floorcoveringnewsvolume 31/number 12 I fcnews.net I the publication more retailers prefer I November 21/28, 2016 I $2.00

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F looring retailers acknowl-edge that while it is pre-mature to know what a

Trump presidency andRepubl ican- contro l ledCongress will mean for theflooring trade over the nextfour years, the initial returnspoint toward a more favor-able business climate.

It did not go unnoticedthat on Tuesday, Nov. 22, thethree U.S. stock indices allbroke records, with the DowJones Industrial Averageclosing above 19,000, theS&P 500 closing over 2,200and the NASDAQ closingover 5,300. All were first-time highs, which may sug-gest that perhaps President-elect Trump will be good for theeconomy after all.

While some flooring dealersdid not want to speak on the

record about the next four years,others provided significant com-mentary on their hopes andbeliefs.

Josh Elder, co-owner ofGainesville CarpetsPlus Colortile

in Gainesville, Fla., echoed a sen-timent shared by many dealerscontacted by FCNews when heContinued on page 18

Continued on page 27

By K.J. Quinn

While much excitement in the U.S. flooring industrysurrounds innovations in LVT, the irony is most ofthese faux designs resemble a product requiring no

introduction: ceramic tile. The category is making some noise ofits own, as new digital printing technologies and larger formatsare driving pent-up demand in the residential market.

“Speaking with various manufacturers and tile distributors

HOUSING STRENGTH,BUYING TRENDS

BOOST CONSUMPTION

Retail roundup

Industry cautiously optimistic about Trump presidency

By Ken Ryan

IN THIS ISSUE

FCNews webinar:ICs or employees?PAGE 8

A look back at 2016 carpet innovationsPAGE 12

Donato Pompo answers readers’ tile questions PAGE 16

Resilient capacity risesThe influx of imports com-bined with increased statesideproduction is impacting themarket in tangible ways.

PAGE 22

Three U.S. stock indices brokerecords on Nov. 22, leading some to believe a Trump presidency might be good for business.

SPOTLIGHT

Congoleum CEO Moran retires; O’Connor named COOment firms are Congoleum’slargest stakeholders—willassume the roles of executivechairman and vice chairman,respectively.

“We are grateful to Bob forhis successful stewardship overthe past five years and we areconfident that, in Chris, we haveselected a strong leader at a timewhen the company is well posi-tioned for the challenges andopportunities ahead,” Venetissaid. “The pace of change isaccelerating, and Congoleumhas incredible potential to lever-age its long-standing commit-ment to quality, design and inno-vation to capture an increasingshare of the market segments inwhich it participates. Chris’insight, vision and executionaltrack record—along with thesupport of a terrific manage-

ment team—are exactly whatCongoleum needs as we enter avery exciting next chapter in ourover 100-year-old cor-porate history.”

O’Connor, whojoined Congoleum aschief financial officerin January 2015, will retain thoseresponsibilities in hisnew position. “I wasvery familiar withCongoleum from mytime as CFO at CMH,and I admired how Bob Moranled the company through somevery challenging conditions andbuilt one of the strongest leader-ship teams in the flooring indus-try,” he said. “I wanted to be apart of a company where Ibelieved the possibilities werelimitless, and I was thrilled

MERCERVILLE, N.J.—Congoleumhas announced the retirementof CEO Robert Moran, effectiveNov. 21. At the same time, thecompany’s board of directorshas appointed ChristopherO’Connor COO, effective Dec.1. Additionally, current boardmembers Peter Venetis andTom McKay—whose invest-

when Bob asked me to joinCongoleum as CFO in 2015. Theopportunity that lies ahead for

Congoleum is enor-mous, and the abilityto lead this nextchapter is both hum-bling and exhilarat-ing. The wholeCongoleum team isfocused on accelerat-ing the innovationand execution thatour customers needfrom us.”

Moran expressed confidencein the board’s choice. “Chris is abright and capable leader whohas contributed significantly toour success in a relatively shorttime. He will ensure Congoleumcontinues to execute on thestrategic growth plans and deliv-er long-term success.”

ChristopherO’Connor

Theoretical by American Olean is inspired by the modern, industrial look of cement.

Ceramic: State of the Industry

Scan this QR code with yoursmartphone to link to our fea-tured site.

22 I November 21/28, 2016 fcnews

other flooring manufacturingresources.”

Other major domestic suppli-ers are increasing stateside pro-duction—particularly in LVT—to satisfy growing end-userdemand. For some, this offers aclear advantage. “Our state-of-the-art U.S. LVT facility hasimproved our competitive edgeon quality and service by takingout freight and duty costs whileincreasing speed in deliveringinnovation and leading designsto customers,” said Jamey Block,vice president, product manage-ment-resilient at Armstrong.“With labor, energy and trans-portation costs accelerating,importing carries the risk of ris-ing prices and/or margin com-pression for Armstrong Flooringand our channel partners. Wehave invested millions of dollarsin the domestic onshoring ofLVT to produce resilient flooringin a cost-effective manner,improve styling and be moreresponsive in servicing key mar-ket segments.”

