Article Number : 5042 |
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| Date | 11/11/2009 9:12:52 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=5042 |
| Abstract | By Louis Iannaco With recovery for the prolonged economic doldrums being seen by most economists as a later rather than sooner proposition, most consumers remain close to the vest when it comes to their... |
| Article | By Louis Iannaco With recovery for the prolonged economic doldrums being seen by most economists as a later rather than sooner proposition, most consumers remain close to the vest when it comes to their spending habits. As a result, many continue to focus on the best value for their hard earned dollar. The consumer confidence level, ”just isn’t as robust as it needs to be yet,” said Ralph Boe, president/CEO of Beaulieu of America. “I believe people need to see what’s going to be finalized regarding the healthcare issue and where their taxes are going to be before they are willing to go out and spend some money again. “Right now,” he explained, “they are trying to hold on to their funds. Flooring is a deferrable purchase at retail so until they have that confidence level back it’s going to be a pretty slow recovery.” According to FCNews research, the carpet industry is estimated as being down approximately 20% in both dollars and units compared to the same period last year, and most executives don’t forecast any significant positive change in those numbers for the remainder of the year. As Steve Sieracki, Shaw’s vice president of product category management, noted, “We were all optimistic going into 2009 that we would experience better business conditions as an industry. We felt the market would be down but no one could have predicted the level of decline the industry faced during 2009.” According to its third quarter earnings report, Mohawk’s carpet segment sales were down 21% for the third quarter, in line with the industry. “Much of our efforts to reduce costs and improve processes have been offset by low industry volumes and unabsorbed overhead,” said Tom Lape, president of the mill’s residential business. “Consumers are purchasing more value-oriented products and selling prices on commoditized products have compressed. Residential volume remains weak with commercial still in decline.” As the industry continues to move ahead into the fourth quarter, there is no mystery as to what is having the largest adverse affect on the broadloom segment. “On the residential side, it’s housing, housing, and housing,” said Werner Braun, president of the Carpet & Rug Institute (CRI). “On the commercial side, I’d say the most significant influences are consumer confidence and the availability of financing. CRI is trying to do its part to alleviate the situation, he noted. “CRI was one of the original parties to the coalition of support behind the HIRE Act, the proposed legislation that would give tax credits to residential and commercial property owners for home improvement or home furnishings purchases” (FCNews, Sept. 14/21). Tony Prespitino, vice president of sales and marketing for Gulistan, concurred with Braun regarding the housing market, saying, while it is showing signs of improvement, “it is unclear if sales are being driven by foreclosure sales and first time home buyer tax credit or if it is sustainable. Consumer insecurity and weak housing market have had a real impact, especially on big-ticket items like flooring. “We saw a significant drop in sales in the fourth quarter of 2008 and into the first quarter of 2009,” he explained. “Since March/April, we seem to have been bouncing along the bottom. In recent months we have experienced some growth over last year’s figures. Given the low numbers we are up against, we expect to have some small sales growth for the balance of this year and into 2010. Our best prediction is that we won’t see sustained growth until the second half of 2010.” While executives saw a rebound for carpet on the horizon, most believe it will take until late next year, or early 2011 until significant growth is experienced. “Throughout 2009, high unemployment, lack of consumer confidence, and continued challenges with credit availability have resulted in another difficult year for our industry,” said Sieracki. “Inventory of existing homes and increased foreclosures had a significant impact in 2009 and this will continue into 2010. Commercially, the excess available space in every sector will present additional challenges for the market next year. “As we look toward 2010,” he added, “we see challenges in the first half of the year but some optimistic reports lately may indicate a better second half.” As Braun noted, projecting into the future, “while there was some guarded optimism that the housing market would rally in the third or fourth quarter of this year, it’s now looking more like we’ll see improvement in the housing market in the third or fourth quarter of 2010. Of course, the commercial market, which generally lags behind residential by six to seven months, should follow suit sometime after that.” Boe believes, as consumer confidence returns, fortunes for the broadloom segment will improve. Unfortunately, he sees this taking place on a significant scale later rather than sooner. “For the first nine months of 2009, each quarter has been down about the same amount, so there has been no uplift at all. I believe there’s going to be a little improvement in the fourth quarter, but that’s mainly because last year’s fourth quarter saw such a dramatic drop. “Housing has gotten a little better in the last few months, except for the last month,” he explained. “Existing home sales have actually been up. Housing construction has picked up a little bit. But the consumer still has many concerns and isn’t going out and paying for a lot of big-ticket items. “Again,” Boe concluded, “once the consumer feels more confidence and they’ve deferred doing a lot of work around their homes, I believe you’ll find the economy a little more robust. I don’t believe that is going to happen in 2010; it is probably going to be more likely in 2011.” |