Mohawk Sales Declined 1.4% in Q4 2023, Earnings Positive

February 09, 2024, from Floor Focus FloorDaily News

Calhoun, GA, February 9, 2024 – Mohawk net sales for Q4 2023 were $2.6 billion, a decrease of 1.4% compared to net sales of $2.7 billion in the same period last year. Q4 2023 net earnings were $139 million, an increase of 421% compared to net earnings of $33 million in Q4 2022.

For fiscal year 2023, Mohawk’s net sales were $11 billion, compared to net sales of $12 billion in the same period last year, an 8% decrease. For the year, the company reported a net loss of $440 million, compared to net income of $25 million in the same period last year.

For Q4, net sales for the global ceramic business were $994 million, a 0.6% increase compared to sales of $988 million in Q4 2022. For 2023, net earnings were flat with 2022 at $4.3 billion.

For the flooring North America business, net sales declined 1.5% YOY to $912 million for Q4 2023, compared to sales of $946 in the same period last year. For 2023, net sales for flooring North America were $3.8 billion, an 11% decline compared to $4.2 billion in 2022.

Flooring Rest of world sales were $706 million in Q4 2023, a 3.6% decline compared to sales of $717 million in Q4 2022. For 2023, net sales were $3 billion, flat with 2022.

Commenting on the company’s fourth quarter and full year results, Chairman and CEO Jeff Lorberbaum stated, “Our fourth quarter results were ahead of our expectations, with benefits from cost containment, productivity and lower input costs. The industry reduced selling prices and we passed through declining costs in energy and raw materials. Under these conditions, we focused on optimizing our revenues and reducing our costs through restructuring actions and manufacturing enhancements. We aggressively managed inventory levels, which reduced our working capital compared to prior year by more than $300 million, excluding acquisitions. We also have invested in sales resources, merchandising and new products with innovative features to inspire consumers to purchase flooring. We closed the year with a net debt to adjusted EBITDA ratio of 1.5 times, free cash flow of $716 million and available liquidity of $1.9 billion, and we are retiring a higher interest rate term loan of approximately $900 million in the first quarter of 2024. We are well positioned to manage current conditions and emerge stronger from this economic cycle when the rebound occurs.

“In the fourth quarter, our Flooring North America Segment sales declined 3.6%. The Segment’s operating margin was 8.2% as reported, or 6.9% on an adjusted basis. Reduced market volumes led to low industry utilization rates and aggressive competition in the marketplace. We are continuing to invest in sales and marketing initiatives to expand our distribution and improve our long-term growth. To enhance our business, we are making capital investments to increase our differentiated features and lower our manufacturing costs. In each product category, we are introducing innovative new collections, which are being well accepted. The commercial channel outperformed our expectations, led by the hospitality sector. We are leveraging our customer relationships to expand our needle punch flooring and trim acquisitions.

“For the fourth quarter, the Global Ceramic Segment reported a 0.6% increase in net sales as reported, or a 4.7% decline on a legacy and constant basis. The Segment’s operating margin was 4.2% as reported, or 4.8% on an adjusted basis. Across the segment, we are managing production to align with demand and have significantly reduced inventory throughout the year. To contain costs, we have increased productivity, reduced overhead and implemented alternative formulations. In the U.S., we are expanding our distribution through our local service centers and offering new collections with premium Italian styling to improve our product mix. We have integrated Vitromex in Mexico and Elizabeth in Brazil and are enhancing our sales, marketing and operational strategies. In both countries, demand significantly declined last year due to rising interest rates and slowing economic conditions, which reduced our results. In Italy, we are optimizing our recent expansion of premium porcelain slabs to meet growing demand in both the residential and commercial channels.

“During the fourth quarter, our Flooring Rest of the World Segment’s net sales decreased by 1.5% as reported, or 4.1% on a legacy and constant currency basis. The Segment’s operating margin was 9.5% as reported, or 10.6% on an adjusted basis. The European building product category remains under stress, with consumers remaining cautious and retailers reducing their inventory levels. We are investing in new products for 2024 while implementing tight cost controls. We are re-energizing our flagship Quick-Step brand with inspirational interactive merchandising displays. We are completing the transition to rigid LVT, and we have decommissioned our residential flexible line. Our wood panels performance has declined during the year from cyclically high pricing to a more competitive environment with excess capacity. We continue to implement restructuring actions in the segment and enhance our recent smaller European bolt-on acquisitions, including insulation, MDF boards, sheet vinyl and mezzanine flooring.”