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Distributors, retailers upbeat about 2018 prospects

December 18/25, 2017: Volume 32, Issue 14

By Ken Ryan

 

Flooring retailers and distributors are all but guaranteeing that 2018 will be a banner year for business, with signs pointing toward healthy growth both residentially and commercially. While the known (shortage of skilled labor) and the unknown (geopolitical strife) could threaten the feel-good story, the consensus among flooring observers is 2018 will be the best year in the last decade.

There is evidence to support this. The Conference Board forecast calls for 2.8% growth during the final quarter of 2017 and 2.5% growth in 2018. This would represent the economy’s best two-year run since 2005.

“I hate to jinx something, but I will eat my hat if 2018 is not a great year,” Sam Presnell, owner of The Rug Gallery in Cincinnati, told FCNews. “Seldom does everything line up. There are so many positive signs—consumer confidence, housing sales, remodeling, interest rates, great products and lower taxes. I am very excited about 2018, and we are ready.”

Presnell’s bullish sentiment was shared by fellow retailers and distributors. Many point to the generally favorable trend of the economy and housing; others view the pending tax bill as the elixir for what ails them.

“I believe the tax bill—if it passes into law in a recognizable form of today’s description—will definitely have a very positive effect on 2018 business,” said Sam Roberts, owner of Roberts Carpet & Fine Floors, with 12 locations in the Houston area. “I believe it will stimulate economic growth and, almost as importantly, increase consumer confidence. For my fellow carpet and flooring dealers with Subchapter S corporations, income should increase nicely and tax expense should sharply decrease.”

Scott Rozmus, president and CEO of Romeoville, Ill.-based FlorStar Sales, a top 20 distributor, believes business will be good in 2018 and could be strong if the proposed tax reform goes through. “The reductions in corporate tax rates in particular would likely generate significant investment across the board, including investment in interior finishes,” he explained.

Beyond the potential benefits of tax reform, flooring observers note that 2017 is finishing on a high note, with residential new construction among the sectors leading the charge. More of the same is expected in the new year. “I think people will continue to spend money on their existing homes and that new construction will also continue to grow,” said Chris Kemp, owner of Kemp’s Dalton West Flooring, with three Georgia locations.

According to Jim Walters, president of Macco’s Floor Covering, Green Bay, Wis., residential new construction and commercial should remain strong in 2018. And while residential retail growth will be more of a challenge it also has the potential to grow, he noted. “As a full-service retailer the key to success is to continue to create value for our customers in a very competitive market that includes big box, Internet retailers and outlet stores.”

Great products drive business and flooring leaders expect the high-octane LVT/WPC/rigid core category to continue to grow and take market share from all other segments in 2018. Companies are adjusting accordingly. “In our business, we saw a rapid change with our product mix from other products, especially hardwood, to a mass migration to LVT,” said Scott Roy, president and CEO of Jeffersonville, Ind.-based Gilford-Johnson Flooring, a top 20 wholesaler. “Given our strong push with LVT, especially the new WPC and rigid core products, we are optimistic about 2018. We believe having the right products at the right prices and a strong style perspective will be important for our customers.”

While an improving economic climate and the potential benefits from a new tax bill may lift flooring businesses to a certain degree, there are challenges specific to each market that could impact 2018. For Roberts Carpet & Fine Floors, it stands to benefit from what Sam Roberts called “a backlog on the urban development side and Hurricane Harvey-related business that should impact us positively in all areas of the business through the first half of 2018.”

Several distributors with operations in the oil-producing states are keeping a watchful eye on the price of oil. “We need oil to stabilize over $50 barrel to see more activity,” said John Sher, president of Adleta, a top 20 distributor in Carrollton, Texas.

A concern for all is the continued shortage of skilled labor. As Macco’s Walters explained, “Having enough qualified installation to meet our sales demand and projected growth continues to be our No. 1 challenge.” Adleta’s Sher agreed, noting, “Labor shortages in the construction trades will be an issue. This could hinder growth in our area.”