Scoring flooring: Industry stats for 2024

There are two ways to look at the flooring industry in 2024. On one hand, after posting dollar growth in 12 of 13 years (the industry was down 0.5% in pandemic-ridden 2020), sales dollars in 2024 retreated for the second year in a row and volume dipped for the sixth time in the last seven years. However, those looking for a silver lining will take note of the fact that the losses were less than half of 2023’s decline. One more thing to consider: The fact that volume is dropping more precipitously than dollars suggests consumers are purchasing better goods and/or the ASP is rising.

While the overall economy in 2024 maintained firm expansion, driven by solid consumer spending, healthy labor markets, improving earnings and government spending, the floor covering industry—particularly the residential sector—faced headwinds from macroeconomic factors. Those included low consumer confidence, inflation, elevated interest and mortgage rates and lower existing home sales.

As such, the flooring industry’s contraction that began in the second half of 2022 continued through 2024 with little change in housing markets and residential remodeling. Consumer confidence remained constrained by compounded inflation, economic uncertainty and geopolitical tensions. Globally, housing sales continued below historical norms. Existing U.S. home sales fell to a 30-year low as many homeowners remained locked in place with mortgage rates below 4%.

The increase in interest rates in 2022, 2023 and 2024 has contributed to several years of negative existing home sales, with such sales near record lows in 2024. The hard surface flooring industry in particular is highly dependent on existing home sales because homeowners often replace flooring before selling a home or shortly after purchasing a home and, to a lesser extent, on new home construction. This inflationary pressure has resulted in elevated mortgage rates. High interest rates and housing affordability adversely affects the demand for existing homes, remodeling and new home construction.

Central banks in the U.S., Europe and other regions cut interest rates during the latter part of 2024, although the impact on housing turnover was negligible in most markets. Consumers continued to defer remodeling investments with many projects being initiated by more affluent consumers or those completing essential home repairs. New residential construction was restrained as higher home costs and interest rates impacted starts. Many U.S. builders increased sales by buying down mortgage rates to make monthly payments more affordable. Throughout the year, investments in the commercial sector slowed, although they remained stronger than residential remodeling.

With soft market demand, industry competition for volume increased, resulting in greater unabsorbed overhead and shutdown costs as manufacturers managed production and inventory. Competition pressured pricing, and the overall mix of products was impacted as consumers traded down to lower-priced alternatives.

Inflation is a global phenomenon that continues to persist. Whether it’s the fallout of aggressive fiscal spending that was necessary to sustain the U.S. economy at the height of the pandemic, or the ongoing aftershocks of conflicts around the world and the subsequent impact on global supply chains, the resulting inflation has been extremely challenging to tame.

While inflation made meaningful progress toward the Federal Reserve’s 2% target throughout 2024, momentum notably slowed in the fourth quarter. While core prices maintained relative stability, the overall downward trend that characterized much of the year began to flatten. The average inflation rate of 2.9% in 2024—while not as steep as 2023’s 3.4%, 2022’s 6.5% or 2021’s 7%—remained tangibly higher than the Fed’s annual 2% target. But again, down significantly from the pandemic years and off considerably from the 20%-plus inflation rate we saw in the 1980s.

Global economic challenges, including the impact of the Russia-Ukraine war, conflicts in the Middle East, supply chain disruptions, the potential of government-imposed tariffs and slow macro environments in certain geographic regions caused uncertainty and volatility.

Construction trends

Higher interest rates over the last three years have impacted both construction planning and spending in the U.S. Rightly so, given the level of financing required to sustain both residential and commercial building construction in America. Greater access to financing can only fuel further construction or resume projects that were temporarily put on hold when borrowing and material costs increased in recent years.

Historically speaking, we were still seeing tighter lending standards in spite of three decreases in interest rates in late 2024. But the mere fact that rates were beginning to trend in the right direction could usher in an environment where builders feel more comfortable borrowing.

With respect to the residential construction market, builders faced persistent headwinds. Just over 1 million units [annualized] were started in the past 12 months, which was not awful. The U.S. has been under building since 2008. Affordability remains a challenge, especially in markets like the Northeast and on the West Coast.

Within the specified commercial contract market, office construction continued to be off in 2024 from pre-pandemic levels. However, once data centers are removed from the mix, the growth rates seem more normalized. While office construction is down, the bottom is not falling out from under this market. It’s akin to roughly the 2019 level of construction.

Growth rates seemed to come back down to earth with respect to the education sector. Hospitals, which have seen an uptick in spending that accelerated during the pandemic years, was still respectable in 2024 although expected to cool somewhat in 2025.