Industry executives likeJamann Stepp, director of mar-keting and management forUSFloors, is seeing an increase indomestic productioncapacity in the sheetvinyl and luxuryvinyl plank and tilecategories with sev-eral U.S. manufacturersramping up production innewly constructed or re-tooled facilities. Relative toWPC-type products, whichis USFloors’ forte, “All ourWPC products [COREtec]are currently importedfrom Asia.”

While anecdotal evi-dence points to a rise indomestic production,some industry observersare not convinced the

additional capacity is showing upin the statistics.

“There’s no doubt thatdomestic production is startingto gain more momentum,” saidMichael Raskin, founder andCEO of Raskin Industries, makerof the U.S.-made FloorNationbrand. “From our view whatwe’re seeing is a lot of companiesmay have announced that they’regoing to have domestic produc-tion, but they haven’t been ableto just yet. At the same time,some companies have butthey’ve had trouble. We’ve beenable to do what we said we weregoing to do (produce productand ship it) within a year fromthe time we announced it.”

Other experts agree that, to alarge extent, any impact fromdomestically produced LVT hasnot been fully realized. “There isa tremendous amount of com-petitive activity, with more andmore brands entering the mar-ketplace, both domestically pro-duced as well as imported,” saidRuss Rogg, president and CEO,Metroflor. “But it’s not as if weare seeing some type of tidal shiftto domestic goods vs. importedproducts. The added domestic

capacity is not fully operable atthis time, so the majority ofNorth America’s demand is stillbeing met through importedproducts.”

Still, the volume being pro-duced stateside can’t be ignored.“When you look at import vs.domestic, most of the domesticcapacity is just now comingonline,” said Dennis Mohn,director of U.S. sales, SatinFlooring, which imports itsresilient products from Asia.

Pricing trendsLogic dictates that whenincreased domestic capacitymeets a surge in imports, theresult is greater competition andpricing pressures. But that’s notalways the case. “I haven’t seen achange in pricing,” Denman said.“In terms of imported product Iknow there has been some pres-sure, raw materials-wise.Surprisingly enough, from oursuppliers we’ve seen eithersteady pricing or some modestprice reductions. I’m not surehow much of that is driven by theidea that more production iscoming back stateside. Pricing isjust one element of it from a

wholesales standpoint, butit will end up changing thecost structure overall as wemove forward. It will shiftover time, but as far as thewholesale price goes I reallydon’t see much movement.”

John Wu, president andCEO of Novalis InnovativeFlooring, is in agreement—sort of. “So far we have notseen pressure on pricing asa result of increased domes-tic capacity. On the con-trary, any pricing pressure isdue to the increase in capac-ity in Asia by newer, smallerand inexperienced factoriestrying to enter the market

via low price only.” While imported shipments of

luxury vinyl along with WPChave increased rapidly in the lastseveral years, suppliers say 2016has seen a tremendous increasein the import of WPC products.“With the current capacities inAsia along with additional capac-ity coming online monthly,”Stepp said, “we are beginning tosee pressure on pricing particu-larly in the opening price pointcategories.”

Satin Flooring’s Mohnbelieves imports are going toremain competitive given the rel-ative lower cost to manufacturein general compared to the U.S.companies. “The U.S. companiesfollow a ‘buy America’ strategy,which allows them to charge alittle more. But at the point ofsale people (the consumers) tendto forget that. Most consumersbuy according to what makesmore sense in terms of theirpocketbooks.”

Pros vs. consDepending on where you stand,a strong case can be made forsupporting imported products orstateside production—or both. “Ithink there are some advantagesthat we’ll see from domestic pro-duction, which means you haveto keep a pretty deep inventory.With the import products thelead time is so long—90 dayslead time to be produced andshipped,” Denman said.“Domestically you’ve got a quick-er turnaround to service thosejobs.”

Armstrong’s Block is inagreement. “We believe thatthere will be a surge in domesticpopularity thanks to shorter leadtimes and more innovative goodsas U.S. production in the indus-try fully ramps up. Significant

The continued influx ofimported resilient flooringproducts combined with

incremental increases in domes-tic production is changing thedynamics of this highly competi-tive market sector. In some casesthe market is seeing fluctuationsin pricing; in others, a change inproduct mix and channel mar-keting strategy is evident.

