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State of the Wood Flooring Industry 2016: A Steady Climb

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So Iopener Hikinguy 416 Sm

As this issue was being finalized, the February housing start data were released, showing that overall housing starts were at a seasonally adjusted annual rate of 1.178 million units, and single-family starts were at their highest rate since November 2007. The numbers are emblematic of the state of today's wood flooring industry—positive in a slow and steady way. That annual rate is only 57 percent of the rate during the peak of the housing market in 2005, and many people responding to the survey this year cited housing as reason they remain cautious about their business planning. The majority of respondents across all business types surveyed—wood flooring manufacturers, distributors and contractors—said they believe the wood flooring industry will be "somewhat better" in 2016. What else is on their minds? Turn the pages to discover more about this year's State of the Industry.—K.M.W.

 

State of the Industry Manufacturers

In January, an online survey was sent to all NWFA-member wood flooring manufacturers. Here are the results.

 

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Among the manufacturer respondents who said sales increased in 2015, the median increase was 10%.

 

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State of the Industry Distributors

In January, distributors filled out surveys about their business in 2015. Approximately 84% of wood flooring distributors who responded said they specialize in wood flooring; 16% were general floor covering distributors.

 

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Among distributors with increased sales in 2015, the median increase was 11%.

 

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Lumber Liquidators Reeling Since "60 Minutes" Episode

The "60 Minutes" investigation into Lumber Liquidators' Chinese-made laminate that aired on March 1, 2015, immediately sent the company's stock into a tailspin, and more than a year later, the company has yet to stabilize.

Its stock price peaked at $69.22 the week before Anderson Cooper alleged the levels of formaldehyde off-gassing from the flooring were higher than allowed by California Air Resource Board Carb Phase 2, the strictest regulations in the country. By the end of March in 2015, the stock had fallen to $30.78. On the one-year anniversary of the "60 Minutes" investigation, the end-of-day bell had the stock price at $11.19.

The year since the "60 Minutes" episode has been fraught with challenges. Law firms went on the offensive, and three class action lawsuits were filed within days of the report. Those three snowballed into more than 100 over the next few months, and many were consolidated into one case. The company's insurance carriers refused to cover the potential losses.

In May, the company announced the Department of Justice was seeking criminal charges against it not for formaldehyde issues but for importing wood products from illegal lumber operations in the protected Siberian tiger habitat in the Russian Far East. A few days later, CEO Robert Lynch quit the company "unexpectedly." Then came the sudden departures of the company's CCO Ray Cotton and CFO Daniel Tarrell.

In October, the Department of Justice found the company guilty of sourcing wood products from the protected forests of the Russia Far East. The company was sentenced with a felony under the Lacey Act and was forced to pay $13 million in fines.

Meanwhile the federal government was investigating the formaldehyde issue. The highly anticipated results of the Consumer Product Safety Commission investigation into the formaldehyde content of the company's Chinese-made laminate were released in February. Centers for Disease Control and Prevention data at first seemed to vindicate the company, finding the flooring did not pose a high risk of cancer. Then, a week later, it was discovered the CDC made a math error. Instead of the flooring posing a risk of cancer in 3 out of 100,000 cases, it now posed a risk in 30 of 100,000 cases. Although the risk was still relatively low, the news went viral and the company's stock, which rebounded briefly after the first data was reported, sank again.

All told, Lumber Liquidators lost $56.5 million in 2015, according to its end-of-year financial report. The year prior the company had made $17.3 million.

So what awaits Lumber Liquidators in 2016? Accompanying the year-end report were remarks from CEO John Presley, who described the company's progress plainly—"[W]e still have a long way to go."—A.A.

 

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State of the Industry Contractors

In January, contractors filled out surveys about their business in 2015. Approximately 89% of them said they specialize in wood flooring; 11% deal with general floor coverings.

 

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See these other WFB State of the Industry reports:

State of the Wood Flooring Industry 2018: On Solid Footing

State of the Wood Flooring Industry 2017: Steady Growth

State of the Wood Flooring Industry 2015: Building Momentum

Solid Ground: State of the Wood Flooring Industry 2014

Improving Outlook: State of the Industry 2013

State of the Wood Flooring Industry 2012: Rocky Ground

Signs of Life: State of the Wood Flooring Industry 2011

State of the Wood Flooring Industry 2010: Test of Endurance

State of the Wood Flooring Industry 2009: Tightening Their Belts

State of the Wood Flooring Industry 2008: Riding Out the Storm

State of the Wood Flooring Industry 2007: Global Vision

State of the Wood Flooring Industry 2006: Distributors React

State of the Wood Flooring Industry 2005: Global Design

State of the Wood Flooring Industry 2004: Seeds of Change

 

 

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