Floor Covering Weekly April 22, 2013 : Page 1

Vol. 62 No. 8 A Hearst Business Publication April 22, 2013 $4 NWFA experiences double digit growth 18 Creative Flooring Solutions Canada’s retail brand powerhouse By Janet Herlihy In less than ten years, Creative Flooring Solutions has grown into one of, if not the largest, privately owned ooring company in Canada, according to Scott Brook eld, chairman and CEO of the diverse, on-the-move operation. Brook eld was a venture capitalist/ chartered accountant with a background in construction and insurance when Wacky Wheatley’s asked him to help nd a buyer. He liked the business so much, Brook eld ended up acquiring the business. Creative Flooring Solutions is now the parent company of a trio of businesses that dominate the Halifax/Dartmouth area of Nova Scotia. Taylor Flooring, Wacky’s Floor Design Centre and Hallmark Carpet One Floor & Home were independent operations until each was acquired by Creative Flooring Solutions, resulting in a diversi ed ooring powerhouse. In 2013, Creative Flooring Solutions acquired a fourth company in Halifax — RCCL (Ralph Connor Company Limited), an all commercial ooring business — and Hallmark Carpet One has moved to a new location, which, at 10,000 square feet, is the largest of any of Creative’s showrooms. “It is located at the Atrium, a 200,000 square foot mall made up of furniture stores. Hallmark is the only ooring store. We designed it to have more space so it is not crowded and has a very modern look. Hall-mark will be our major residential renovation brand, while Wacky’s and Taylor are more builder focused,” Brook eld said. Watch for Creative to continue to grow. “We will do more expansion outside Nova Scotia,” Brook eld predicted. “But, will stay in Atlantic Canada. We’ll continue to improve and ne-tune our businesses.” First, there was Wacky’s In 2007, Creative purchased Wacky Wheat-ley’s operation from partners Mike Wheatley and Larry Gumbley. “Wacky’s started in 1980 in Bedford, Nova Scotia, as a large discount retailer Continued on page 21 Canadian market focus Coverage continues on pages 16 & 19 NFA looks to future opportunities, branding “Business is getting better,” Sam Roberts, owner, Roberts Carpet and Fine [B, C] Floors, told FCW , during the e National Floorcover-vendor round-robin, where ing Alliance (NFA) — 42 members visit each of the of North America’s largest group’s core vendors in one dealers — met here April 4 – 7 for the group’s spring NFM’s Dave Snedekar meets with day. Roberts’ business is up approximately 17 percent meeting — an opportunity Congoleum at NFA. versus a year ago, but margins to discuss challenges facing members such as tight margins and big box remain tight. “I’m hoping as business continues competition as well as to propose new pro-to improve things will A, get better for specialty grams like an NFA brand and a group e ort to stores, and B, see margins improve,” he said. e rst quarter was quiet in Montana, solve issues like an aging sales force. Business conditions overall have improved according to Jon Pierce, general manager, since last year. Most dealers are reporting busi-Pierce Flooring. “ en when the snow went ness up anywhere from single to double digits. away, something happened. We’ve had a nice Margins remain tight, even for these dealers — uptick in retail, in builder business, property most report at margins. A few said they are up management business and contract,” he said, a little due to concerted e orts. Continued on page 7 Courts sends ITC China dumping determination for further review By Amy Joyce Rush e Department of Commerce (DOC) case regarding the dumping and countervailing of imported engineered hardwood ooring from China was remanded to reconsider its ndings by the International Trade Com-mission (ITC) on March 20, 2013. e Commission must le the remand results with the court on or before Sept. 30, 2013. e petition was initially led with the ITC and DOC November 10, 2010 by the Coalition for American Hardwood Parity (CAHP), a group of American manufac-turers including industry leaders Shaw/ Anderson and Mannington claiming mate-rial injury by reason of below market value multilayered wood ooring products being sold on U.S. soil. e case also claimed that the products were being subsidized by e People’s Republic of China. e hard-fought battle went to Washing-ton in October of 2011 for a nal hearing and in November, a nal a rmative deter-mination was made. Also in October 2011, the DOC determined separate rates, which applied to the majority of Chinese imported engineered hardwood, of 3.31 percent for antidumping and 1.51 for countervailing. e rates, which are currently being appealed by both sides, are also subject to annual reviews. By Kimberly Gavin To be clear, the court is only reviewing the record that exists and is limited to the speci c issues that the Court of Interna-tional Trade has directed the ITC to review, according to Je Levin, counsel for CAHP. “ e commission conducts a ‘mini inves-tigation.’ It’s a much di erent animal than what went on rst go around in fall 2011. e ITC can’t just start over again. It is limited to the re-examination of the speci c issues the court remanded on,” said Levin. “One is whether the ITC correctly identi ed all U.S. manufacturers of multilayered wood ooring and one is whether or not the Commission correctly and comprehensively evaluated other economic factors that may have con-tributed to the injury aside from cheaply sold products. ey can’t collect new evidence.” Levin further clari ed that the ITC can’t collect new evidence unless it nds that it did not correctly identify all of the relevant producers. In that case, he said, the ITC would ask for the missing companies’ oper-ational and nancial data. “I do not see that P e r i o d i c a l For breaking news updated each business day, visit us online at www.fcw1.com Continued on page 18