One thing that virtually allresilient flooring manufacturershave observed is an increase inactivity across market sectorsand channels. “Certainly we’reseeing a lot of movement in thebuilder/multi-family sector andthe big box piece of the marketthat’s primarily served throughimported LVT,” said KurtDenman, chief marketing officerand executive vice president ofsales, Congoleum. “Domesticresidential is—and has been forquite a while—a bit of a strong-hold for us in domestically pro-duced LVT.”

Denman cited Congoleum’sDuraCeramic line in particular.“It continues to be a strong per-former for us and it has beendomestically produced since thebeginning.”

Other executives also seehigher activity on the domesticside. “Right now the need toimport resilient flooring fromoverseas is based on volume andthe capacity to produce is in linewith strong customer demand,”said Eric Erickson, vice presidentof marketing, Beauflor USA. “Asthe U.S. demand for resilientflooring grows, it is becomingimportant for domestic produc-ers to keep up not only in volumebut also with new product inno-vations. At Beauflor, we are nowable to do that with our new U.S.manufacturing capabilities. Asmore competitive capacitycomes to the states, along withincreased investments in domes-tic innovation, it will challengethe companies importing fromoverseas to remain competitive.”

Some domestic producersare already ramping up in thatregard. Clark Hodgkins, resilientcategory manager, Shaw, has wit-nessed a significant amount ofinvestment in resilient manufac-turing in the U.S. with a numberof new facilities being completedover the past year. “This includesour own LVT manufacturingfacility in Ringgold, Ga.,” he stat-ed. “Domestic manufacturingprovides significant opportunityfor improved service in terms oftime to market as well as innova-tion with it being located in closeproximity to design teams and

resilient

America’s appetite for LVT is swelling. Shown is Congoleum’sDuraCeramic, which was ranked the No. 1 hard surface

product by Consumer Reports.

Domestic vs. import: Suppliers weigh the pros and cons

Continued on page 24

By Reginald Tucker

The popularity of rigid core products ischanging the mix in the U.S.

The emergence of WPC-type products such as USFloors’ COREtecis helping distributors and retailers maintain profit margins,despite the fact that most of these floors are imported.

24 I November 21/28, 2016 fcnews

benefits such as shorter leadtimes and reduced working capi-tal allow us to realize a morecompetitive cost structure. Atthe same time, onshoring doesnot tie up money for inventoryand warehousing.”

That is not to say that import-ing doesn’t have its benefits. Sosays Sean Stewart, managingpartner of Divine Flooring,which sources its LVT productsfrom China. “What makes ourapproach different is we actuallyhave our own employees inChina,” he explained. “Weinspect everything before itships. Granted, that doesn’tmean we’re perfect; many of ourcompetitors are not inspectinganything. We look at China astrying to provide the greatestamount of value as opposed tolooking at it as simply the lowestprice.”

According to Armstrong—which brought back domesticproduction in recent years, mainadvantages of producing LVTdomestically are many—fasterturnaround time, better qualityand better service to customers.“Plus, our state-of-the-art plantin Lancaster will give us a cost

position second to none andallows us to bring innovativeproducts of the highest order tothe market, creating differentiat-ed products and staying ahead ofinnovation in imported prod-ucts,” Block said.

Evolving product mixWhile the productrange manufacturersoffer is not alwaysdefined by region, thechanging mix of differ-ent product construc-tions has been impact-ed by global resilientproduction trends as itpertains to technologi-cal capabilities. “Inorder to remain com-petitive with world-wide producers, ourU.S. manufacturingfocus is not only aboutcompetitiveness incost and speed to market, butalso innovation,” Beauflor’sErickson said. “The technologywe have developed in our PureLVT line, for example, brings fea-tures and benefits that otherproducts simply do not have. OurBlacktex Collection, which wewill begin producing soon in theU.S., is in a category all its own:Luxury Vinyl Roll (LVR). Our

LVR has all of the best qualitiesof LVT and cushion vinyl com-bined into one great product.”

The majority of LVT sold inthe U.S. today is still sourced outof Asia, despite inroads made bydomestic manufacturers build-ing plants stateside. Since the

turn of this century, imports,mostly from Asia, have takenmarket share, industry observerssay. “However, LVT growth hasled to a wave of investment indomestic production, and this isstarting to make inroads,” Blockexplained. “More recently, WPCproducts have gained a lot oftraction, although at this timealmost none of it is produced

domestically.” When it comes to resilient

flooring, domestic productionhas historically been strong,Block added. “We’ve been pro-ducing resilient flooring in theU.S. since 1909, starting, ofcourse, with linoleum. Today we

produce heteroge-neous and homoge-neous vinyl in the U.S.for residential andcommercial applica-tions. We manufactureCushionStep fiber-glass-backed vinyl inthe same Lancasterfactory where we alsoproduce our new sen-sation, Vivero withDiamond 10Technology.”

