US Floor Coverings Hits High
Monday, August 1, 2022 from Floor Covering Weekly
In 2021, U.S. floor coverings sales came roaring back from the pandemic recession as the availability of a COVID-19 vaccination and continued fiscal and monetary stimulus gave consumers the confidence to replace their flooring. According to Catalina Research, residential purchases also received a boost from sharp gains in new home construction and existing home sales due to historic low interest rates. At the same time, dollar sales growth reflects relatively strong price increases as manufacturers passed through rising labor, material and transportation costs as demand recovered. In addition, manufacturer sales benefited from re-stocking of pandemic depleted inventories at distributors and retailers.
The recovery from the pandemic-induced 2020 recession was much stronger than anyone would have imagined, resulting in U.S. floor coverings square foot sales finally surpassing pre-housing bust demand levels experienced between 2002 and 2007. Demand surpassed these levels as the huge Millennial generation entered their prime home buying years, which caused housing demand to reach the highest levels since the financial crisis of 2008. In addition, households were seeking more room for at-home work, meals and entertainment since the COVID-19 pandemic caused a change in lifestyle. This resulted in a surge in remodeling spending.
As a result of these trends, the value of U.S. floor coverings manufacturer sales (shipments minus exports plus imports) could have increased by 21.7 percent to $33.6 billion in 2021. Square foot sales could have risen by 13.8 percent to 28.3 billion. Growth includes a 6.8 percent increase in average manufacturer selling prices, the sharpest in decades. These strong sales increases follow two years of sluggish demand due to a rise in interest rates in 2018 and 2019, and the pandemic-induced recession in 2020.
Industry growth was led by residential markets, from movers and non-movers alike. In 2021, household floor coverings spending could have increased by 19.3 percent, driven by rising home values and growing existing home sales. Builder purchases also strengthened as housing starts increased by 16 percent. In addition, consumers and builders shifted their preference for higher-end flooring as home values rose. This trends also contributed to rising average manufacturer selling prices.
These positive trends resulted in double-digit increases in retail floor coverings sales. The upturn benefited specialty floor coverings retailers since the pandemic restrictions ended, allowing this channel to take back share lost during the pandemic lockdowns. During the lockdowns, the strongest sales increases were at home centers and major flooring chains that were allowed to remain open.
Currently, the major headwind for floor covering manufacturers, distributors and retailers was a slower recovery in commercial market sales. Non-residential building construction spending remained on a downward trend in 2021, causing commercial sales to lose share to residential markets.
U.S. floor coverings demand began to slow in the fourth quarter of 2021 as rising interest rates caused housing demand to weaken, while the ending of government pandemic stimulus spending slowed personal income gains. Supply chain issues also became a drag on sales in the second half of the year. Sharp floor coverings price increases could have also begun to crimp demand.
Carpet & Area Rugs
Carpet and area rug sales had a surprisingly strong recovery in 2021. Carpet and area rug sales could have increased by 17.7 percent in dollars and 12.1 percent in square feet in 2021, pushing sales up to $13 billion and 12.8 billion square feet. Average manufacturer selling prices could have increased by 5.2 percent. These trends dropped carpet and area rugs’ share of total floor coverings sales to an estimated 38.5 percent in dollars, and a 45.3 percent share in square feet. This is down from 39.8 percent and 46 percent, respectively, in 2020.
Wall-to-wall carpet lagged these gains as consumers increased their preference for hard surface flooring. Carpet tile sales also lagged sector gains due to slower commercial market sales growth. In addition, carpet manufacturers have an above average reliance on transportation equipment markets, and output in this industry remained below pandemic-recession levels.
Growth opportunities, however, increased for area rugs. Growing area rug sales can be seen in carpet and rug import data, since most foreign-sourced products in this sector are area rugs. In 2021, carpet and area rug sector imports increased 35.7 percent in dollars and 31.8 percent in square feet.
Ceramic Tile & Stone
Ceramic and porcelain tile was one of the stronger growing industry sectors in 2021. Ceramic and porcelain tile suppliers benefited from their above average reliance on the builder market, which had a sharp turnaround in 2021. Residential replacement sales also received a boost from homeowners again allowing installers to work in their home. As a result, dollar sales of ceramic and porcelain tile could have increased by 19.4 percent, and square foot sales by 11.5 percent. Sector sales growth, however, lagged overall industry gains due to its above average reliance on the weaker commercial market. This caused ceramic and porcelain tile’s share of total floor coverings sales to decline to an estimated 12.4 percent in dollars and 12.5 percent of square feet. This compares to 12.7 percent and 12.8 percent, respectively, in 2020.