Creative Flooring Solutions

Janet Herlihy

<br /> Canada’s retail brand powerhouse<br /> <br /> In less than ten years, Creative Flooring Solutions has grown into one of, if not the largest, privately owned flooring company in Canada, according to Scott Brookfield, chairman and CEO of the diverse, on-the-move operation.<br /> <br /> Brookfield was a venture capitalist/ chartered accountant with a background in construction and insurance when Wacky Wheatley’s asked him to help find a buyer. He liked the business so much, Brookfield ended up acquiring the business.<br /> <br /> Creative Flooring Solutions is now the parent company of a trio of businesses that dominate the Halifax/Dartmouth area of Nova Scotia. Taylor Flooring, Wacky’s Floor Design Centre and Hallmark Carpet One Floor & Home were independent operations until each was acquired by Creative Flooring Solutions, resulting in a diversified flooring powerhouse.<br /> <br /> In 2013, Creative Flooring Solutions acquired a fourth company in Halifax — RCCL (Ralph Connor Company Limited), an all commercial flooring business — and Hallmark Carpet One has moved to a new location, which, at 10,000 square feet, is the largest of any of Creative’s showrooms.<br /> <br /> “It is located at the Atrium, a 200,000 square foot mall made up of furniture stores. Hallmark is the only flooring store. We designed it to have more space so it is not crowded and has a very modern look. Hallmark will be our major residential renovation brand, while Wacky’s and Taylor are more builder focused,” Brookfield said.<br /> <br /> Watch for Creative to continue to grow. “We will do more expansion outside Nova Scotia,” Brookfield predicted. “But, will stay in Atlantic Canada. We’ll continue to improve and finetune our businesses.”<br /> <br /> First, there was Wacky’s<br /> In 2007, Creative purchased Wacky Wheatley’s operation from partners Mike Wheatley and Larry Gumbley. “Wacky’s started in 1980 in Bedford, Nova Scotia, as a large discount retailer of carpet and vinyl,” explained Larry Woodland, vice president of operations and sales for Wacky’s Flooring Group. “It ended up with five locations in the Maritime Provinces that were largely retail with a small commercial operation. Between 1980 and the acquisition, we grew Wacky’s to be a complete retail operation that offered the best prices on all types of flooring and window treatments. We had decorators on staff and a builder business. Scott Brookfield decided the company had a lot of potential. He said he wanted to double the size of the business in five years and he delivered through both acquisition and organic growth,” Woodland reported. There are now seven Wacky’s locations including Commercial Carpet Centres. Woodland said, “Now Wacky’s is known for our wide selections of flooring, an educated staff including decorators, and excellent installation services. Scott Brook- field encourages a fresh approach to explore other opportunities. We have recently added cabinets.”<br /> <br /> Taylor makes two<br /> Taylor Flooring was Wacky’s biggest competitor in the Halifax/Dartmouth area, until 2009, when Creative Flooring Solutions bought Taylor Flooring from Robert Taylor, who continues to lead the division. Taylor is celebrating its 20th anniversary this year.<br /> <br /> Taylor’s brand strategy is that all 300,000 people in the Halifax/Dartmouth area should consider Taylor to be synonymous with quality flooring and service, according to John Wells, Taylor’s general manager, who became a minority shareholder. “Other companies focused on volume and price so we attracted a quality demographic,” Wells said.<br /> <br /> When Wells joined the business in 2001, it had one store each in the sister cities of Halifax and Dartmouth. Taylor opened its Sydney showroom in 2005 and its fourth store in Bridgewater, an hour’s drive southwest of Halifax, in 2006.<br /> <br /> Hallmark: The third big brand<br /> In 2012, Creative Flooring Solutions acquired Hallmark Carpet One. “Taylor’s four locations are high-end Mohawk Color Centers and Wacky’s seven are aligned Shaw dealers,” Brookfield explained. “I had been looking for a business with a presence in the Halifax marine industry and Cliff Gaetz, the former owner of Hallmark, is a player in that business. He was ready to sell the Carpet One business and is now our general manager. It was an opportunity to acquire another brand that has good potential for growth.”<br /> <br /> Strength in numbers<br /> While each flooring brand serves a different market, there is strength in being part of a larger organization. “We maintain three separate companies in the region, but pool resources for warehousing, purchasing, installation and administration,” Wells explained. “We have about 200 installers, who are dispatched by a central office every day. The biggest advantage is buying power and the accumulated resource of all three retail brands’ experienced staff.”

