This is a summary of key points from Floor Covering Weekly Posting – September 16, 2015 – FCW Post:
Catalina reports stronger flooring sales in Q3
U.S. floor coverings sales (defined as supply, calculated as shipments minus exports plus imports) have strengthened somewhat in the third quarter. This trend is expected to continue into the fourth quarter. As a result, second half growth is estimated to outpace the first half of 2015. In the second half of 2015 square foot sales are estimated to increase by 3.8 percent versus 2.9 percent in the first half. Dollar sales gains are estimated to inch up to 4.4 percent in the second half, up from 4.3 percent in the first half.
Stronger gains are being led by sharper increases in commercial market sales. Commercial market gains are being driven by a nearly 30.0 percent increase in private nonresidential building construction spending. Industry growth also continues to benefit from the recovery in new housing construction. Builders are estimated to construct 7.5 percent to 8.0 percent more square footage during 2015 than in the previous year.
On the other hand, the residential replacement market remains a drag on industry growth. The decline in existing home sales in 2014 continues to keep growth in this important market in the 2.5 percent to 3.0 percent range in dollars. The decline in existing home sales is a drag on residential replacement sales since existing home buyers are more likely to purchase flooring in the first year of ownership than non-movers. Existing home sales declined due to rising mortgage interest rates in 2014 and relative weak gains in employment and personal income.
The strong growth in commercial and builder markets has contributed to the inroads made by hard surface flooring since commercial and builder markets depend more heavily on hard surface flooring. For example, hard surface flooring is estimated to have accounted for 57.9 percent of total commercial market sales in 2014 and 96.9 percent of total builder flooring purchases. This compares to only a 43.2 percent share in the residential replacement market (Catalina Report on Floor Coverings Industry Trends and End-Use Markets, July 2015).
As a result, hard surface flooring dollar sales are estimated to have increased by 7.0 percent over the first three quarters of 2015 and square foot sales could have increased by 6.6 percent. On the other hand, soft sector sales growth could have been 2.4 percent and 1.7 percent, respectively. In the third quarter of 2015, hard surface sales gains were led by rising sales of ceramic tile, resilient flooring, and wood flooring. These gains could push hard surface’s share of total floor coverings dollar sales to 51.9 percent in the third quarter of 2015, up from 50.8 percent in the third quarter of 2014. On a square foot basis, the hard surface share could have climbed to 45.7 percent in the third quarter of 2015, up from 44.5 percent in the same period of the previous year.
Catalina estimates that sales gains could strengthen further in 2016. Growth is forecast to continue to be led by gains in commercial and builder markets, while a projected 8.0 percent to 9.0 percent increase in existing home sales during 2015 should give a boost to residential replacement sales in 2016.