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Q1 retail roundup: Dealers pick up the pace after slow start to 2019

April 1/8, 2019: Volume 34, Issue 22

By Ken Ryan

 

From the East Coast to the Southwest and through the Upper Midwest, flooring dealers are nearly uniform in their assessment that thefirst two months of 2019 were disappointing but
that a rebound in Marchhas set the tone for a rally
that could have legs.

More than 20 flooring dealers polled by FCNews about business conditions agreed that 2019 will still
be a growth year, albeit at a slower rate than 2018. Government data supports
that view. On March 20,
the Federal Reserve announced it would leave its key interest rate unchanged with no projected rate hikes for 2019. The decision came as the Fed pared its forecast of U.S. economic growth in 2019 to 2.1%, down from its previous projection of 2.3% and the roughly 3% pace of expansion in 2018. “We foresee some weakening, but we don’t see a recession,” Federal Reserve chairman Jerome Powell said, adding that the job market remains strong although “growth of economic activity has slowed” since late 2018.

With some exceptions, flooring retailers have witnessed reduced activity in the first two months of 2019 vs. 2018, followed by a more robust March that dealers hope is a sign of things to come. Retailers also caution that 2018 was an especially strong year for many. “January and February were short of our expectations mainly because last year the same two months were outstanding,” said Steve Weisberg, president, Crest Flooring, Allentown, Pa. “We did the same advertising as last year with less than satisfactory results this year. The surprises were the sales figures for January and February not being what were anticipated. March came in like a lion for us, which should help with the first quarter’s figures.”

Q1 is typically the slowest quarter of the year for flooring dealers, so a tepid start does not sound the alarm. In some places, particularly portions of the Midwest, a winter of unrelenting snowstorms held back even the hardiest shoppers. “We were a bit disappointed with Q1 but not surprised with the results,” said Jon Dauenhauer, co-owner of North Dakota-based CarpetWorld Bismarck. “The weather was particularly bad even for our state, and that really played a role in our sales.”

Minnesota was also buried by snow this winter, but some dealers weathered the storms better than others. Case in point was Rochester-based Hiller’s Flooring America, which is up 5% in 2019 to date despite more than 5 feet of snow—a record for this city, according to the National Weather Service.

Where weather was not a concern, other factors—such as the government shutdown that stretched into 2019, a volatile stock market or just general uncertainty—benched some consumers. ICC Floors in Indianapolis staffed up in the fourth quarter on the strength of a 10% growth spurt, only to see the rally fizzle when 2019 rolled around. “We are flat over last year,” said Cameron Haughey, co-owner. “With that being said it has not met our expectations. We attribute the slow start to rising rates in Q3 and Q4 and a rough patch for the stock market in December, slowing new home sales and large remodels. Things seem to be back on track for Q2, and we are optimistic we can still grow our business 5%-10% year over year.”

In nearby Bloomington, Ind., Hoosier Floor Co. (dba CarpetsPlus Color Tile) is enjoying what manager Kate Butcher described as a steady stream of customers that could be a harbinger of things to come. “Our goal is to hold margins and keep up with the pace of work needed to be done. People are just coming in throwing money at us to get the work done. We do a lot of tile showers, hard surface floors and backsplashes.”

Dave Snedeker, executive vice president at Bob’s Carpet & Flooring, Clearwater, Fla., said he’s noticed the first quarter seemed to be an extension of the last two or three quarters in which there were bad weeks and good weeks and no real consistency. “Overall, we were pleased with the start of 2019 but were hopeful it would be a little stronger than it has started,” he told FCNews. “I am optimistic things will remain stronger than ’18 but cautious that we should also expect gains to be minimal.”

Other dealers reporting a slow start to 2019 are also coming off several years of stellar performance. A.J. Boyajian, co-owner of A.J. Rose Carpets & Flooring, with three Massachusetts locations, said his outlook for the near term is very positive. “Traffic is good, there are solid indicators from our residential builders, and commercial projects continue to be robust.”

A few retailers noticed hesitancy among their clientele, especially regarding larger purchases. In some instances, there is no clear reason why. “Everyone has an opinion, but we really do not know or understand why people are not purchasing,” said John Taylor, owner, Taylor Carpet One, Fort Myers, Fla. “The only surprise is this is our busy season and people don’t seem to be making the decision to buy. We are still optimistic and looking to maintain or increase our business over last year’s second quarter.”

Nick Freadreacea, president, The Flooring Gallery, Louisville, Ky., also sees reluctance among consumers that led to a first quarter of diminished expectations. “We had individual sale events that were successful, but the day-to-day sales were slower than expected. After November and December were soft, we had hoped January would start the year off stronger but have yet to see that in the retail sector. Builder and multifamily are still strong. We still feel there is a tremendous pent-up demand and hope the spring will bring the retail segment back.”

In anticipation of a tough year due to market changes and the St. Louis area economy, Ambassador Flooring Co., Chesterfield, Mo., prepared its business accordingly. “Despite the fact that we prepared for a tough year, we’re actually starting to see a tremendous uptick in traffic to our store,” said Kelly Taylor, owner, citing such factors as strategic marketing decisions as well as a robust residential project market.

Flooring dealers who have diversified their business often stand the best chance of withstanding the inevitable slowdown. Case in point is Enhance Floors & More, Marietta, Ga., where the first quarter was a little disappointing. The saving grace? “If we did not do full bathroom renovations it would have been particularly bad,” Elisabeth Stubbs, owner, said. “We’re hoping that once the warmer weather is here to stay we will see the typical seasonal uptick.”