FCNews exclusive: Mohawk’s Ken Walma opens up

Ken Walma has been president of Mohawk Flooring North America for nearly a year, succeeding Paul De Cock, who was elevated to the role of president and COO of Mohawk Industries. Walma arrived with a varied background that included managing multi-channel businesses for both public companies and private equity. That, coupled with a customer-first philosophy, positioned him as a most appropriate candidate to lead the flooring division. Coming from outside the industry also allows him to bring a fresh perspective to the company.

Walma recently sat down with FCNews publisher Steven Feldman for his first wide ranging, in-depth interview.

You come from Big Ass Fans, which commanded a 70% market share. What attracted you to flooring, where nobody has a dominant share? And specifically, why Mohawk?

I am a continuous learner and love the art of the business, how commercial enterprise works and how you create value and serve customers, then applying what I have learned to make a business better. My career has been a journey across a number of industries and a number of businesses though I haven’t necessarily moved around companies as much. I’ve been fortunate to be a part of large and small companies and do many things, but Big Ass Fans was different because it was a direct-to-consumer business. Prior to Big Ass Fans, I spent 15 years at Eaton, which was a very large, diversified industrial company.

A big reason I went to Big Ass Fans was because I wanted something truly different. I had never experienced a direct-to-consumer business or a strong brand that had the flare of Big Ass Fans. I had never experienced a mid-size business that had that type of intensity. It was also a private equity opportunity, which brought an additional level of focus and intensity whereas my entire career had been with large public or large private companies. So it was “Hey, let’s go see what this is like, let’s have some fun and let’s learn a bunch.”

We had tremendous success, but after a few years I started to get the sense that I could take what I learned back to a large company and do something special. I got a call from Mohawk—I knew Paul De Cock and half a dozen or so of my peer group that worked here. I kept in touch and heard great things about Mohawk, and between the industry, the environment where we are in the cycle and the people and the opportunity to make an impact, I wanted to join the team.

I think the flooring industry has tremendous opportunity to take credit for the positive impact we make on consumers and the planet, yet create even more value in the future.

Give me the similarities and differences between Big Ass Fans and Mohawk.

I’ve been fortunate to experience many companies, and company cultures are like families. They all have their unique intricacies that are important to understand and value. Big Ass Fans and Mohawk are different except one thing: the passion and conviction of the employee base are very similar. “BAFers” are some of the most passionate you’ve ever seen. People wear the clothing every day, whether they’re at work or at home, they love the company, they hang out together, they work together. It’s cultish in a fun and positive way. And I would say that sort of fervor, although different to some degree, is present at Mohawk with a focus on supporting each other, our customers and the company.

A lot of people come into this industry and think they can make a company a consumer brand overnight, and every single one of them has failed. How do you increase sales and market share in this environment?

I think every manufacturer with a recognizable consumer brand has attempted in some way, shape or form to go to the consumer direct and most fail. There are a couple of things here. First, consumers, how they buy and what’s important, continually evolves. The next two generations, meaning the Millennials and the Gen Ys, the power of brand and resulting reputation is becoming more important. These are people who have grown up buying on eBay, Amazon or online. They’ve been disappointed many times by companies they had never heard of. Companies that live up to their brand promise and communicate it well are going to be favored. To some degree, flooring manufacturers in the past may have tried too early and the consumers simply weren’t there, or they didn’t live up to their promise. Second, while the power of the brand is going to continue to become more important in the flooring industry, the more critical piece is to do this in concert with how we get our products to the consumer, which is with the brand of our dealer customers. Mohawk and the other well-known manufacturers that work in concert with dealers will be favored in that kind of environment.

Your second question, how do you grow share? The market is between $20 billion and $23 billion, and we’re a good piece of that. There’s plenty of opportunity for us to be better at articulating our products to help our dealer customers grow their share and our resulting share with them. We have been on a good share growth path in North America and have grown more than the market in the last couple quarters even with some of our systems challenges. We just need to continue to service customers better, provide more innovative products and keep getting better at that irrespective of what the end market does.

You’ve been at Mohawk for 10 months. Tell me one thing that you may have thought when you walked in the door that today you may have walked back on.

