The Industry’s Business News & Information ResourceFLOOR COVERING WEEKLY

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Vol. 64 No. 14 A Hearst Business Publication July 27, 2015 $4

Laminate

Carpet & Area Rugs

Vinyl Sheet & Floor Tile

Hardwood

Ceramic Floor & Wall Tile

Stone

4.3%

15.3%

12.2%

5.7%

12.1%

49.2%

$267 million6.0% from 2013

$1.24 billion5.3% from 2013

$2.65 billion10.7% from 2013

$3.35 billion14.7% from 2013

$2.67 billion6.6% from 2013

$10.73 billion2.1% from 2013

$935 million1.4% from 2013

UP 5.6%from 2013Source: Catalina Research

2014 U.S. Floor CoveringSales: $21.83 billion(in millions of manufacturers’ dollars)

Chart 1

STATISTICAL REPORT 2014According to Catalina Research,

U.S. floor coverings manufacturerdollar sales (shipments minus

exports plus imports) are estimated to haveincreased by 5.6 percent in 2014 to $21.83billion. Quantity salescould have climbedby 3 percent to 19.6billion square feet.These gains continuedthe recovery in floorcoverings over the pastthree years. Between2011 and 2014, dollarfloor coverings salesare estimated to haveincreased at a 6.9percent compoundannual rate and squarefoot sales could haveincreased by 4.3 per-cent annually. Theseare the strongest industry growth trendssince the 2002 to 2005 housing boom.

The recovery in U.S. floor coverings sales,reported Catalina, has been driven by the 18.1percent compound annual growth in housingstarts over the 2001 to 2014 period. In 2014,housing starts increased only 8.4 percent,however, housing completions by square feetrose by 12.7 percent.

The recovery in the residential replace-ment market was stimulated by a 5 percentcompound annual increase in existing homesales between 2011 and 2014. This led to a4.8 percent annual growth rate in consumerfloor coverings spending over this period.However, existing home sales declined in

Slow, steady growth continues2014 due to the increase in mortgage inter-est rates and sluggish gains in employmentand personal income. As a result, consumerfloor coverings spending increased by only2.9 percent in 2014.

On the other hand, therecovery in commercialfloor coverings purchasesstrengthened in 2014. In2014, nonresidential build-ing construction spendingincreased by 5.6 percent afterdeclining by 0.6 percent in2013. Stronger gains in 2014were led by an 11.4 percentincrease in private nonresi-dential building constructionspending. Meanwhile, gov-ernment building construc-tion spending continuedto decrease, which draggeddown the increase in com-

mercial demand.The stronger recoveries in the builder and

commercial markets contributed to addi-tional share gains for hard surface flooring.Soft surface flooring now accounts for lessthan 50 percent of total dollar floor cover-ings sales. This is down from some 70 per-cent two decades ago. Soft surface flooring’sshare remains above 50 percent on a squarefoot basis since wall-to-wall carpet generallysells for less than hard surface flooring.

In 2014, the shift to hard surface flooringwas led by gains in wood flooring, luxury vinyltile and ceramic tile. Consumers increasedtheir preference for these hard surface floors

News................................... 4

2014 Industry Statistics ...... 5

marketWise ......................... 6

Imports/Exports .................. 8

Wood................................... 9

Tile & Stone ...................... 16

Resilient............................ 22

Carpet............................... 26

Laminate........................... 30

The Last Word.................... 34

On the inside

Continued on page 5

Expect constructionactivity to strengthen

— Kermit Baker, Joint Center ofHousing Studies at Harvard University

Cork, rubber, other plastics & linoleum(Other Resilient)

1.2%

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R=RevisedSource: Catalina Research

Graph 1

20 years of floor covering sales value(in billions)

$26.0

$24.0

$22.0

$20.0

$18.0

$16.0

$14.0

$12.0 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02R ’03R ’04R ’05R ’06R ’07R ’08R ’09R ’10R ’11R ‘12R ‘13R ‘14$14.60 $15.20 $15.95 $17.40 $18.80 $19.90 $20.20 $21.29 $22.25 $24.66 $25.44 $25.38 $23.63 $22.29 $17.05 $17.47 $17.89 $19.06 $20.67 $21.83

U.S. floor covering market sales value(in millions of manufacturers’ dollars)Product sector 2010 2011 2012R 2013R 2014 % change

Carpet & area rugs $9,393 $9,505 $10,041 $10,505 $10,729 2.1%

Hardwood flooring 1,784 2,051 2,331 2,918 3,346 14.7%

Ceramic floor & wall tile 2,084 2,210 2,241 2,507 2,672 6.6%

Laminate flooring 893 894 908 922 935 1.4%

Vinyl sheet & floor tile 2,000 1,938 2,185 2,390 2,645 10.7%

Other resilient flooring1

256 229 241 252 267 6.0%

Stone flooring2

1,062 1,064 1,110 1,175 1,237 5.3%

Source: Catalina Research1 Other resilient includes cork, rubber, other plastics and linoleum.

