Resilient flooring state of the industry 2024

For the second year running—and only the second time in the past 15 years—resilient flooring will end 2024 down in both dollar sales and volume. The consensus among the major resilient flooring suppliers is that once the dust clears and the calendar flips to 2025, the category will be down low double digits in sales and single digits in volume.

The decline was driven largely by a slow housing market, persistent inflation and ongoing supply chain challenges. “Like other flooring sectors, the resilient market is still being affected by the post-COVID-19 decline in home improvement while supply chain issues linger,” explained Joe Young, vice president of residential product and marketing at Engineered Floors. “The overall retail flooring business has contracted as discretionary income declined for some, and others with higher income moved their discretionary income to travel, entertainment, etc. Nationwide, we are still seeing high interest rates keeping homebuyers on the sidelines while inflation has caused some homeowners to delay renovations.”

Sam Kim, senior vice president, product, MSI, agreed, noting, “Disposable income pressure and interest rates, along with the current shipping crisis continue to pose headwinds for the industry.” However, he added, “We see various pockets of robust activity and growth.”

It’s true that while resilient flooring is taking a hit in 2024 (and declined in 2023) there are still bright spots for the No. 1 flooring category in the industry (FCNews research found resilient flooring generated $8.546 billion in 2023, more than any other flooring category).

First, suppliers say the category’s features are still in high demand among consumers. “Resilient provides a lot of value to the consumer—it’s waterproof, it’s easy to install, it has superior style and design and is continuing to advance in new technologies, both in performance and design,” said Roderick MacLeod, resilient category director, Shaw Industries. “There is familiarity with the product. Recent innovations and the cost per square foot compared to other alternatives make it a good option for most customers.”

Another bright spot is the commercial market, which suppliers agree has held up better than residential in 2024. “For Philadelphia Commercial, we see resilient as an attainable ‘affordable luxury’ category that smaller hospitality businesses can take advantage of (i.e. bed & breakfast; local motels/inns; restaurants; etc.),” MacLeod said. “The vast offering of resilient based on construction, design, color, etc., lends itself well to achieving upgraded looks at an achievable price point. And most resilient allows for easy pairing with carpet tile, which can be ideal for large open areas like lobbies or from a hallway corridor into unit rooms.”

Which commercial market segments held their own in 2024? “Well, the healthcare space is strong—we’re seeing plenty of construction activity there, and so with that business our commercial sheet business is strong,” said Yon Hinkle, vice president – resilient products, AHF Products. “Our VCT business is still pretty strong—those are product categories that dominate in that space.”

Hospitality is also going strong, suppliers agree, as projects that were put on the back burner in 2020-2022 continue to move forward.

Housing slows

While there are bright spots that helped resilient flooring keep its place as market leader, there are still hurdles that need to be tackled. Housing being one of them.

Sales of new single-family houses in June, for example, were at a seasonally adjusted annual rate of 617,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. That was 7.4% below the June 2023 estimate of 666,000. Existing home sales in June were at a seasonally adjusted annual rate of 3.89 million, which is a decrease of 5.4% vs. June of 2023, according to the National Association of Realtors.

Resilient suppliers concur, new and existing home sales can heavily impact resilient sales. “We like to say whenever you sell a house, an existing house, it creates two transactions,” said Adam Ward, vice president, resilient, Mohawk. “The person selling the house is buying a new home, so they’re going to remodel it, and then the person moving into the home is going to remodel it as well. So with that being at near lows, you’re not seeing that remodel demand really take hold.”

In addition, Ward added: “Inventory is increasing from what it bottomed out at, but prices are high. Interest rates are high, so you’re still seeing a slow existing home market, which really doesn’t drive a lot of that remodel activity.”

Steve Ehrlich, vice president of business and operations, Novalis, agreed, also noting the impact of interest rates. “The ongoing hurdle to home sales remains high interest rates, with no imminent indications of relief expected to stimulate sales until potentially 2025 or even early 2026. Both Generation X and Millennials are prioritizing expenditures on travel and entertainment rather than making significant investments in real estate or large-scale home construction projects.”

The bright spot, Mohawk’s Ward noted, was multi-family. “Multi-family has continued to remain strong, which is helping the category greatly.”

Inflation takes its toll

Inflation, in fact, has been a major cause of headaches for the category—from the slowdown in housing market to the tightening of consumer purse strings.

“Many American families are dealing with less disposable income, so they’re prioritizing essential expenses over renovations,” Doug Jackson, Cali CEO, told FCNews. “We’re seeing plenty of home projects, but they tend to be smaller in scale—reflooring just a few rooms at a time rather than the entire home. The high cost of materials and increased living expenses have prompted homeowners to delay or scale back their flooring projects, opting for smaller, more affordable updates instead of full renovations.”

Less room for home purchases and renovations also equates to less foot traffic at retail—something suppliers say they’ve noticed in 2024. “My travels across the country reveal particularly sluggish foot traffic in retail establishments,” Novalis’ Ehrlich said.