The thought that the market and the economy was ready for a bounce back has changed. I don’t think that’s the case anymore. Whereas we were expecting a post-COVID-19 rebound or a post-financial-crisis rebound or post-September-11th rebound, we’ve all been trained that, on the residential side, as the market drops, it’ll come back roaring. I think that’s changed. The macro economic environment is different, and I am expecting a more moderate recovery. So we’ve pivoted our thinking away from “Let’s just get ready for a comeback.” That’s not going to be the case.

What have you identified as Mohawk’s strengths? Tell me the areas where your experience and expertise can align to make Mohawk better and increase value for the consumer.

Mohawk has the ability to be agile and a firefighter unlike any company I’ve ever seen. Our ability to fix a problem is as formidable as any company I’ve been a part of in my 25 years of professional experience. The counter to that is the opportunity to be more longer term and externally focused.

Mohawk’s been through a period of restructuring, particularly the residential business, over the last couple of years as the market has come down. We’ve spent a lot of time improving quality, service and thinking about the things that make our manufacturing and service value streams effective. That’s what you have to do in a large company in a down market. But the balance of how much time we spend with our retail customers suffers when you do that. Building that same capability and thinking and muscle with the external thinking is our opportunity.

During my 10 months here, I have been focused on understanding how the total machine is running—starting and ending with the customer. How well do we understand how it’s running, how well are we thinking about it? Then what I love to do is get that machine running better and faster.

How is the machine running today?

Good, and getting better. If you would use the metric of share growth, we’ve outperformed the flooring industry for the last couple quarters. Even with our challenges, there are areas where we’re doing extremely well. Parts of the hard surface business have been a challenge for Mohawk historically, but we are continuing to accelerate in hard surface and are catching up to where we should be. There’s still plenty of opportunity for us. We have green shoots of opportunity all over the business, and whether the market starts to return or not, our prospects are good.

What else have you learned about the industry, about this company? What are customers telling you?

One, in my private equity days you would label industries, and the flooring industry is labeled as an industry that “eats itself.” What does that mean? The industry, specifically the manufacturers, have largely increased and decreased in total aligned with GDP, versus finding a way to create more value from adjacent markets and create growth for industry in total. So that’s an opportunity for the manufacturers as a whole, and we need to be key lead in this activity. We need to challenge ourselves to demonstrate the power and the delivery of the total experience we create and think about how we can enhance that for the end consumer. That’s one of the reasons I’m here.

Two, I think the dynamic with the retailers is awesome. In many cases, I’ve found industries where the relationship between the manufacturer and the channel partner customers can sometimes be less partner-based. It’s more transactional. Here you see true partners; we are in it to win together.

What are customers telling you that they want to see more of from Mohawk?

I think Mohawk needs to tighten up a little bit. We have diversified our offering so quickly. We have a number of brands that we offer across hard surface, soft surface and accessories. I think we’ve become so broad and so big that it’s a little confusing. I think our opportunity is to be leaner and more aggressive and poignant about places where retailers can make the most money with our products, where we can help them close the most opportunities. Sometimes you go to a restaurant that has a giant menu. Does it mean everything’s going to taste perfect? Usually not. At some point we have to get really good at the things that create the most value to make that experience better for the retailer and, ultimately, the consumer experience.

Do you expect the industry will turn around once mortgage rates come back down? And is Mohawk better prepared than others to handle that?

There’s no question we’re positioned well if there is a 30% return, and it will likely return that amount—it is just a question of how long it will take to get there. We have more hard surface assets in North America than any other manufacturer. An America-first trade strategy is going to favor Mohawk. There’s plenty of capacity in the carpet industry to service strong industry growth. Additionally, our service and network infrastructure and our dealer base of 18,000 customers is ready to go.

To answer the first part of the question, I don’t know that rates are going to make their way back down. If you look over the last 40 years, 6% is a very good rate. We’ve all been trained that 2%, 3%, 4% should be an achievable rate when really it’s almost impossible to hold inflation with a rate like that. While I would expect them to come down a bit, and I’m not an economist, I don’t think they are going to get back anywhere near there and we’re not depending on it.