2 Natural stone. Excludes manufactured and engineered stone.

Table 1

U.S. floor covering market sales volume(in millions of square feet)Product sector 2010 2011 2012R 2013R 2014 % change

Carpet & area rugs 10,686 10,221 10,460 10,861 10,948 0.8%

Hardwood flooring 901 1,031 1,160 1,322 1,430 8.2%

Ceramic floor & wall tile 1,992 2,078 2,166 2,366 2,456 3.8%

Laminate flooring 958 950 964 996 1,002 0.6%

Vinyl sheet & floor tile 2,860 2,579 2,726 3,034 3,300 8.8%

Other resilient flooring1 250 205 196 199 208 4.5%

Stone flooring2 260 262 271 286 295 3.1%

Source: Catalina Research1 Other resilient includes cork, rubber, other plastics and linoleum.

2 Natural stone. Excludes manufactured and engineered stone.

Table 2

2014 floor coveringsquare foot salesTotal: 19.64 billion square feet

16.8%

12.5%

55.7%

7.3%

1.5%

Chart 2

5.1%

Carpet &

area rugs

10.95 billion

Ceramic floor &

wall tile

2.46 billion

Vinyl sheet &

floor tile

3.30 billion

Laminate flooring

1.00 billion

Hardwood flooring

1.43 billion

Stone flooring

295 million

Other resilient*

208 million

Source: Catalina Research*Cork, other plastics, rubber and linoleum

1.1%

Note: R= Revised

Note: R= Revised

as manufacturers introduced innovativeproducts such as easy-to-install engineeredwood floors, click-installed luxury vinyl tile,and wood-plank porcelain tile.

Consumers also turned to competitivelypriced foreign-sourced flooring while employ-ment and personal income gains remainedsluggish. The dollar value of foreign-sourcedproducts sold in the United States increased by11.5 percent in 2014 in dollars and by 10.6 per-cent in square feet. In fact, import shipmentshave been increasing at double-digit rates overthe current recovery period.

In 2014, foreign-sourced productscaptured 34.2 percent of total U.S. dollarfloor coverings sales and 39.3 percent oftotal square foot sales. This is up from 30percent and 32.4 percent, respectively,in 2011. Foreign sourced products madethese inroads since average import pricesare estimated to be some 13 percent belowaverage U.S. floor coverings selling prices.

Over the past decade, competitively pricedflooring has increasingly been sourced fromChinese manufacturers. Chinese-producedflooring accounted for 40.6 percent of totaldollar imports in 2014 and an estimated 13.9percent of total U.S. sales. Other leading for-eign-sourced producers are located in India,Italy, Mexico, Turkey and South Korea. FCW

Slow, steadyContinued from page 1 Floor Covering Weekly collaborated with Catalina Research for this 23rd

annual statistical analysis of the U.S. floor covering market. Catalinacompiled and analyzed data from the U.S. Department of Commerce,the Bureau of Labor Statistics and proprietary sources to provide theflooring market trends in this issue.

In this year’s Statistical Report, sales for 2012 and 2013 were revisedbased on new shipment data from the U.S. Department of Commerce. All

2014 numbers, however, are preliminary (except exports and imports) andare subject to revision.

U.S. market sales are in manufacturers’ dollars and exclude in-stallation costs.

Note also that numbers in Tables 1 and 2 have been rounded.More detailed calculations appear in each product section.

All retail information is courtesy of Jonathan Trivers’ exclusive mar-ketWise report. Product sales are derived from Catalina’s numbers.Numbers for “Who sells it: Who the customer pays” come from theEconomic Census of Retail report.

Methodology

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marketWise

2014 floor covering industry sales(in billions) $57.5

Product Labor Total

$ Sell GP % $ Sell GP % $ Sales GP %

Carpet $13.4 32.0% $3.3 18.2% $16.7 29.3%

Vinyl $5.6 37.5% $2.4 25.0% $8.0 33.8%

Ceramic tile $6.0 36.7% $7.7 30.0% $13.7 32.8%

Stone/marble $1.3 38.5% $1.8 38.9% $3.1 38.7%

Wood $5.0 38.0% $2.5 24.0% $7.5 33.3%

Laminate $1.8 28.0% $.9 20.0% $2.7 25.9%

Carpet cushion $1.0 30.0% N/A N/A $1.0 30.0%

Installation materials $1.5 33.3% N/A N/A $1.5 33.3%

Total installed products

$35.6 34.6% $18.6 26.9% $54.2 31.9%

Area rugs $3.4 35.2% N/A N/A $3.4 35.2%

Total floor covering $39.0 34.6% $18.6 26.9% $57.6 32.1%

Source: marketWise

Table 3

Table 4

2014 product sales growth(Sales in billions; product + labor)