When the dust cleared and all the numbers were counted and run through the wash multiple times, total industry sales in 2024 dropped 4.6% to $23.955 billion compared to 2023’s $25.116 billion. That number is still up 4.3% from 2020’s $22.975 billion. To put it another way, the industry is up 48% 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 down only 3.1% from that point. Thus, despite all the challenges, the flooring industry posted its fifth-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 17.835 billion square feet sold in 2023 to 17.206 billion square feet in 2024, a 3.5% decrease. This marks the sixth decline in the last seven years and represents the lowest volume total since 16.98 million square feet were sold in 2012. Only in pandemic recovery year 2021 did the industry post growth in units (6.2%). Every category showed a sharp decline in volume except vinyl, which was only down half a percentage point. If not for a solid commercial segment, particularly healthcare, assisted living and education, the dip would have been greater.

What does this tell us about 2024? Two things: With many consumers paying extra attention to their wallets, they traded down to lower-priced flooring options. At the same time, price pressures due to a litany of factors resulted in lower prices in every category except for wood.

While many will not be excited about 2024 given the 3.5% decline in volume and 4.6% drop in dollars, it pales in comparison to 2023, when the industry was off 9.1% in volume and 10.1% in dollars. However, after years of seeing the average selling price of all flooring increase, we have witnessed a decline these last two years. 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. Fourteen years later, the industry is up 48% in dollars but only 3.5% in volume. So the average selling price of one square foot of flooring (wholesale) has increased $0.41 in the last 14 years. The average wholesale price of all flooring in 2024 was $1.39, down from $1.42 in 2023 and $1.44 in 2022. But in 2021 the ASP was $1.33 vs. $1.21 in 2020 and 2019, which was up from $1.17 in 2018 and $1.11 in 2017.

For historical 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 as we climbed out of the pandemic; 0.5% decreases in dollars and volume in COVID-19-marred 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 2024 posted declines in dollars ranging anywhere from 2.3% (vinyl) to 9% (wood). In terms of units, every category took a step back with vinyl the only category with a percentage loss under 4.2%. In terms of pricing, only wood posted a higher ASP than the prior year. In fact, wood had increased in value each of the last five years, moving from $2.48 to $2.73 a square foot. The highest ASP increase on a percentage basis belongs to ceramic, which has moved from $1.20 in 2019 to $1.38 in 2024. 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 better than residential in 2024. While total industry dollars were down 4.6% to $23.955 billion, commercial was down only 3% from $7.23 billion in 2023 to $7.02 billion in 2024. The good news is that number is still higher than 2021’s $6.5 billion. The factors that wiped away 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 led the way were healthcare, education, hospitality and, to a lesser extent, retail. Corporate continues to struggle but is showing signs of hitting the bottom.

Commercial was truly the bright spot for both carpet and resilient. While carpet overall was down 4.1% in dollars and 4.2% in volume, those numbers retracted to 1.3% and 3.7%, respectively, when only considering commercial, which accounts for about 40% of carpet sold (including Main Street). On the resilient side, an overall decline of 2.3% in dollars became a 2.4% increase when taking only commercial into account. And commercial LVT, which comprises about three-quarters of commercial resilient, was up slightly over 4% in dollars (due in large part to price increases) and about 1% in volume.

On the subject of resilient, it’s hardly a secret how rigid core has been driving the category, posting increases every single year—until 2023. WPC dollars were down 17.7% and SPC dollars were off 12.4%, and that continued last year with drops of 1.3% and 3.6%, respectively. SPC dollars remain on par with 2020 numbers. The average SPC selling price dipping from $1.68 to $1.60 as companies sought to sell off excess inventory. WPC dropped from $2.60 to $2.48. SPC average selling price is now on par with 2020 before 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 2024, as it had in 2023 and 2022, was hardwood, down 9% in dollars and 10.7% in volume. This on the heels of 2023 declines of just under 15% in dollars and slightly more than 17% in volume. In the last three years, hardwood is down nearly 31% in dollars and just under 35% in volume to its lowest levels since 2013 and 2011, 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 laminate and rigid core. The latter continued to eat wood’s lunch. With the advent of new technologies, 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.

Laminate, which had been on the comeback trail for the previous few years, has hit a roadblock on said path these last two years, dropping 16.8% in dollars and nearly 16% in volume. On a positive note, laminate is up 6.4% in dollars from 2019 but down 1.5% in volume, making the average selling price a dime higher. Two issues here: 1. Home centers, a key channel for laminate, saw diminished flooring sales in 2023 and 2024; and 2. 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 in 2022, the average selling price of all flooring (wholesale) in 2022 soared to $1.44. But price pressures have resulted in the industry giving a nickel back in ASP.

