As far as most people in the wood flooring industry are concerned, 2009 will go down as another year they'd like to forget. While some optimists had held out hope for rapid improvement, the economy, and housing in particular, was not quick to recover after the crash at the end of 2008. There were positive indicators in 2009, such as the healthier stock market, but construction numbers were dismal. Overall U.S housing starts in 2009 were 554,000, nearly one-quarter the record-high 2 million posted in 2005 and nearly a 40 percent drop from the 905,000 starts in 2008.
Of course, as goes construction, so goes the wood flooring industry. On a positive note, there hasn't been the blood-letting of manufacturing and distribution many predicted; most companies seem to still be holding on. Many of those businesses look different from a year or two ago, though, with reduced production, skeleton staffs and slashed budgets (as one distributor said, "It used to be nothing for me to spend $200 or $300 on a client lunch; now I take them to Wendy's.").
Happily, many in the industry feel that construction and the economy have finally hit bottom—the NAHB projects 647,000 starts this year and close to a million in 2011—but tight credit and cautious consumers remain a damper on the industry, and low lumber supplies due to the crash of the sawmill industry and bad weather are another challenge. The question for many companies will be whether they have the stamina (and the cash flow) to last until the recovery takes hold and the industry breathes a collective sigh of relief.
For a snapshot of the industry right now and the results of Hardwood Floors' State of the Industry surveys, turn the page.
MANUFACTURERS
In January an online survey was sent to all NWFA-member wood flooring manufacturers. Here are the results.
"I think we're positioned for an uptick of some kind by the summer or the second half of the year. I'm not sure how strong it's going to be or how excited to get about it, but I do feel like, given all the news from the financial markets and reports on the economy, that we should see stronger demand in the second half of 2010 than we did in the second half of 2009."
— Neil Poland, president, Mullican Flooring
Looking Ahead:
Manufacturers think business in the industry in 2010 will be...*
* none answered "dramatically better" or "dramatically worse."
A Year to Forget:
Manufacturers said their business in 2009 was...
Certified:
Manufacturers rank the importance of FSC certification to their success as...
Charge:
Manufacturers expect prices in 2010 to...
Product Trends
A majority of wood flooring manufacturers surveyed expect the popularity of FSC-certified flooring and wide planks to "increase somewhat" in 2010. Most say demand for distressed flooring and dark colors will stay the same. Demand for exotic species and bamboo flooring is expected to "decrease somewhat."
"We have been FSC-certified for three years and have yet to see any significant benefit. A lot of people ask about and mention its importance, but when it comes down to price, the dollar is the only 'green' that matters."
— Ben Cochran, flooring sales, Cochran's Lumber and Millwork Inc.
"Everyone knows about global warming problems for mankind, so FSC is one of the most significant tools for making sure that the timber is coming from the right sources. The demand for FSC products is growing very well, especially for retailer and government projects."
— Akarin Vongapirat, managing director, BNS Wood Industry Co. Ltd.
"Whatever increase you have in the [lumber] industry is going to come strictly from owner capitalization, and I just don't know how much owner capitalization is out there after three years of losses ... that will limit the amount of flooring production we'll be able to have. Prices are going to continue to go up until everyone gets logs and starts producing."
— John Clark, sales manager, Cherrybark Flooring Inc.
Lumber/Flooring Prices
Appalachian Green 4/4 No. 2ARed Oak Lumber Price (per MBF)
Appalachian ¾ x 2¼-inch Select Red Oak Price/Ft.²
Appalachian 34 x 214-inch No. 1 Common Red Oak Price/Ft.²
Source: Hardwood Market Report
DISTRIBUTORS
In January, wood flooring distributors completed mailed surveys and online surveys. Here are the results.
A Bad Year:
Distributors said their business in 2009 ...
In 2008:
28% increased
25% stayed the same
47% decreased
"It will be a long time before the industry will be back to where it was three years ago. It may never be the same. It is, however, slowly and steadily improving, and it is up to the innovators of the industry to adapt and come out on top."
— John Christopherson, owner, Alaska/Olympia Wood Flooring Supply
"People still want wood flooring, but they are not building and buying new homes that have wood flooring. They're buying other less expensive things instead of getting what they really want, but their desire for wood flooring hasn't changed. That is a good thing, because when their income comes back and construction comes back the demand will be there ... but a number of companies may not be."
— Peter Fahey, flooring division manager, Clem Distributing Co.