2009 2010 2011 2012 2013 2014% increaseover last year

Carpet  $15.0  $15.3  $15.6  $16.0  $16.7  $16.7  even

Vinyl  $5.0  $5.4  $5.7  $6.5  $7.2  $8.0  +11.1%

Ceramic tile  $9.5  $10.3  $10.9  $11.6  $12.9  $13.7  +6.2%

Stone/marble  $2.7  $2.7  $2.7  $2.8  $3.0  $3.1  +3.3%

Wood  $5.0  $5.4  $5.6  $6.0  $6.5  $7.5  +15.4%

Laminate  $2.8  $2.7  $2.7  $2.7  $2.7  $2.7  even

Installation supplies  $2.0  $1.9  $2.1  $2.2  $2.3  $2.5  +8.7%

Rugs  $3.0  $3.0  $3.0  $3.0  $3.1  $3.4  +9.7%

Total  $45.0  $46.7  $48.3  $50.8  $54.4  $57.6  +5.9%

Source: marketWise

Jonathan Trivers

Remember the famous song from Annie, “Tomorrow”?

The sun will come out tomorrowSo you gotta hang on til tomorrow, come what mayTomorrow, tomorrow, I love ya, tomorrowYou’re only a day away.

That’s the song we sang at the end of 2012. Certainly 2013 would really be different and the flooring industry would be oper-ating on all cylinders. Didn’t quite happen. So again, at the end of 2013 we sang that song with greater gusto, bringing in 2014. Again, tomorrow was slightly better than 2013 but nowhere near where it should be considering pent up demand at residential replacement, resurgence of commercial toward the end of the year and new homes are larger than ever. (This is being written in June 2015; maybe the song will ring true for 2015. But not so for 2014.)

Again the impact of home sales (new and existing) to our flooring industry can be seen for 2014. Sadly, we mean negative impact. Existing home sales were down by 3.1 per-cent compared to 2013 and new homes were up only 1.6 percent. Existing home sales of 4,930,000 is very respectable — that is within 20 percent of the best years ever. But new home sales of 435,000 are awful; that number is 750,000 short of the best year ever. From 2011, it had been growing by 40,000 new homes each year and then in 2014 we sold only 3,500 more new homes than in 2013. In

Tomorrow is only a day awayregular years, builder business (flooring sold to new homes) represents about 25 percent of industry sales. For 2014, it was a dismal 14.1 percent of total industry sales. (See table 7.)

Anecdotally, we hear of nightmares trying to get a home loan; and we are talking about folks who have excellent credit and the down payment needed. The pendulum has swung from the go-go days of anyone with $10 in their pocket could get a $300,000 home loan with no down payment. So they still had their $10. Now, even an excellent credit worthy customer has so many hoops to jump through — Fannie, Freddie, state regulators or even Obamacare. Why not? There are more excuses for the delays and dif-ficulty. For five months in 2014 fully 40 per-cent of all existing home sales were cash. And many new home buyers are first time home buyers and you can imagine how painful the process was and is for them.

Full service flooring retailers have upped their game and their share of market for total flooring dollars is 48.3 percent. It is only slightly down from 2013 but all signs are that they are adapting well to new market realities. They are leading the way by selling better goods and better service. A great profitable combination.

Key chapters of 2014 marketWise report are:▶ Census of Retail (2012) sets benchmark for retail sector.▶ Boomers are spending money again.▶ Lumber Liquidators and Lowe’s underperform.▶ Housing trends 2014 and bright star multi-family housing.

Starting in August 2014 the Census Bureau began to roll out its Economic Census for 2012 with comparative data for 2007. Responsible research companies correct their 2012 data if it’s different from Census num-bers. Those numbers become the benchmark for an industry; companies estimate the next five years and then correct back when the Census issues its latest Economic Census which happens every five years with ending in 2 and 7.

We did exactly that as you will see in data for sales by businesses. Our 2012 numbers are now spot on to the 2012 Economic Census and we adjusted 2013 against those numbers and have done so for 2014 (See table 6: Who sells it: Who the customer pays).

These are the interesting findings for 2012 and in some cases comparison to 2007. The only category to show sales growth in that period was internet sales of flooring. It went from $400 million to $800 million — 90 percent laminate, hardwood and rugs. Yes, it doubled its sales in a terrible down market but in our estimation, that is more a function of such a low number. Even in 2012, internet sales were 1.3 percent of the entire industry.

Direct sellers (Empire Today, et al) had the worst decrease in sales from 2007 to 2012. This category had a -61.5 percent decrease in sales. Hard surface specialty flooring retailers (Lumber Liquidators, et al) had a — 39.6 percent decrease for that same time period. Those retailers that sold to con-tractors and or used high-pressure sales and created “one and done” customers (proba-bly not coming back to buy again) were hit hardest. New home sales collapsed and the first time flooring buyer and middle-income

2014 marketWise commentarycustomer vanished. (Both are coming back but ever so slowly.)

At the same time, full service flooring retailers experienced a 30.2 percent decrease in sales. We see those numbers as good news for full service flooring retailers. Their market share has pretty much bottomed out and they are successfully selling better goods and better service to older baby boomers. 2014 was a case in point. (We discuss in detail later in this commentary.)