U.S.-and foreign-based manufacturers have been investing in new domestic production capacity. As a result, U.S. ceramic tile square foot shipments could have increased by 7.9 percent and square foot imports by 14 percent in 2021. Foreign-sourced products regained some share in 2021, after share loss over the past decade as foreign-based manufacturers invested in U.S. production capacity. Imports also leveled off due to the imposition of import injury tariffs by the U.S. Department of Commerce. Imports’ share of U.S. ceramic tile sales in dollars could have declined to 61.5 percent in 2021 from a 65.5 percent share in 2015.
Stone flooring sales have not kept pace on a dollar and square foot basis due to ceramic and porcelain tiles’ pricing advantage. Stone flooring’s sales were also hurt by its above average dependence on slower growing commercial markets. As a result, stone flooring sales could have increased by 13 percent in dollars and 8.4 percent in square feet in 2021.
Wood flooring sales also received an assist from the sector’s heavy reliance on the builder market. The surge in new home building contributed to a 26.2 percent sales increase in dollars, and a 12.5 percent gain in square feet in 2021. Wood flooring was able to make these gains despite increased competition from rigid core LVT. Wood flooring demand was also not hurt by a 12.4 percent increase in average selling prices as lumber prices soared. This indicates consumers valued the high-end characteristics of real wood flooring.
As a result, wood flooring sales could have accounted for 12.9 percent of total floor coverings dollar sales, up from a 12.5 percent share in 2020. However, wood flooring’s share of industry square foot sales remained at 6.1 percent due to the sharp price increases.
Consumers turned to foreign-sourced products to seek out competitively-priced flooring. In 2021, square foot imports increased 24.3 percent, while domestic manufacturer shipments rose only 5.4 percent. Sourcing, however, has been shifting away from Chinese manufacturers due to the tariffs imposed on Chinese-made wood flooring. U.S. selling opportunities increased for manufacturers located in Cambodia, Indonesia, Thailand and Vietnam. In 2021, Chinese manufacturers could have accounted for 10.3 percent of total U.S. dollar wood flooring sales. This is down from a 12.1 percent share in 2020. Vietnam and Cambodia producers had a combined share of about 13 percent in 2021, up from 11 percent in 2020.
In 2021, resilient flooring sales could have increased by 30.3 percent in dollars and 19.3 percent in square feet. These sharp gains primarily reflect rising demand for rigid core luxury vinyl tile (LVT) products, including WPC and SPC technologies. In 2021, LVT sales could have soared by 37.4 percent in dollars and 25.6 percent in square feet. These gains are similar to the gains experienced over the previous five years. LVT has also taken share from other resilient flooring such as vinyl composite tile and sheet vinyl.
Resilient flooring could have accounted for 27 percent of total floor coverings dollar sales in 2021, and 31.1 percent of total square foot sales. LVT’s share of total floor coverings sales rose to 21.5 percent in dollars and 22.2 percent in square feet in 2021. In 2021, LVT sales were driven by the 50 percent increase in rigid core LVT sales in dollars, and a 38.2 percent gain in square feet sales.
Domestic rigid core manufacturing capacity has been expanding as demand rose, however, foreign-sourced products continue to be needed to meet demand. Imports’ share of total U.S. resilient flooring square foot sales could have been 86.4 percent in 2021, up from 71.6 percent in 2017.
In 2021, laminate flooring dollar sales could have increased by 13.7 percent to $1.1 billion, and square foot sales by 4 percent to 993 million. Laminate flooring’s dollar share could have dropped to 3.2 percent in 2021, down from a 3.4 percent share in 2020. Square foot share could have declined to a 3.5 percent share from 3.8 percent.
Demand slowed as competition increased from LVT flooring and resistance to sharp price increases. Average laminate flooring prices could have increased by 9.1 percent in 2021. The gains were led by double-digit price increases for imported product lines.
Resistance to higher priced imported products allowed U.S.-made products to gain share. Foreign-sourced products, however, continued to account for more than 50 percent of total U.S. square foot sales. Competition increased from suppliers located in Belgium, Brazil, China, Ireland, Spain and Vietnam in 2021.
U.S. floor coverings sales already slowed in the first half of 2022 as rising interest rates put downward pressure on housing demand. High inflation rates are also limiting consumers’ ability to spend on discretionary home improvement projects.
As a result, real consumer floor coverings spending could decline over the rest of 2022. Based on these trends, U.S. floor coverings current dollar sales could increase by about 6.6 percent to $35.9 billion during 2022, and square foot sales could rise 2.1 percent to 28.9 billion.