I feel like 6% is the number.

And again, if the rate is coming down, this is because other factors are not good as in employment’s going down or the GDP is going down and we’re in recession. Maybe the rates get better, but now the consumer isn’t wanting to buy because they’re worried about the economy. So I think there’s balance here.

Now, the COVID-19 piece. People forget there was $3 trillion that was forced back in the economy, so there was a strong investment period and desire to spend it. That had never happened and probably will never happen again. So whether the rate moves around and any other factors, I just don’t think there’s this big pop.

So the reality is two things: 1. There’s a $23 billion industry for us to demonstrate our capabilities and show we can help our retailers make more money and that the consumers will be more satisfied with our products; and 2. If the market bounces, which it will, is it going to come back 10% or 30%? I have no concerns on our ability to service that market.

How do we get carpet to come back?

Retailers are loving carpet again because when people walk in and ask, “What’s the cheapest thing you have?” it’s not carpet. That consumer has been moved to a hard surface product. People who come in and want carpet want valuable carpet; they want more colors, more patterns. It’s an upgrade now and they want it for their bedroom, and they’re debating on what rug they would want in their hard surface area. It’s become fun to sell carpet again—and it’s to a consumer who wants it. So carpet can make a comeback on the value. It just may be at different price points than it was in the past.

Could the future of carpet, rather than being installed wall to wall, be something that takes up almost an entire room, call it a rug, call it bound carpet?

It could, there’s no question, but I think at some point it gets bigger, and then people say, “Why am I putting a nice floor underneath it? I’ll just cover the whole floor and save money.” So I think it’s an evolution.

Retailers care about one thing: How will Mohawk help them make money going forward?

The first thing we do is continue to develop our Edge program, which is designed to be a rewards program that offers not only better placement on our website to drive leads back to the retailer, but we can help them with marketing, we can help them with training, we can make them more successful. We are trying to be their go-to partner through that program. We’re going to continue to make enhancements there and demonstrate the value. We have the data that shows Edge partners are winning in the marketplace because of the tools and capabilities we provide to them. We are probably going to double the number of Edge Aligned Stores this year, which is a testament to the program and the incentives we put in place to help them.

No. 2 goes back to this question around thinking. We have to better match our products and services under the precipice of making the retailer more successful and closing the opportunity faster. While we’ve built great products and services, we’ve not matched them specifically to “This is what a consumer’s asking for. Here’s our evidence that we deliver that. We’re helping you close the sale.” So we’ve got some work to do in our materials and tools and offering on top of Edge across our broader retailers.

How have tariffs impacted this company, and with so much domestic production, are tariffs almost a competitive advantage for Mohawk?

First, there’s no question, a tariff or America-first strategy is going to favor Mohawk. However these land, we are better positioned than those that have a smaller domestic footprint than we do. Now, here’s the trick. Everybody expected that tariffs would be passed on to the consumer very quickly and easily like they were in 2018 when we were in a deflationary environment. That has not been the case. Where this favors us now is we’ve already seen arguably a number of smaller hard surface companies declare bankruptcy in the last few months, and tariffs have been a part of this. This will be a financially challenging environment for a number of companies, manufacturers specifically. But Mohawk is positioned, as some of the larger competitors are, to weather that storm. I think there will be less price to get with the consumer. The strategy of this tariff round is that the Trump administration wants the manufacturers and suppliers to eat it. There’s not a lot of margin in the flooring industry for manufacturers. So that’s a tough one. That second piece that favors Mohawk is our capability to leverage our supplier relationships, our cost out programs and try to minimize how much has to be passed onto our retailers and consumers.

I’m putting 13,000 retailers in this space right now. I’m giving you five minutes. What are you going to say to them?

Mohawk wants to be a better partner than we’ve ever been. We want to increase our ability to listen. We want to increase our ability to respond to you, and we want to make you more successful. There has been great effort and progress here in Mohawk, but now that is priority No. 1, we are going to be the best partner you have. We may not be today, but that is what we will be. When we have this interview again next year, ask me how much progress we’ve made. And I intend for it to be very good.

I’ll see you right here in a year.

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