This is the startling finding from the Census or Retail and Contractor sales: From 2007 to 2012, we lost 5,700 installers — 3,300 fewer ceramic tile and 2,400 fewer carpet, vinyl and wood installers. Many retailers have felt this loss of installers but most didn’t know it was and is a national epidemic.

During that time, a whole bunch of install-ers left their homes in California, Arizona, Nevada and Florida and went to Texas, Wyoming, Montana and North Dakota. Those markets had very robust flooring sales due to the number of people moving to those states for work in energy (gas, oil) and energy related industries. Sadly those installers moved but were surely counted and we still lost 5,700 from the work force. How many have come back is anyone’s guess but since so many installers are now in their late 50’s, we suspect the problem on adequate number of installers to serve the industry, much less quality installers, is going to get much worse.

This issue of number of viable installers is a national issue and the very life of our indus-try is dependent upon finding 10,000 new flooring installers in the next five years. But it will only change if the key players realize that it must be solved state by state. States control

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marketWise

Table 5

2014 market share installed products

2009 2010 2011 2012 2013 2014

Carpet  38.2%  37.1%  36.6%  35.4%  34.3%  32.7%

Vinyl  12.1%  12.6%  12.9%  14.0%  14.4%  15.1%

Ceramic tile  24.0%  24.9%  25.5%  25.7%  26.7%  26.7%

Stone/marble  6.7%  6.4%  6.2%  6.0%  6.0%  5.9%

Wood  12.1%  12.6%  12.6%  13.0%  13.1%  14.4%

Laminate  6.9%  6.4%  6.2%  5.9%  5.5%  5.2%

Note: These market share numbers were computed from the sales of product, labor and the installation materials used for that product category.Source: marketWise

Table 6

Who sells it: Who the customer pays(in billions)

2009(%)

2010 (%)

2011(%)

2012(%)

2013(%)

2014(%)

2014($)

Floor covering stores 53.6 49.7 46.4 48.8* 48.6* 48.3% $27.8

Home improvement

- Home Depot

- Lowe’s

16.0 16.7 17.3 15.7* 15.2* 15.4% $8.9

8.8 9.9 9.4 9.4 9.2 9.2 $5.3

7.2 7.5 6.0 5.7 5.5 5.4 $3.1

Hard surface stores 6.9 10.1 10.6 8.3* 7.9* 7.6% $4.4

- Lumber Liquidators 1.8 1.7 $1.0

Floor & Decor 0.7 $0.4

The Tile Shop 0.5 $0.3

Internet, non-store 2.1 1.9  2.2 2.2 2.6% $1.5

Other, Furniture, department, discount, home furnishing stores

4.4 4.3 3.9 5.3* 5.0* 4.9% $2.8

Contractor 19.0 17.1 19.9 19.7 21.1 21.2% $12.2

Total ($) 100% $57.6

*Revised to reflect 2012 Economic Census, Preliminary Product lines Statistics by Industry.Source: marketWise

Table 7

Who sells to the three end-user markets(in billions)

ResidentialReplacement

Builder Commercial Total

Floor covering stores $19.3 $2.1  $6.4  $27.8 

Home improvement $7.9  $0.5  $0.5  $8.9 

Hard surface stores $3.4  $0.5  $0.5  $4.4 

Internet, non-store $1.3  $.1  $0.1  $1.5 

Other, furniture, department, discounters, home furnishing stores

$2.8 N/A N/A $2.8

Contractors N/A $4.9 $7.3 $12.2

Total $34.7 $8.1 $14.8 $57.6

% to total 60.2% 14.1% 25.7% 100.0%

Source: marketWise

technical and community colleges. This is the key place to create interest in flooring instal-lation as a good, profitable and meaningful job. It is a national problem but the solution will come state by state.

The Floor Covering Leadership Council was formed in 2014 by 12 flooring-focused associations to identify the most important issues affecting the industry and develop solutions for the benefit of floor cover-ing businesses and professionals. They established three initiatives: creation of an industry-training portal, improvement of communications between members and the industry and dealing with needs and issues related to installation. Members of FCLC voted to begin work on a campaign designed to showcase and promote the many benefits of being an installer.

That won’t get it. We will only attract young folks to our industry if we target each state’s technical and community colleges and installers are offered family wage salaries. Everything else is window dressing and won’t get the industry to where it needs to be. Make no mistake about it, this is a crisis upon us and it will only get worse.

Love the boomersSo many worry about Millennials; they are

coming. But they are now turning 30 so their impact on our flooring industry is very, very small. First, they have to move out of their parents’ home; second, they need to get a real job (better than barista at Starbucks); and, third, they need to turn off their cellphone and find a mate; and so it goes.

Listen up: Baby boomers have the money, the inclination, the taste, the home (homes, as more and more buy a second home) and thankfully they are putting new locks on their doors so their Millennial-age children don’t come home. Don’t give up on them; for the time being the smart money is on those over 50 years old.