David Sheehan, senior vice president – residential marketing and product, Mannington Mills, agreed, noting: “Since late May, store traffic has dramatically declined. It’s hard to generate momentum when there aren’t customers in the market for a floor. We’re promoting at both the point of sale as well as offering great deals on pallet orders.”

However, there may be light at the end of the tunnel. “With the latest Fed meeting, it looks like the sentiment’s finally starting to turn,” Shaw’s MacLeod said. “We’re hopeful that there may be one to two cuts by the end of this year, which may help fuel some more growth next year, both in remodeling and in new home builds.”

Dick Quinlan, senior vice president, sales and marketing, Wellmade Floors, even noted the benefits of declining home sales. “Higher interest rates have reduced the number of homeowners selling their existing home to trade up. Homeowners with low 3% mortgage rates are not selling. They do not want to buy at 5% to 7% interest rates. These stay-put homeowners are expected to start to make improvements in their existing homes, which will increase resilient sales in the second half of 2024.”

Ongoing supply challenges

Home prices and interest rates are not the only challenges the resilient category is facing. Last year, the category had to contend with lower selling prices—mainly due to the lasting effects of the import crisis. Those prices have remained relatively low, though suppliers say they may be creeping back up again.

“Lower average selling prices are a direct reflection of the historical import cost (container cost) escalation beginning at the end of 2020 and peaking in late 2021,” Noah Fulton, vice president, business strategy, Karndean, told FCNews. “It wasn’t until early 2023 that the decline stabilized. As inventory turned through at these rates, pricing to the market followed the same trend at a slight lag compared with import costs. While there are other factors, such as labor and raw material changes, the container cost was the biggest factor.”

Those supply chain issues have begun to crop up again after finding some relief in 2023. Namely higher costs in shipping, materials and logistics.

“Resilient’s downturn can be attributed to rising raw material and production costs driven by inflation and supply chain disruptions,” Cali’s Jackson said. “This has resulted in higher prices, making flooring options less competitive and less appealing to customers.”

Novalis’ Ehrlich concurred, noting, “The major challenges we are facing include a substantial increase in logistic costs, which have risen by more than 100% since last November.”

With substantial challenges ahead there are some suppliers trying to make it easier on their retail partners by providing the means for those retail partners to differentiate themselves in the market. “Our flooring is not available in the big-box stores,” Karndean’s Fulton explained. “We only partner with specialty retailers because we know they have the experience and expertise to ensure our products provide the beauty and performance homeowners expect.”

Others agree there’s still a lot to look forward to. “Resilient is too much of a win in terms of durability and value for it to be down for long,” Cali’s Jackson explained. “Luxury vinyl is going to continue to improve aesthetically keeping it a very enticing option for many homeowners.”

Domestic production

With the issues surrounding imports continuing to crop up—especially as it relates to resilient flooring—suppliers both domestic and abroad have upped their U.S. production game.

AHF Products, for example, manufactures in eight plants throughout America and produces about 80% of its total volume in the U.S. Domestic products include solid and engineered wood flooring, rigid core (SPC), laminate and accessories.

“Disruption has become real, and it’s become regular,” AHF’s Hinkle said. “Whether it’s the time it takes to get secure containers, the geopolitical situation—now freight going up more than double. In fact, that was near triple what it was just three or four months ago, though it’s come back down a little bit—but not much. So those things have led customers to focus on domestic capacity and domestic supply so they can avoid the significant impact when they don’t get their product when it’s supposed to be there or when they get charges they didn’t expect and it’s more expensive than they thought.”

Wellmade has made investments needed to double the annual capacity in its Cartersville, Ga., plant—where it products its popular HDPC products—from 100 million square feet to 200 million square feet. “Wellmade domestic production provides a stable, low-risk supply of high-quality product Made in USA,” Quinlan said.

Since 2020, Novalis has been manufacturing SPC at its Dalton facility, and as of 2023 the company has also started SPC production in Mexico. “Both plants are dedicated to producing the highest-quality products for both commercial and residential markets,” Ehrlich explained. “We have expanded our capacity through the establishment of our new plant in Mexico, strategically positioned to be closer to our customers and significantly reduce lead times associated with importing from overseas. To meet the escalating demand for domestic production, we plan to expand our capacity in Mexico.”

One of the newer kids on the block, Engineered Floors began production in its PureGrain DLVT facility in late 2023, officially introducing the product to market in January. “We made a significant investment to repurpose a section of our Seretean Plant in Dalton to manufacture our DLVT,” Young explained. “Due to the overwhelming positive response to this American-made product and the potential to eliminate the constraints associated with imports, we have plans to increase capacity in the future. By manufacturing resilient flooring in America, we continue our focus on our company pillars of quality, service and innovation. We control all steps of the manufacturing process. Since our manufacturing process takes place under one roof, we are able to respond to our customers’ needs almost instantly and can shift production as the market dictates.”

The post Resilient flooring state of the industry 2024 appeared first on Floor Covering News.

Resilient flooring state of the industry 2024 Posted First on https://fcnews.net