Hicksville, N.Y.—With the economy sagging and the cost of raw materials rising, you’d think wood flooring executives would be down in the dumps. Such is not the case however, as several industry people, while being cautious in certain areas, expressed overall satisfaction with the way the first six months of the year have gone and optimism for the second half of 2003. “The first few months of the year were a little bit slow but then we started to pick up as the season turned to spring,” said Ed Korczak, executive director of the National Wood Flooring Association (NWFA).

“Wood flooring sales are up about 5% to 5-1/2% over the first six months of last year. We started to see a little bit of a slow down the last month or so, but now that the interest rates have been lowered again, it looks like the next six months will pick back up again. “With the lower rates,” he explained, “we are going to see some refinancing going on and usually, when people do that they use that money to remodel their homes, so we can expect to see some new business from that. Also, the 30-year mortgage rate is down to 5-1/2%, new home starts should continue very strong and get the shot in the arm they’ve needed.”

“Overall, the builder side of the business is very strong,” said Chris Thompson, vice president of sales and marketing for Mirage. “There are areas of retail that are strong. Retail has been spotty in a lot of areas where they will be good one week, not so good the next. The builder side of the industry has been extremely consistent, very strong. In the last 60 days, the retail side has picked up considerably in many markets. “So far, it’s been a good year for us,” he continued. “It’s been a difficult year in a lot of ways on the retail side for some people. Overall, however, the first half of the year has been pretty good. We’re definitely up over this time last year. “We opened our second plant last September,” he added, “and that has been a tremendous help to us in terms of capacity and being able to supply customers on a timely basis (FCNews, Sept. 2/9). It’s been a big part of our growth this year.”

Armstrong World Industries, which has been de-emphasizing its unprefinished wood business, has seen its engineered products “do better than our solids,” said Patrick Barnds, general manager of wood products, “and that has been mainly driven by the dramatic increases in raw materials. We’ve done our level best, in the face of these increases, to maintain our pricing in the marketplace because it is a hotly competitive marketplace today. “You simply do not have the luxury of passing on increases of raw materials to your end customers,” he explained. “They are not going to accept it. So, we’ve seen a slowdown in that part of the market relative to the engineered segment. We are still up however. “We are up low double digits in our prefinished solid business and three to four percentage points more than that in our prefinished engineered business,” Barnds added. “So, excluding our unfinished side, our business is doing remarkably well given the operating part of it.

“Interestingly, in the builder market/new home construction area, it seems demand has not kept pace with what we considered to be the pace of new home construction,” he continued. “And that goes for the resilient side of the business as well. We just haven’t seen floor product demand keep up with what we have seen in new housing construction. What we’re finding is, late winter-early spring weather did impact housing starts but not enough to explain the weakness in overall sales. “It looks like it’s taking longer to complete homes, and one of the last products to go into a completed home is flooring, that starts to explain some of the weaknesses you see in the flooring numbers,” Barnds sated. “That pattern has leveled off in April and May, and we’ve seen a relatively significant uptick in the latter part of May through June. There is some pent up demand out there. Many people have been postponing their purchases, so we can be cautiously optimistic about the second half. ”

“We’re on budget for the first six months of the year,” said Steve Bunch, Columbia’s director of business development. “Which means, on average, about double digit growth in our hardwood category against this time last year. We’ve had a very good year so far both in hardwood and laminate. We are obviously running ahead of last year and we have a very aggressive budget, so it’s good news thus far. And we feel very upbeat about the second half of the year as well.”

Like Barnds, Jim Morando, president of Harris Tarkett, noted how the rise in raw materials costs is affecting business. “We had a strong sales quarter in the first quarter. The second quarter seemed to cool off quite a bit. What is happening in the lumber market is having a real adverse affect on our profitability. “The lumber on the yard today is 30% more expensive than what we paid 18 months ago,” he explained. “And, if more than two-thirds of our cost is in the raw materials, you can do the math.”  “The wood business has been a very strong area for us as we continue to diversify our offerings,” said John Himes, Mannington Mills’ director of marketing for wood and laminate. “First through American Rustics, and now with our handscraped product, American Lagacy. We continue to hit on and refine trends, and that’s what is driving the huge majority of sales.

Emerging trends, as well as our exotic products, have been big growth areas for us so far this year. “Industry-wide, we see a lot of similar things,” he added. “Wood flooring is being used in bigger areas and through more rooms in the house. The builder business continues to be a driver in that segment as well.” “We’re seeing more kitchens get wood flooring,” said Korczak, “as well as half baths. Commercially, we’re seeing more movement in the niche markets, stores trying to promote a particular image, not the larger, mainstream retail operations. “The exotic woods are coming in. The darker Brazilian cherries still maintain a strong hold on the marketplace. Walnut is still very strong. The more exotic species are coming in a little more slowly. Clear, natural finishes are still big right now.”

While exotics continue to do well, “the mainstay of the industry is still oak and maple,” said Thompson. “That isn’t going to go away. That’s where all the trees are. That’s your lumber source. The industry can’t go away from oak and maple. Those are the species that we have.” “The sales of some of our new high-end products are really strong in new home construction right now,” said Barnds. “We’ve introduced about 80 different new products into the market in the past six to eight months and they are really taking off. Some of what we consider premium, either grades or exotic species, precision milled or wide-width products, we’re seeing a lot of demand for that right now.” “The response to our exotic Out of Africa collection has been unbelievable,” said Bunch. “The magic and mystique of African rosewood and some of the others has really created a lot of excitement in this product category. The other category we’re doing extremely well with is click longstrip. We see the longstrip hardwood business changing as did the laminate click business. This trend is developing very quickly. We see the whole market moving over to glueless click and we are really benefiting from this.”