Today there are 100 million people over 50

years old. That’s one third of our total pop-ulation. They buy two out of three new cars and half of all the computers. They control 70 percent of all the disposable income and rank as the third largest economy in the world after the U.S. and China.

Robert Love of AARP says that everyone in car commercials use people who are around 18 to 30 years old. But people over the age of 75 buy five times as many new cars as that age group. (Admittedly, those over 75 shouldn’t be driving at all but they have the newest cars out there.)

Forget cars; over 50 is a great demographic for flooring. Trust me, they are the buyer for better, different flooring and they will pay for excellent installation and customer service. In fact, in a recent survey, 56 percent of all those over 60 years old said they plan to stay in their present home after they retire. Aging in place. They will upgrade most amenities including flooring. And they will be the per-fect customer for kitchen, bathroom, safety features and flooring.

This age group was in large part the reason our industry did as well as it did in 2014. It wasn’t new homes but it sure was buyers who were improving their home because they wanted to. By and large they respect pro-fessionalism, excellent service and personal attention to their purchase. That has full service flooring stores written all over it.

You can tweet ‘til the cows come home; but if you have first rate sales people and excellent installers, this customer wants to buy from you. And she has 100 million friends who have the money and the desire. And that’s the truth.

Lumber Liquidators and Lowe’s StruggleLong before 60 Minutes’ gotcha show

on formaldehyde and Lumber Liquidators and long after Lowe’s was chosen to be the only home improvement store showcasing Stainmaster carpet instead of our best known flooring felon, Martha Stewart flooring,

both Lowe’s and Lumber Liquidators were experiencing sluggish same store sales. Each had different reasons but the results were the same in 2014 — neither kept up with the industry. (Table 6: Who sells it: Who the customer pays)

In the middle of last year, Lumber Liquida-tors started to stumble. We are not sure if the reason they gave is the real reason but here goes: The sheen on their wood was too bright, too stark, too formal. The new look for wood, according to Lumber Liquidators, is a more casual finish with less luster. That’s it.

Apparently they came to this design wisdom a little late as it had a gigantic supply of the shiny stuff. Its open to spend was such they couldn’t afford to replace all the shiny

stuff post haste; they had to sell some bad stuff to get the new stuff. It took nine months to make the change. That was at a consider-able gross profit cost (they deeply discounted the shiny stuff to get rid of it.). Even with their totally silly 100 year wear warranty, even with its new store of the future being implemented, they couldn’t get rid of the old stuff fast enough. And even with new stores opening in the last six months of 2014, Lumber Liquidators sales were stagnate. And then in 2015 the really, really nasty stuff hit the fan.

Prior to 2013, large, multi-department retail-ers did not have to report their sales by product category in the 10-K filing with the SEC. We

Continued on page 8

· FLOOR COVERING WEEKLY · WWW.FCW1.COM July 27, 2015

Table 8

U.S. floor covering imports value(in millions of dollars)

Industry Sector 2010 2011 2012 2013 2014

Carpet & area rugs1 $1,859.3 $2,032.7 $2,171.6 $2,300.4 $2,598.0

Hardwood flooring2 632.6 702.3 834.3 989.1 1,174.8

Ceramic floor & wall tile

1,275.8 1,325.2 1,441.2 1,724.7 1,822.8

Resilient

Vinyl sheet & floor tile 728.8 764.4 877.3 1,055.3 1,188.6Other resilient3 109.6 117.2 100.5 105.4 108.4

Laminates4 476.2 419.2 495.8 522.6 577.0

Total imports $5,082.3 $5,361.0 $5,920.7 $6,697.5 $7,469.6

Year-to-year change 14.3% 5.5% 10.4% 13.1% 11.5%

Table 10

U.S. floor covering exports value(in millions of dollars)

Industry Sector 2010 2011 2012 2013 2014

Carpet & area rugs1 $999.2 $1,066.6 $1,095.4 $1,112.1 $1,105.0

Hardwood flooring 130.7 136.9 144.7 128.1 166.0

Ceramic floor & wall tile

50.3 52.5 55.7 52.3 65.5

Resilient

Vinyl sheet & floor tile 163.8 176.8 153.7 148.3 157.5

Other resilient2 40.9 40.4 37.5 37.8 41.1

Total exports 1,384.9 1,473.2 1,487.0 1,478.6 1,535.1

Year-to-year change 17.4% 6.4% 0.9% -0.6% 3.8%

2014 Import/Export

Table 9 Table 11

U.S. floor covering exports volume(in millions of square feet)

Industry Sector 2010 2011 2012 2013 2014

Carpet & area rugs1 947.3 1,009.4 980.3 1,064.4 984.7

Hardwood flooring 56.8 59.1 61.0 54.4 59.4

Ceramic floor & wall tile

50.8 53.7 57.3 50.8 53.6

Resilient

Vinyl sheet & floor tile 377.6 363.3 335.0 263.5 268.5 Other resilient2 76.7 74.7 73.4 70.2 77.1

Total exports 1,509.2 1,560.2 1,507.0 1,503.3 1,443.3

Year-to-year change 18.8% 3.4% -3.4% -0.2% -4.0%

Export Key 1 Includes exports of roll goods, bath mats, area rugs, auto and aircraft carpeting, and artificial grass.