No category has been challenged more than SPC when it comes to ASP. After peaking at $1.85 in 2021, the category’s ASP now sits at $1.60. 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 HTMX 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. Novalis has significant share 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 1.9% year over year (the retailer reported flooring revenues in fiscal year 2024 of $8.596 vs. $8.762 billion in 2023), Lowe’s—the second-largest home center chain—reported flooring department sales of $4.102 billion, 5.9% drop over 2023. Flooring sales account for roughly 5% of sales at Lowe’s and 5.4% at Home Depot.

Floor & Decor, which continues to open new stores at an aggressive pace, reported sales of $4.459 billion in 2024, up 1% from $4.414 billion in 2023. Remarkably, sales are up a whopping 84% from 2020. However, there is a big caveat with these raw numbers. Floor & Decor opened 30 stores last year and 118 since 2020. When you compare same-store performance in 2024, sales were down 7.1%, the same percentage as 2023. That’s worse than its competition. 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 24% of Floor & Decor’s sales last year, company financials show, with ceramic tile clocking in at 23%. Also telling, Floor & Decor’s average ticket was down 2.5% in 2024.

Following is an overview of the respective floor covering category performances in 2024:

Carpet

Looking for a bright spot in an otherwise cloudy year? From a statistical standpoint, the carpet category improved mid-single digits in sales and volume between 2023 and 2024. After enduring double-digit losses in 2023, total sales in 2024 fell a more manageable 4.1% to $7.15 billion while volume was down 4.2% to $7.53 billion.

In the $3.15 billion commercial carpet segment, sales were down 1.3% and volume was 3.7% lower, although both represented improvements over the previous year.

While inflation and stubbornly high mortgage rates were the main factors contributing to 2024’s results, there were encouraging signs as well.

Resilient

The resilient flooring category felt its second consecutive decline in both dollar sales and volume in 2024, according to FCNews research. When the dust settled, Floor Covering News research found the resilient flooring category as a whole generated $8.381 billion in 2024, which is down about 2.3% from $8.576 billion in 2023. In terms of volume, the resilient flooring category (not including rubber) accounted for 5.846 billion square feet at the first point of sale—down 0.5% from 5.876 billion square feet in 2023.

Resilient also held on to its lead in dollars over carpet (not including area rugs) for the third year running (by $1.3 billion). In fact, the LVT segment of the resilient category itself (including residential and commercial rigid core and flex) managed to eclipse carpet for the first time with $35 million to spare.

Hardwood

The not-so-good news for the U.S. hardwood flooring market in 2024 is the category continued to cede more market share to competing hard surfaces, especially the ultra-realistic, wood-look-alike products like LVP, rigid core and laminate. FCNews research shows hardwood flooring sales at the first point of sale fell 9% to approximately $1.845 billion and 10.7% in volume to 676 million square feet—levels not seen since 2013.

The “good news” when looking at the category’s performance in 2024 vs. 2023 is the rate of sales and volume declines are tangibly lower. In 2023, for example, U.S. hardwood flooring sales at the first point of distribution fell 15%; last year those declines fell to the single digits. Meanwhile, square footage shipped in 2023 was off more than 17% from the year prior. While virtually all flooring categories were down in 2024, the significantly lower rates of decline in the hardwood flooring sector—industry watchers say—is an encouraging sign the adjustments that hardwood flooring manufacturers are making are paying dividends.

Laminate

While the well-documented and publicized resurgence of the U.S. laminate flooring market is still very much alive and kicking, it appears that momentum may have lost just a little bit of steam in 2024. FCNews research put category sales at approximately $1.15 billion last year—a decrease of 7.5% over 2023. This on the heels of a 9.8% falloff in sales from the year prior. Volume also dipped in 2024—although at a slower rate compared to 2023— to roughly 923 million square feet, a 4.8% decline. By comparison, laminate flooring volume at the first point of distribution fell 11.7% in 2023.

So, what led to two consecutive years of declines in a category that was on an upward trajectory since 2019? Essentially the same dynamics that adversely impacted every category—even the red hot LVP subsegment—in 2024. Homeowners and renters spooked by high mortgage rates and lingering inflation.

Ceramic

Like the rest of flooring in 2024, tile declined in both sales and volume last year due to various factors, most significantly the struggling housing market and economic uncertainty.

When the dust settled, ceramic experienced about a 7.5% decline in dollars in 2024 to $2.984 billion vs. $3.226 billion in 2023, according to Floor Covering News research. While this is the tile category’s second consecutive dollar sales decline, it is still a 4.9% increase from 2020’s $2.844 billion when the category experienced its first decline since 2009 amid the Great Recession.

Ceramic volume also found itself in the red, registering a 6.3% decline to 2.161 billion square feet from 2.306 billion square feet in 2023, its lowest level since 2014. The year 2015 came in a close second with 2.19 billion square feet.

The post Scoring flooring: Industry stats for 2024 appeared first on Floor Covering News.

Scoring flooring: Industry stats for 2024 Posted First on https://fcnews.net