customers with the sale of our wood business. We will be providing transitional services to the independent wood business during most of 2019 to ensure a gradual and seamless transition for our distributors and customers.
Russell Grizzle, president/CEO, Mannington Mills
We feel the industry has room to grow 3% to 5% with nice growth in the general economy and positive consumer confidence, both of which are the highest they’ve been in some time. Some caution has developed in the last several weeks, but we are confident and excited about the new year.
I can’t think of a time when our industry has faced more change. However, change overall is not new as we have been facing a great deal of change since the recession of 2008-09. Product preferences are changing rapidly, and those of us in multiple product categories must deal with rapid growth in some products and large declines in others. In addition, the selection/shopping process is evolving with social media and delivery systems changing quickly as well.
With so much change in product in recent years, it has become confusing for those looking to buy flooring. Our challenge is to differentiate ourselves, make it easier for our customers in their selection process, make sure their Mannington flooring purchasing experience is a great one and they truly love the final outcome of their home or space.
At Mannington, we will continue to introduce new designs in both residential and commercial while continuing to strive for fully satisfied customers through products that are not only beautiful but also last and perform. To provide better service to our customers, we will be starting up our new rubber flooring manufacturing plant in Georgia as well as our first phase of rigid core LVT manufacturing. Finally, we have three officers retiring at the same time, so we need to manage that transition. However, we are prepared and have a good succession plan in place. We are in a very good position moving into 2019.
Tom Lape, president, Mohawk Residential
We saw some clouds in the back half of 2018, but we are still very optimistic going into 2019 with what we are seeing. I can’t think of anybody who is pulling back on advertising commitments, who isn’t actively updating their shopping environment, who isn’t expanding their channel [strategy] and who isn’t aggressively expanding their digital presentation.
So, we’re still feeling bullish on the industry. The main catalysts are the consumer and the economy. And now that the mid-term elections are over, we have some clarity.
In 2018, we heard a lot about labor shortages, raw materials, tariff-related news, the impact on material cost. We heard a lot about the movement of products, especially vinyl, and how dealers are navigating through these channels competitively.
As we move into 2019, digital has gotten bigger in terms of importance. Five years ago, people were dabbling in digital. Today, I can’t think of any company where digital isn’t strategic. Owners are personally immersed in digital. Everyone is pursuing slightly deviated digital strategies. It’s about getting that formula right.
Today’s market has a little bit of bifurcation in it. At the upper end of the market you need vibrant, well-styled lines to compete. Second, with all the disruption taking place, the more you can provide stability and certainty in the supply chain, the better your chances of winning. We do the lion’s share of our business in the U.S.; we have supply chain and speed to market advantages.
In 2019, we will be rolling out our Edge go-to-market strategy with our largest dealers. We have the largest vinyl launch in our history with Pergo, SolidTech and Karastan. All three launches are now complete. RevWood was a huge story in 2018 and will be a bigger story in 2019; it’s the ultimate crossover product that sits between solid engineered and rigid vinyl. We had huge commitments for [RevWood] at Edge.
Tim Baucom, executive vice president, residential, Shaw Industries
My sense in dollars is the industry will grow a little more than GDP in 2019, about 4% to 5%, but units will be a little more stubborn—let’s say 3% to 4% growth.
The general uncertainty in the market is of concern right now. The people who are spending money today are the people who are certain of their circumstances and will get what they want—and that is better goods. There is a little trepidation for some, and that leads to postponed purchases, which will hurt the middle to the lower end of the market.
We’re still seeing housing turnover, and yet it is still kind of sluggish—less than expectations—which is leading to that depression in mid- to lower-end goods. Better goods are doing well even for LVT, with longer, wider, better features.
The biggest challenge facing the industry is labor and right behind that—and I don’t know if I would have said this six weeks ago—is consumer confidence. On one hand, the economy is doing very well; we’re at full employment. People should feel good about the job prospects, but there is something that is keeping consumers back on their heels. Maybe it’s the volatility of the stock market over the last six months. You can look at your 401(k) and see that it is down, and you may feel less wealthy. Consumers don’t know what to do with all this trade war stuff.
As for us, this is a convention year. The power of the Shaw Flooring Network is the network. We ask ourselves, ‘How do we become the conduit to solve our customers’ problems?’ Shaw Flooring Network has helped us refine new product introductions. We’re refreshing our LifeGuard and ColorWall franchises, and our commitment to PET, PT, PTT, Anso, etc., will continue in 2019 and beyond.