Observers agreethat sheet, tile, plankand glass backed prod-ucts still represent the

lion’s share of the resilient cate-gory. “With that said, the popu-larity of WPC is growing at anextremely fast pace,” Steppnoted. “Our predictions are acontinuation of this trend, as theWPC category solves and/oreliminates many challengesand/or installation barriers thatother resilient category productscannot.”

In terms of construction,Novalis’ Wu believes domestical-ly produced LVT is still primarilyfocused on glue down LVT with afew manufacturers capable ofproducing click LVT. The abilityto make enhanced designs suchas embossed-in-register, henotes, is still very limited domes-tically. “Imported LVT continuesto be innovative and able to man-ufacture in large volumes, withenhanced visuals. For LVT, themix has definitely shifted morefrom traditional glue down LVTto floating LVT of various for-mats such as click LVT, loose layLVT or WPC-type LVT. Withinfloating LVT, loose lay and WPC-type currently have the greatestmomentum.”

At Raskin Industries, thefocus continues to be on offeringboth dry back and loose lay fiber-glass sheet reinforced product.“We’re focusing on better quali-ty,” Raskin said.

Like Wu, Shaw’s Hodgkins iscontinuing to see a shift towardWPC and LVT products. “Sheetproducts continue to decline inthe larger, comprehensive mix.The transition is a reflection ofthe growing trend toward woodvisuals with realistic looks thatintegrate graining, knots and tex-ture. Our customers are search-

Continued from page 22Domestic vs. import

resilient

EarthWerks was one of the first imported LVT brandsto catch on in the U.S. Shown is Pavillion.

fcnews November 21/28, 2016 I 25

ing for high-end styles that canbe incorporated through moreaffordable WPC and tile styles.The influx in these imports is atestament to the increased inno-vation and commitment to creat-ing the most realistic looks thatare highly competitive with realwood and tile products.”

The “X” factor in this equa-tion, many observers say, is thegrowing popularity of WPC orrigid core LVT products—whichare primarily imported goods. AsRogg stated: “Therefore, whilethere is U.S. capacity comingonline, none of these factories isproducing this platform of prod-uct yet. This dynamic is causingan increase in the import ratiobecause there is no other catego-ry within the world of LVT that isaccelerating as fast as rigid coreformats.”

On the whole, as the resilientmarket has matured, productswith a wide variety of styling andprice points have emerged. “It’sno longer just a low-cost optionthanks to innovations in aesthet-ics and performance, particularlywaterproof performance anddurability,” Hodgkins added. “Asthat diversification continues, it’shelpful to have a mix of sourcesto meet customer price anddelivery expectations.”

Satin Flooring’s Mohn sees amix across the board due to thesheer number of players enteringthe field. That, he said, has pavedthe way for companies to lever-age various technologies as ameans to further differentiatethemselves. “It used to be just alow-end vinyl,” he recalled.“Then you had companies likeCongoleum and NAFCO makinggood product domestically thatwas totally different than whatyou say with imports. ThenSwiff-Train changed the wholething with EarthWerks and whatthey did with the brand.”

Future trendsStatistics show nearly 80% ofLVT is imported from overseas,mainly China. Suppliers remaindivided as to whether or not thispercentage will change dramati-cally as more production facili-ties online.

“We believe that domesticproduction of flooring has been a

boon to the industry; if producttrends and consumer prefer-ences continue in the directionthey’re going, it’s likely that we’llsee more investment in productsmade in America,” Hodgkinssaid.

Others, like Novalis’ Wu, pre-dicts there will be a shift fromimport to domestic but slowerthan everyone expected a fewyears ago. He cites two primaryreasons for this: the first is theincrease in market share by float-ing LVT which is not a capabilitythat most domestic manufactur-ers have added yet; and second isin the increase in the major shareby LVT against other product cat-egories such sheet vinyl, lami-

nate and carpets. “Asia manufac-turers with their multiple waysto go to market tend to grab theincreased share faster thandomestic players,” Wu explained.

At Armstrong, the belief isthe insatiable demand for luxuryvinyl tile will continue to grow ata rapid pace for the next severalyears, according to Block.

Metroflor’s Rogg believes ifrigid core LVT continues to growat its current pace, and no U.S.capacity for this type of productis brought online in the nearfuture, this ratio will likely staythe same. “Most U.S. capacitythat has been built is either fordryback or click, but not rigidcore,” he said.

New formats in resilient flooring, such as LVF, are creating opportunities for retailers to improve their margins.

Pictured is Woodlands from Mohawk.

Novalis Innovative Flooringmarkets its NovaFloor brand

to retailers.