2 Includes exports of flooring made of other plastics, rubber, and other materials.Source: U.S. Department of Commerce;

Catalina Research

U.S. floor covering imports volume(in millions of square feet)

Industry Sector 2010 2011 2012 2013 2014

Carpet & area rugs1 1,960.7 1,956.5 2,075.0 2,153.3 2,428.7

Hardwood flooring2 330.9 371.4 423.3 507.7 633.4

Ceramic floor & wall tile

1,393.2 1,408.7 1,490.3 1,721.7 1,709.8

Resilient

Vinyl sheet & floor tile 1,335.2 1,251.8 1,581.5 1,826.7 2,093.9Other resilient3 213.5 161.9 153.4 167.2 204.7

Laminates4 522.7 454.8 557.5 612.8 657.0

Total imports 5,756.2 5,605.1 6,281.0 6,989.4 7,727.5

Year-to-year change 10.1% -2.6% 12.1% 11.3% 10.6%

Import Key1 Includes imports of roll goods, bath mats, area rugs, auto and aircraft carpeting, and artificial grass.2 Hardwood flooring data for 2013 is revised.3 Includes imports of flooring made of other plastics, cork, linoleum, rubber, and other materials.4 Estimated by Catalina ResearchSource: U.S. Department of Commerce;Catalina Research

relied on public statements or promotions (“We are the largest seller of wood and laminate of any home improvement store”; “Stainmaster has changed our sales in carpet”, etc. etc.). Sadly that was mostly bunkum.

Starting in 2013, these companies were obligated to report their sales by category (home improvement had to break out flooring sales). For 2014, Lowe’s had a +3.3 percent increase in flooring but lost market share to Home Depot (its main competi-tor) and to floor covering specialty stores in total. (Table 6 Who sells it: Who the customer pays)

Both Home Depot and Lowe’s used the same snarky whole house installation promotion for carpet. In most minds Stain-master was a far superior brand for Lowe’s than Martha was for Home Depot. Lowe’s

opened more stores than Home Depot and Lowe’s has always been considered more female friendly. And when Home Depot was taking so long to complete the order and get the product installed, Lowe’s gleefully announced that its process was working the best of any in flooring.

As the saying goes, Talk is cheap but deeds are dear. For 2014 Lowe’s was all talk.

Housing MarketAccording to the latest Harvard University

report on housing (Joint Center for Housing Studies) covering 2014, the key indicator for our housing doldrums is homeownership rate. Right before the economic downturn of 2006- 2011, homeownership was right around 69.4 percent. That was the highest it has ever been. For 2014, homeownership rate was 64.5 per-cent and sinking even into first quarter 2015. It hasn’t been that low since 1993.

Reasons? As we wait breathlessly for Millennials to become the buying gener-

ation for flooring, we must first deal with Gen X or the baby bust generation. Those folks were born between 1965 and 1983; in 2014 they were between 39 and 49 years old. As it relates to housing, they were hit the worst of any age group and there are far more renters than owners in this age group. This group is the key to housing growth (sale of new and sale of older homes) and to flooring sales in general. Unfortunately, household incomes have stagnated and restricted access to financing has further frustrated this group from purchasing a home. As we noted in our introduction, lenders are reluctant to lend to borrowers with less than stellar credit.

We cannot overestimate the issue of tight borrowing. Harvard’s annual report on housing states it this way, “Urban Institute estimates for 2001-2013 indicate a 37 per-cent drop in home purchase loans among borrower with scores between 660 and 720 compared with a 9 percent decrease among

borrowers with higher scores.”And so households went to the renter

market since they couldn’t buy. And the multifamily construction and sales have gone great guns to take care of the new accelerated demand. This makes 2004–2014 the best 10 year period for rental demand in the last 25 years. Even with this great growth in multifamily housing sales, the rental market remained tight in 2014. Prices have gone up and soon (maybe as early as 2015) the rental price will be such that buying (especially with a more relaxed lending policy) should swing back to owner occupied single family houses.

2014 was a year of transition. At the end of the year, new home sales, existing home sales and most of commercial contract were doing great. Not great enough to make the entire 2014 a stunning success but certainly great enough to hope that their sales and momentum continues for the entire 2015. We shall see.

— Jonathan Trivers

2014 marketWiseContinued from page 7

16 Tile & Stone

· FLOOR COVERING WEEKLY · WWW.FCW1.COM July 27, 2015

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Ceramic tile purchasesby end-use market($2,672.4 million)

0.2%

19.4%

27.0%

16.0%

37.0%

Residential builders: $518.6 million

Residential replacement: $989.8 million

Manufactured housing: $10.7 million

Commercial new construction: $721.2 million

Commercial replacement: $426.9 million

Transportation: $5.2 million

Chart 8

Source: Catalina Research

0.4%

By Megan Salzano

It used to be that realistic visuals like wood grain and stone looks, texture and large format tiles were only available from overseas manufacturers. But today, U.S. manufacturers have invested in new capa-bilities and are able to offer high quality, high design product, helping to fuel tile’s continued growth.

