They say all good things must come to an end, and such was the case for the floor covering industry in 2023. After posting dollar growth in 12 of the last 13 years (the industry was down 0.5% in pandemic-ridden 2020), flooring was unable to withstand an unprecedented number of challenges, dipping 10.1% from 2022. Volume did not fare much better, dropping 9.1%, its fifth decline in the last six years.
What contributed to the steep decline? It begins with macroeconomic factors, specifically low consumer confidence, inflation, an elevated interest and mortgage rate environment and lower existing home sales. The average inflation rate of 3.4%, while not as steep as 2022’s 6.5% or 2021’s 7%, remained significantly higher than the Fed’s stated 2% target.
Prior to the COVID-19 outbreak, inflation was low for three decades. The high point was a 5.4% rate in the ’90s. However, as the pandemic began to subside, inflation began to rise. Much of this was attributed to the government sinking $1.9 trillion into the economy in the form of stimulus checks.
Disruptions in supply chains and price increases in some sectors of the economy exacerbated the situation. The Federal Reserve expected prices to return to normal, but this did not happen.
It realized it had to take steps to curb the increase in prices, repeatedly raising interest rates in its war against the rising cost of living to the highest levels in a generation, creating challenges for an industry that is highly sensitive to rate fluctuations. These rising interest rates negatively impacted the housing market, which directly contributed to a slowdown in demand for floor covering.
Under the impact of these rate increases, coupled with higher home price inflation, pressure was put on housing affordability and resulted in substantial declines in existing home sales. When mortgage rates surged higher than they had been in two decades, the housing market slowed. And while sales volume remains slow, prices are high because of a lack of inventory.
As well, many remodeling projects were postponed and consumers who invested in home improvements traded down to products that fit their budgets. New home construction also declined as rising interest rates and a weak housing market reduced housing starts through the year.
If interest rates and inflation were not enough for flooring to overcome, the industry was besieged by the damaging effects of the UFLPA (Uyghur Forced Labor Prevention Act). The game changed in February when the U.S. Customs and Border Protection added PVC as a “sector of concern” when inspecting shipments from China.
As such, the burden of proof on SPC suppliers such as Mannington and Shaw—but dozens of others as well—became so onerous and costly that most found it was more cost effective to return the majority of the product that had been detained by CBP to the affected vendors. In turn, they gave up on sourcing from that region of China and pivoted to other countries. Many told FCNews last year that once a company’s products get detained, the burden of proof is so high that it was nearly impossible to get their goods released.
If anything positive emerged from UFLPA it’s that it taught companies the importance of a diversified supply chain. Today LVP suppliers are less reliant on China and more inclined to look to Vietnam, Cambodia, Thailand, India and even Mexico for their sourcing needs. The UFLPA situation also accelerated the non-PVC product movement, industry observers say.
On a positive note, the commercial sector remained stronger than residential as projects that got derailed post-pandemic reached fruition. However, investments began to slow later in the year as interest rates increased and lending tightened. All these factors reduced demand, with margins under pressure from unabsorbed overhead, temporary shutdown costs and labor inflation. As market competition for volume increased, the flooring industry reduced selling prices as it passed through declining costs in energy and materials.
The Russian invasion of Ukraine created a global energy crisis and led many countries to end dependence on Russian gas completely. Russia is the largest exporter of fossil fuels in the world. At the same time, OPEC decided to cut oil output by 2 million barrels per day, which immediately led to a spike in fuel prices. That was the largest pullback by OPEC members since the outbreak of the pandemic.
The result: The price of natural gas soared to a record high, and as a consequence the price of electricity also increased. High energy prices have contributed to high inflation, forcing factories to reduce output or stop operations altogether. Among the other broader consequences of Russia’s actions in the initial year of the conflict was price escalation of oil and oil-based raw materials and chemicals.
The supply chain situation, though it arguably improved throughout the year, remains historically bad. American factories reported that material, labor and transportation constraints prevented them from operating at full capacity. Transoceanic freight travel times finally started to decline as the year wore on, prices returned to normal and overall supplier delivery times only started improving in the fourth quarter.
When the dust cleared and all the numbers were counted and run through the wash multiple times, total industry sales in 2023 dropped 10.1% to $25.122 billion compared to 2022’s $27.995 billion. That number is still up 9.4% from 2020’s $22.975 billion. To put it another way, the industry is up 55% in dollars since it started its recovery from the Great Recession in 2009. And for means of comparison, until 2021 and 2022’s record-setting years, the high-water mark for the industry was in 2006 when it reached $24.715 billion. The industry is up 1.6% from that point.