Purchasing Options
61% of distributors said their business has been affected by big-box stores such as Home Depot and Lowe's, up from 34% last year.
Species Sold
In 2008:
35% red oak
17% white oak
11% other domestics
10% Brazilian cherry
7% maple
19% other imported species
1% heart pine
What They Sold
In 2008:
50% unfinished solid
15% prefinished engineered
33% prefinished solid
2% unfinished engineered
Finish Sold
In 2008:
42% water-based
45% oil-modified
6% conversion varnish
2% moisture cure
5% wax
It's The Economy, Stupid
Distributors overwhelmingly said that the economy is the biggest threat to their business. Trailing far behind the economy were, in order, manufacturers selling direct, big-box stores and competing floor coverings.
"The support we've received from our distributors throughout this economic downturn has reminded us how important these solid and long-lasting relationships are. When things are tough, end users get more price-conscious and picky, and the distributors' handling of both situations in a positive and balanced manner is of great value to the manufacturer."
— Terri Birkett, sales, Ten Oaks
"Our state has nearly 15 percent unemployment. Without new jobs being created, homeowners will not consider a new home. Some are doing remodeling, but there are increased requests for reduced pricing, and some installers are selling for cost to get the service. This makes it very difficult for distributors to compete."
— Midwest distributor
"I think everyone is in survival mode just trying to stay open. What's going to happen is they'll burn through their cash in the next year to two years; 2010 will be about the same as 2009. In 2011 it may start to get better, but we still need to go through the correction in the commercial market, and that will burn into 2011 ... Now, that doesn't mean it's not going to be good for us, because we're budgeting to play in this market."
— Joseph J. Chapetta, general manager, Sam's Flooring & Supply Co.
CONTRACTORS
In January an online survey was sent to wood flooring contractors. Here are the results.
Bad News:
Contractors said their business in 2009 ...
In 2008:
21% of contractors indicated that business increased
26% stayed the same
53% decreased
"The economic slowdown has killed the price that we can charge. Pricing in my area has dropped to what it was about 10 years ago."
— Greg Algaard, president, The Wood Floor Guy Inc.
"When we opened in 1997 there were seven hardwood flooring companies in our town of 375,000. We grew to a population of around 450,000 now, and before this last economic slowdown there were over 55 local companies. I will be interested to see how many are in business next year."
— Chip Alliman, owner/president, A & A Custom Flooring
Where They Buy
74% of contractors said they bought products from a specialty wood flooring distributor in 2009 (two years ago, the number was 88 percent)
36% of contractors said they bought products direct from a manufacturer in 2009 (two years ago, the number was 22 percent).
Finish Used*
In 2008:
48% oil-modified
43% water-based
6% conversion varnish
2% wax
2% moisture cure
* Numbers may not add up to 100 percent due to rounding.
Species Installed*
In 2008:
50% red oak
18% white oak
8% maple
10% other domestics
7% Brazilian cherry
6% other imported species
3% heart pine
"Red oak select unfinished is not available, and the prices are rising in these times. The economy, while it seems to be improving slightly, is still way down."
— Stephen W. Shaffer, president, Shaffer Flooring Company Inc.
"In this economy, many contractors think they can install wood flooring, and they'll do it for minimum wage. It's hard to compete with that."
— Ryan Patey, president, Signature Services Inc.
"It is getting increasingly frustrating for legitimate businesses who feel constant pressure from laborers who charge very low prices and are working without insurance, storefronts, licenses, etc. They are severely undercutting legitimate businesses."
— Louis Buono Jr., president, Buono's Flooring Co. Inc.
They're Installing ...
In 2008:
61% unfinished solid
20% prefinished solid
17% prefinished engineered
2% unfinished engineered
They Install Over ...
In 2008:
49% basement
28% crawlspace
23% slab
"The outlook for the industry is good, I hope. It all depends on people not losing any more jobs so the money starts flowing again. People want to spend, but they are scared right now."
— Scott Dunbar, owner, Dunbar of Duluth Inc.
New vs. Old
The 2008 numbers were identical.
Install vs. Sand/Finish
In 2008:
48% sanding/finishing/refinishing
52% wood flooring installation
"Uncertain economic conditions will likely depress sales for one more year. Thereafter we anticipate slow growth with more emphasis on refinishing work."
All Things Wood Floor, created by Wood Floor Business magazine, talks to interesting wood flooring pros to share knowledge, stories and tips on everything to do with wood flooring, from installation, sanding and finishing to business management.