Modest sales, market share gainsAccording to Catalina Research, 2014

ceramic tile sales are estimated to have climbed 6.6 percent to $2.7 billion while square foot sales increased by 3.8 percent, not quite the rate of growth in 2013, accord-ing to Catalina.

Still, the category continues to grab market share. Ceramic tile accounted for 12.2 percent of total floor covering dollar sales and 12.5 percent of square foot sales.

Rajesh Shah, co-president, MS Interna-tional (MSI) said that a significant portion of tile consumption in 2013 was related to the “flipper” market for homes, an area that dried up in 2014. A lot of pent up demand coming out of the recession, he said, was executed in 2013.

“Home inventory is more in-line with his-torical norms. Housing starts growth dimin-ished in 2014 primarily related to resource

constraints including labor and raw mate-rials,” Shah said. “This has been rectified in 2015 and we are seeing strong growth in new housing as well as residential remodeling.”

Price per foot risesCeramic tile average square foot price

increased from $1.06 in 2013 to $1.09 in 2014. Another factor that effected tile sales in

2014 was increased average selling prices. This increase, according to Catalina, led by a 7 percent increase in average import prices caused imported product to lose ground. Imports, in fact, could have represented 69.6 percent of total square foot sales in 2014, down from 72.8 percent in 2013.

Design, technology drive salesAccording to Jason Roshel, senior direc-

tor, product strategy at Dal-Tile, domestic producers have invested heavily in advanced decoration technology as well as the capa-bility to produce a wide variety of sizes and surface finishes that were previously only being offered by European suppliers.

“This investment has elevated the aes-thetic characteristics of the products to the extent that the products from U.S. produc-ers are as visually appealing as the products being imported from Europe,” he said.

Continued on page 18

18 Tile & Stone

· FLOOR COVERING WEEKLY · WWW.FCW1.COM July 27, 2015FCW_7x6-3-8thPG_Qwalk-PW-BrawnBeauty-July2015.indd 1 6/16/2015 11:05:43 AM

Ceramic tile market value and volume(in billions)

1.0

1.5

2.0

2.5

3.0

3.53.5

3.0

2.5

2.0

1.5

1.0 2010 2011 2012 2013 2014

Market sales Square feet

Chart 9

Source: Catalina Research

$2.2

4R

2.17

R

$2.5

1R

2.37

R

$2.0

8

1.99 $2

.21

2.08

$2.6

7

2.46

Ceramic tile imports value and volume(in millions)

0

400

800

1200

1600

2000

10

24

38

52

66

80

2,000

1,600

1,200

800

400

0 2010 2011 2012 2013 2014

$ 1,

441

1,49

0

$1,7

25

1,72

2

$1,2

76 1,39

3

$1,3

25

1,40

9

Market sales Square feet

Chart 10

Source: U.S. Department of Commerce; Catalina Research

$1,8

23

1,71

0

Lindsey Waldrep, vice president, mar-keting, Crossville Inc., added that with a positive and growing economy, fashion is taking center stage. Deeply layered visuals and large sizes increase costs, and these are the preferences in the market today.

She added that, in addition, customers are willing to add more artistic touches to their projects through mosaics, accents and trims, and this “jewelry,” she said, is not inexpensive, helping to drive up the price of the overall sale and will drive up the overall sales ticket.

In addition, domestic production of tile continues to increase. Foreign manufacturers, such as Del Conca and Concorde Atlas, have begun to invest heavily in U.S. production.

“Most of the world is going through a period of instability, with the U.S. being the bright spot for demand and overall investment. Most overseas manufacturers are seeing this and investing heavily in the U.S. The future continues to look bright for overall tile demand in the U.S.A.,” Shah at MSI said.

As we near the middle of 2015, manufactur-ers have already seen substantial growth and are confident that increased domestic capacity

as well as technological advancements will only fuel tile’s market growth and popularity.

Stone sticks with itStone has been challenged by the surge of

realistic, replicated natural stone looks on ceramic and porcelain tile, and is experienc-ing tough competition.

According to Catalina Research, stone flooring is less price competitive, with the average selling price per square foot at $4.20. And, stone flooring’s share of total floor coverings dollar sales in 2014 is estimated to be 5.7 percent and only 1.5 percent of total square foot sales.

Still, dollar sales of stone are estimated to have increased by 5.3 percent and square foot sales by 3.1 percent.

Shah said that MSI sees stone growing in the upcoming years. “New stones are being mined that meet today’s trends, and at the same time, many new applications are hap-pening for both tile and stone. This includes walls, outdoors, garages and basements. With the new applications as well as overall growth in the economy and market, both industries will grow.”