Thus, despite all the challenges, the flooring industry posted its third-highest dollar volume ever. (Note: These numbers are in wholesale dollars reflecting the first point of sale. They also do not include stone flooring— nor do they account for ceramic wall tile, cove base and rubber accessories.)
The story is not as bright when looking at volume or square footage. FCNews research reveals that the industry went from 19.505 billion square feet sold in 2022 to 17.727 billion square feet in 2023, a 9.1% decrease. This marks the fifth decline in the last six years and represents the lowest volume total since 17.439 million square feet were sold in 2013. Only in pandemic recovery year 2021 did the industry post growth in units (6.2%). Every category showed a sharp decline in volume. If not for a solid commercial segment, particularly healthcare, assisted living and education, the dip would have been greater.
While many will not be excited about 2023 given the 9.1% decline in volume and 10.1% drop in dollars, at least the average selling price is increasing. When we were recovering from the Great Recession in 2010, flooring sales were $16.221 billion and 16.625 billion square feet for an ASP of $0.98. Thirteen years later, the industry is up 55% in dollars but up only 6.6% in volume. So the average selling price of one square foot of flooring (wholesale) has increased $0.44 in the last 13 years. The average wholesale price of all flooring in 2023 was $1.42, down from $1.44 in 2022. In 2021 it was $1.33 vs. $1.21 in 2020 and 2019, which was up from $1.17 in 2018 and $1.11 in 2017.
For comparison purposes, the industry was up 4.85% in dollars but down 3.4% in volume in 2022. This comes on the heels of a 16.3% increase in dollars and 6.2% rise in volume in 2021; 0.5% decreases in dollars and volume in 2020; a 0.4% gain in dollars and 2.8% decline in volume in 2019; 4.6% growth in dollars and a decline of 0.6% in volume in 2018; 3.85% growth in dollars and 3.2% in volume in 2017; 5.1% growth in dollars and 3.8% in volume in 2016; and 4.4% and 3.2% growth, respectively, in 2015. Keep in mind average selling prices dropped heavily in 2020 because of the pandemic but escalated greatly in 2021 as excessive freight/logistics costs were passed on to retailers.
Against that backdrop, each segment of the flooring industry in 2023 posted declines in dollars ranging anywhere from 8% (ceramic) to 15% (wood). In terms of units, every category took a step back with ceramic and resilient the only ones escaping with single-digit percentage losses. In terms of pricing, every segment gained ground in 2021 and 2022 but only wood and laminate had a higher ASP than the prior year. Soft surface and ceramic have posted the largest ASP gains over the last two years. The only category that has noticeably dropped in ASP since the pandemic is rigid core as the segment has been inundated with cheap imports.
Interestingly, commercial fared much better than residential in 2023. While total industry dollars were down 10.1% to $25.122 billion, commercial dipped only 1.5% to $7.227 billion. The good news is that number is 11.2% higher than 2021’s $6.5 billion. The factors that wiped away some positive gains from 2022 included surging construction materials costs and financing rates, a decline in the labor pool and some lingering supply chain issues. The segments that lead the way were healthcare, education, hospitality and, to a lesser extent, retail.
Commercial was truly the bright spot for both carpet and resilient. While carpet overall was down 9.5% in dollars and 10.3% in volume, those numbers retracted to 4% and 9%, respectively, when only considering commercial, which accounts for about 40% of carpet sold (including Main Street). On the resilient side, overall declines of 9.7% in dollars and 7.1% in volume were reduced to 0.5% and 3.1%, respectively, when taking only commercial into account. And commercial LVT, which comprises about three-quarters of commercial resilient, was basically flat year over year.
There are a few reasons for this. First, commercial projects that were put on hold because of the pandemic were released over the past two years. Second, a bunch of companies put multifamily/property management into their commercial numbers and many reported decent business in that segment.
On the subject of resilient, anyone who has not been comatose for the last 10 years understands how rigid core has been driving the category, posting increases every single year. Until 2023. No category was more greatly impacted by UFLPA than SPC and WPC as so much of that product comes from China. WPC dollars were down 17.7% and SPC dollars were off 12.4%. SPC dollars remain on par with 2021 numbers. From a volume standpoint, WPC declined 17.1% but SPC was down only 5.9%. That is reflected in the average SPC selling price dipping from $1.80 to $1.68 as companies sought to sell off excess inventory. SPC average selling price is now on par with 2019 before the COVID-19 drop in 2020 and the inflationary years of 2021 and 2022.
Speaking of which, no product has been victimized by inflation more than ceramic tile, which in the last two years is up 4.8% in dollars but down 6.9% in volume. The average selling price hovered around $1.20 for nearly a decade but saw its ASP leap to $1.43 in 2022 and $1.40 in 2023. This category in 2022 experienced more price hikes than any other due in large part to freight increases. Ceramic is more import-driven than other hard surface categories and is the heaviest of all flooring products on a square-foot basis. So it stands to reason that it would be most impacted by increases in freight costs.
