Thursday, April 1, 2010

Catalina says U.S. Flooring Industry Set for Spring Thaw - Who Will Benefit?

FLOOR COVERING STATISTICAL TRENDS AND OUTLOOK

In my February 11th post I asked the question “Are Floor Coverings Sales On Schedule For A Spring Recovery?"  The answer is yes. Based on the March 2010 Catalina Floor Coverings Quarterly Update, the U.S. floor coverings industry is on track to show a 1.4% increase in square foot floor coverings sales (shipments, minus exports plus imports) in the second quarter of 2010.  This would be the first increase in quarterly floor coverings sales since 2006. Now the question is . . . 

. . . . who will benefit from this “Spring thaw?”  The answer seems to be retailers catering to the do-it-yourself (DIY) market and the products purchased for DIY projects.

The recovery in the residential replacement and remodeling market is being driven by do-it-yourself projects because the important first time home buyers are more likely to have lower income than the average homeowner and sluggish personal income gains have caused a shift to lower priced flooring projects.

The growing importance of DIY projects has allowed the major home center chains and Lumber Liquidators to increase share on the retail level because these retailers cater to do-it-your-selfers.  We estimate those retailers accounted for 24.7% of total U.S. floor coverings retail sales in the fourth quarter of 2009, up from 22.0% in the fourth quarter of 2008.

The trend towards DIY projects may also change the product mix of the hard surface flooring to click-able installations such as engineered wood and laminate flooring, and the newly introduced vinyl planks. I mentioned this in my post last month in Is Hard Surface Flooring Growth Just A Click Away?  This trend can be seen in the sharp increase in laminate flooring sales at Lumber Liquidators in 2009.

Overview of Statistics Leading the Flooring Industry Recovery
The improvement in industry sales is due to the turnaround in domestic housing demand since the third quarter of 2009.  Total housing demand rose by about 20.0% in the fourth quarter of 2009, and could rise by 7.1% in the first quarter of 2010.  These gains were due to the surge in existing home sales.  Existing home sales rose by 26.1% in the fourth quarter of 2009 and are estimated to rise by 7.4% in the first quarter of 2010.

The rebound in existing home sales is being driven by positive reaction to declining home prices, low mortgage rates, and the $8,000 first time home buyers’ tax credit (a $6,500 tax credit was extended to all homeowners from December 2009 to April 2010).  As a result, floor coverings manufacturers and marketers are sharply increasing dependence on the residential replacement and remodeling market.  However, the estimated increase in industry sales continues to be held down by a weak builder market and sharp drops in nonresidential demand.

Hard Surface Flooring  Gaining Share Overall
I think we will see  hard surface floors could gaining some share in the first quarter of 2010 due to the increasing popularity of  DIY products,  especially lower priced products such as  LVT and laminate.  Consumers’ growing preferences for lower end flooring lines over the past two years have caused a decrease in share for wood and stone flooring but we’ve noticed ceramic has gained share over the past two quarters due to inventory replenishment.  The supply chain could have been pretty thin after two years of sharp ceramic tile sales declines.  Overall,  the hard surface category should pick up share this year.

Let us know at the Floor Coverings Institute how you are benefiting from the “spring thaw.”

Stuart

Stuart Hirschhorn is a member of the Floor Covering Institute and Director of Research of Catalina Research, Inc. which provides in-depth market research on the floor covering industry.

2 comments:

  1. Quality Floors DirectMay 21, 2010 at 1:25 PM

    Things have begun to improve, and I do believe that if we hold on for the ride, we can make it. I have noticed a decrease in wood floor demand, but the increase in alternatives has brought about a balance.

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  2. Stuart HirschhornMay 21, 2010 at 4:27 PM

    Quality Floors Direct I was glad you were able to hold on for the spring upturn. I will follow up with the most recent data and thoughts on the second have next week.

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