Dal-Tile’s Roshel added, “Though we are able to replicate stone with new technology, the inherent beauty and value of natural stone is timeless. We anticipate that the demand for stone will steadily grow, specifi-cally limestone and marble.” FCW

Modest salesContinued from page 16

$1.20

$1.15

$1.10

$1.05

$0.0 2010 2011 2012 2013 2014

R= Revised Source: Catalina Research

Ceramic tile average value per square foot

Chart 11

1.00

1.05

1.10

1.15

1.20

1.25

$1.0

6R

$1.0

5

$1.0

6 $1.0

3R

$1.0

9$4.25

$4.12

$4.00

$3.85

$0.02010 2011 2012 2013 2014

R= RevisedNote: Natural stone excludes stone flooring made from

manufactured and engineered stone. Source: Catalina Research

Stone average value per square foot

Chart 12

3.750

3.875

4.000

4.125

4.250

$4.0

9R

$4.1

2R $4.2

0

$4.0

7

$4.0

8

20 Tile & Stone

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R= RevisedNote: Natural stone excludes stone flooring made from manufactured and engineered stone

Source: Catalina Research

Stone market value and volume(in millions)

0

250

500

750

1000

1250

1500

2010 2011 2012 2013 2014

$1,1

10R

271.

0R

$1,1

75R

286.

0R

$1,2

37

295.

0$1,0

62

$1,0

64

260.

0

262.

0

Market sales Square feet

Chart 13

1,500

1,250

1,000

750

500

250

0

80

66

52

38

24

10

0

400

800

1200

1600

2000

10

24

38

52

66

80

2010 2011 2012 2013 2014

$55.

7

57.3 $6

5.5

53.6

$50.

3

50.8

$52.

5

53.7

Market sales Square feet Source: Catalina Research

Ceramic tile exports value and volume(in millions)

Chart 14$5

2.3

50.8

2014 key pointsTile & Stone▶U.S. ceramic tile sales in dollars are esti-mated to have increased by 6.6 percent to $2.7 billion and square foot sales could have increased by 3.8 percent to 2.5 bil-lion. Though tile sales continue to increase and grab market share, its fast-paced growth has slowed.

▶Tile is estimated to have accounted for 12.2 percent of total sales in dollars and 12.5 percent in square feet in 2014. This is up from 12.1 percent and 12.4 percent, respectively.

▶Average square foot pricing for imports in-creased by 7 percent in 2014 to $4.20. This has caused foreign-sourced product to lose ground. Imports represented 69.6 percent of total square foot sales. This is down from 72.8 percent in 2013.

▶Stone flooring dollar sales are estimated to have increased by 5.3 percent in 2014 to $1.2 billion and 3.1 percent to 295 million square feet.

▶Stone flooring’s share of total floor cover-ings dollar sales is estimated to be 5.7 percent and 1.5 percent of total square foot sales.

After a few years of modest growth, ceramic tile dollar sales increased by 13.1 percent in 2013 — the largest percentage increase of any flooring category that year. But for 2014, the growth pace was cut in half with sales rising just 6.6 percent. Square foot sales for 2014 increased by a modest 3.8 percent, according to Catalina Research. That’s compared to an 11.9 percent increase the previous year.

But, according to Catalina, ceramic remains a strong category and there are solid indicators that it will remain a growing seg-ment of the business in 2015.

First, investments continue to be made in the category and not just here in the U.S. Most recently, Dal-Tile acquired the North Ameri-can operations of Cerámica San Lorenzo. The purchase includes a modern manufacturing facility in Mexicali, Mexico, and a product showroom and warehouse in Southern Cal-ifornia. The plant is Dal-Tile’s 11th manufac-turing facility in North America; it produces tile collections under the San Lorenzo brand for the builder, residential remodeling and commercial segments. Dal-Tile is also build-

Investments tofuel 2015 growth

ing a ceramic tile manufacturing facility and distribution center in Dickson, Tenn.

In addition, U.S. tile producers have been investing in capabilities. Florida Tile, for example, continues to put money into upgrading technology and manufacturing equipment, and increasing its capacity in its Lawrenceburg, Tenn. facility.

Supplier investments in the category coupled with gains in the builder and com-mercial markets are fueling growth this first half of 2015 and indicate continued growth for the remainder of the year.

In the first half of 2015, ceramic tile dollar sales are estimated to have increased by 6.5 percent in dollars and 7.4 percent in square feet. Stone flooring too has made gains thus far this year — 5.1 percent in dollars and 3.8 percent in square feet, according to Catalina.

Overall floor covering purchases in the builder sector are estimated to have increased by 5. 5 percent in the first half of 2015. This growth bodes well for hard surface. Dollar sales of hard surface flooring in the first half of 2015, in fact, are estimated to have increased by 6.2 percent and 4.6 percent in square foot sales. These gains, reported Cata-lina, were led by rising sales of ceramic tile, resilient flooring and wood flooring.

— Amy Joyce Rush