The category that suffered the most in 2023, as it had in 2022, was hardwood, down just under 15% in dollars and slightly more than 17% in volume. And in the last two years, hardwood is down 23.2% in dollars and 26.5% in volume to its lowest levels since 2014 and 2013, respectively. Why? Given how many consumers still had the itch for renovating their homes yet were feeling the effects of inflation, they found themselves opting for more budget-friendly options like rigid core. The latter continued to eat wood’s lunch. With the advent of technology, consumers are finding they can purchase a wood look for a fraction of the cost of the genuine article. The only portion of the wood flooring market that seemed to be immune to this phenomenon was the high end of the market.
Laminate, which had been on the comeback trail for the previous few years, hit a roadblock on said trail in 2023, dropping nearly 10% in dollars and 11.7% in volume. On a positive note, laminate is up 2.3% in dollars from 2020 but down 5% in volume, making the average selling price a dime higher. In fact, laminate along with wood were the only categories to show a higher ASP in 2023 than the year prior. Three issues here: 1. Home centers, a key channel for laminate, saw diminished flooring sales in 2023; 2. A dramatic drop-off in imports from EPLF members; and 3. Slower activity in new construction.
Much of the dollar growth the industry achieved in 2022 was attributed to multiple rounds of price increases as suppliers tried to keep pace with rising costs. Container costs remained high before abating toward the end of the year. And freight expenses once product reached these shores were through the roof.
To further illustrate the impact of price increases, the average selling price of all flooring (wholesale) in 2022 soared to $1.44, up from $1.33 in 2021 and $1.21 in 2020. Here’s some more good news: The industry held the line on prices aside from SPC. The overall ASP was $1.42, down only two cents. And for those historians out there, in 2006, when more flooring was sold than any other year, the average selling price was $0.94. Back then it was about products like resilient tile and VCT.
One more fact about SPC: Those average selling prices are driven down by the Home Depots and Floor & Decors of the world, which buy less expensively because of their sheer volume. Home Depot is supplied primarily by Halstead and MSI. Floor & Decor is supplied heavily by CFL and Novalis. Lowe’s has a higher-end product mix with a bunch of suppliers in there. When you look at the cost to retailers and distributors, it is well over $2.
Home centers’ share
Home centers, big boxes and mass merchants contributed their fair share to the decline in overall flooring sales as well. While flooring sales at Home Depot dipped 5.1% year over year (the retailer reported flooring revenues in fiscal year 2023 of $8.754 vs. $9.222 billion in 2022), Lowe’s—the second-largest home center chain—reported flooring department sales of $4.327 billion, a 14.2% drop over 2022. Those numbers are slightly skewed, though, as Lowe’s sold its Canadian retail business in fiscal 2022 and there was also a 53rd week in its 2022 fiscal year. Flooring sales account for roughly 5% of sales at Lowe’s and 5.7% at Home Depot.
Meanwhile, LL Flooring (formerly Lumber Liquidators) showed a significant decline in 2023, generating $904.7 million in sales, down 18.5% from $1.11 billion in 2022. Comparable store net sales decreased 19.6% primarily attributable to lower transaction counts and average ticket size in both pro and consumer customer channels. The decline in both cases were driven by the continued headwinds from the difficult macroeconomic environment and ongoing brand awareness challenges.
But probably the biggest winner in the big box/large-store format category in 2023 was Floor & Décor, which continues to open new stores at an aggressive pace. Floor & Décor reported sales of $4.414 billion in 2023, up 3.5% from $4.265 billion in 2022. Remarkably, sales are up a whopping 82% from 2020. However, don’t be fooled by the raw numbers. Floor & Décor opened 30 stores last year and 88 since 2020. When you compare same-store performance in 2023, sales were down 7.1% vs. an increase of 9.2% in 2022. The company attributed year-over-year declines in comparable store sales to the aforementioned challenges in the housing market that directly contributed to a slowdown in demand for flooring. Laminate and vinyl made up 26% of Floor & Décor’s sales last year, company financials show.
Following is an overview of the respect floor covering category performances in 2023:
Carpet
Inflation/high mortgage rates were cited by mill executives as significant contributors to carpet’s struggles in 2023 as the category declined 9.5% in dollars and 10.3% in square yards vs. 2022. Residential sales, meanwhile, were down 13%.
Inflationary pressures hurt the segment on two fronts: Consumers had less disposable income to spend on flooring and the resale housing market remained stagnant as homeowners stayed put due to persistently high mortgage rates at or near 7%.
Carpet is still reeling from the COVID-19 period when the category “over-indexed” as consumers spent more on flooring (including carpet) than they ordinarily would have in normal times.
The encouraging news for carpet? Over the past 12-18 months, residential hard surface and carpet declines are moving at about the same rate, which means carpet is no longer losing share to hard surface, at least not at the same rate it was during the previous decade.
Resilient
After more than a decade of staggering growth, the resilient category felt its first decline across the board in 2023.
When the dust settled, Floor Covering News research found the resilient flooring category as a whole generated $8.546 in 2023, down 9.7% from $9.46 billion in 2022. In terms of volume, the category accounted for 5.768 billion square feet at the first point of sale (not including rubber) in 2023, down 7.1% from 6.206 billion square feet in 2022.
However, putting that into perspective, 10 years ago resilient garnered just $2.2.06 billion in sales.
Even taking 2023’s decrease into account, that’s still nearly triple the market in the last decade. What’s more, the resilient category has experienced double-digital growth, leading the flooring industry, for eight years—with growth peaking at 30.3% in 2021.
Furthermore, resilient managed to keep its lead in dollars over carpet (not including area rugs) for the second year running (by $1.09 billion). The LVT segment of the resilient category itself (including residential and commercial rigid core and flex), also nearly managed to eclipse carpet, behind by just $14 million.
SPC, the category darling, despite dropping double digits in dollar sales, still accounts for 46% of resilient’s dollars and 40% of units. When WPC is included, the rigid core section accounts for 57.5% of resilient’s dollars and 46.6% of its units.
Hardwood
Intense competition from competing “wood-look” segments such as SPC and laminate, coupled with diminished activity in the new home construction market, negatively impacted hardwood’s performance in 2023. FCNews research showed sales dropped 15% to $2.05 billion at the first point of distribution, with volume tumbling 17.3% to 757 million square feet. That’s the second consecutive year in which volume fell by double digits, reflecting higher raw materials and production costs associated with the manufacturing of hardwood flooring.
With the softness seen in residential building in the U.S. in 2023, wood’s share remained flat at 19.8% of new home construction. Likewise, as consumers opted for less expensive hard surface options in their remodeling projects, the category’s share of residential replacement sales fell several percentage points to 65.4% of the market—down from nearly 68% in 2022. The average wholesale price of hardwood flooring rose to $2.71 per square foot— the highest price in a decade.
Naturally, hardwood saw its share of hard surface dollars decrease to 13.4% in 2023, with volume representing 7.7% of hard surface square footage sold. This is down from 16% and 10%, respectively, compared to five years ago.
Laminate
A softer new home construction market, slower overall DIY activity at most of the nation’s home improvement centers and a dramatic falloff in laminate flooring imports from some of the major European providers all contributed to sales declines in the category for 2023.
FCNews research shows laminate flooring sales at the first point of distribution reached $1.247 billion last year—a 9.8% decrease from 2022. In that same vein, volume shipped came in at 970 million square feet, a drop of 11.7% compared to the year prior.
Despite laminate’s sizeable falloff in sales and volume—the first time the category has shown a decrease since 2018—its overall share of the floor covering pie has not changed appreciably year over year. This is primarily due to the fact that the U.S. flooring market as a whole was down in 2023. At the end of the day, laminate represented nearly 5% of total industry sales and 5.5% of total industry volume last year.
That’s right in line with 2022, which had laminate at 4.9% of total sales and 5.65% of volume.
Ceramic
Like most flooring categories in 2023—including the behemoth resilient category—tile declined in both sales and volume last year due to various factors, most significantly the struggling housing market.
When the dust settled, ceramic experienced about an 8% decline in dollars in 2023 to $3.226 billion vs. $3.507 billion in 2022, according to Floor Covering News research. Despite the drop, ceramic dollars are up 4.8% from 2021 and represents the second-highest dollar sales ever. Flooring volume also found itself in the red, registering a 6% decline to 2.306 billion square feet, its lowest level since 2016. That is compared to 2.453 billion square feet in 2022 and 2.477 billion square feet in 2021.
While this is the tile category’s first dollar sales decline in years, it is still a 13.4% increase from 2020’s $2.844 billion when the category experienced its first decline since 2009 amid the Great
Recession. What’s more, 2022’s $3.507 billion was a record high for the category, and the 2.442 billion square feet was the third-highest total since 2006 when housing sales reached unprecedented levels. It’s not too unreasonable to expect a decline from powerhouse numbers, especially after the particularly hard shot the housing market took in 2023.
The category also kept its standing in 2023 as the third-largest sector in flooring, representing 12.8% of the flooring industry’s total $25.122 billion.