NFA looks to future opportunities, branding

Kimberly Gavin

<br /> the National Floorcovering Alliance (NFA) — 42 of North America’s largest dealers — met here April 4 – 7 for the group’s spring meeting — an opportunity to discuss challenges facing members such as tight margins and big box competition as well as to propose new programs like an NFA brand and a group effort to solve issues like an aging sales force.<br /> <br /> Business conditions overall have improved since last year. Most dealers are reporting business up anywhere from single to double digits. Margins remain tight, even for these dealers — most report flat margins. A few said they are up a little due to concerted efforts.<br /> <br /> “Business is getting better,” Sam Roberts, owner, Roberts Carpet and Fine Floors, told FCW, during the vendor round-robin, where members visit each of the group’s core vendors in one day. Roberts’ business is up approximately 17 percent versus a year ago, but margins remain tight. “I’m hoping as business continues to improve things will A, get better for specialty stores, and B, see margins improve,” he said.<br /> <br /> the first quarter was quiet in Montana, according to Jon Pierce, general manager, Pierce Flooring. “then when the snow went away, something happened. We’ve had a nice uptick in retail, in builder business, property management business and contract,” he said, attributing better business conditions in the region to the oil and gas boom in Western North Dakota, which has hit Billings, Montana “like a tsunami.” Pierce added, “It’s been a grueling four or five years. We do see light and we are geared up.”<br /> <br /> NFA convention format includes a Two- Minute-Drill when members share best practice or some operational information. But this year NFA president, Phil Koufidakis, also president of Phoenix-based Baker Brothers, asked each member to cover how much business was up or down, how margins were holding up, best promotion of the last six months, and biggest challenge.<br /> <br /> Darren Braunstein, vice president for Worldwide Wholesale, based in Edison, N.J., reported that business slowed following last fall’s Category 4 Hurricane. But, since December, business has been up double digits. “It’s the benefit of pent-up demand,” he said.<br /> <br /> Margins for the store remain “consistent” though Branstein reported they have been trying to get margins up. “The challenge is that customers are shopping more. They have more time,” he noted. One of the tricks in Worldwide’s box — as with many NFA members — is private labeling. Braunstein said they have done so with carpet for many years. Now they are moving in that direction for hard surface.<br /> <br /> Although the consumer is back in the market, she has changed her buying habits, said the group. “Lack of loyalty is compounded by technology at her fingertips,” Pierce said. “She’s more savvy and value conscious.”<br /> <br /> Business is up double digits in 2013 for Nebraska Furniture Mart as well, reported Dave Snedekar, director of flooring. Margins are up slightly over the past six months. Snedekar said his biggest challenge remains the perception by consumers that big box stores have the lowest prices. Nebraska’s marketing department has started an advertising campaign to show that’s not so, he said.<br /> <br /> Many dealers report that the private sale is alive and well. Jim Mudd, president, Sam Kinnaird’s Flooring, Louisville, Ky., said, “They give us big dollars and profits.”<br /> <br /> JeffMacco, president Macco’s Flooring in Wis., and Fla., concurred. “We have phenomenal success every time we run one.” Macco said his business is up in the 20 percent range for the past six months.<br /> <br /> One of the biggest challenges mentioned around the room is the hiring of competent sales people. More than one NFA member focused on the fact that the sales staff is aging, and that replacing them is becoming increasingly difficult. “Personnel is my biggest challenge,” said Ian Newton with Flooring 101 based in Oxnard, Calif. “There is not a big pool of qualified people to draw from.” Newton’s conclusion? “One solution is technology. It’s the key to training new sales people.”<br /> <br /> Jerry Jones, owner, Cassity Jones Inc., Longview, Texas, said his employee challenge is exacerbated by his location in an oil and gas community. The boom in that industry is attracting employees who might otherwise be sales staff. “No younger people want to come into sales,” he said. Jim Winn, president, Carpet Distributors, and Roberts said specifically that their sales teams are aging and are hard to replace.<br /> <br /> Koufidakis said that the sales personnel issue was nearly unanimous and he proposed the group put some resources toward looking at what might be done as a group to find solutions.<br /> <br /> Marketing ahead<br /> Over the years, the NFA has developed group buys that benefit the membership and provide significant volume for partner mills. The first major effort was a very successful roll buy from Shaw Industries. Next came a coordinated effort with Armstrong. Those programs continue to evolve as the group works on advantageous buys with a variety of product categories and vendors.<br /> <br /> A group brand may be next, according to Koufidakis. “It just makes sense,” he said. The exact name is under consideration pending approval by the membership, but the group voted unanimously to proceed with the concept.

Courts sends ITC China dumping determination for further review

Amy Joyce Rush

<br /> The Department of Commerce (DOC) case regarding the dumping and countervailing of imported engineered hardwood flooring from China was remanded to reconsider its findings by the International Trade Commission (ITC) on March 20, 2013. The Commission must file the remand results with the court on or before Sept. 30, 2013.<br /> <br /> The petition was initially filed with the ITC and DOC November 10, 2010 by the Coalition for American Hardwood Parity (CAHP), a group of American manufacturers including industry leaders Shaw/ Anderson and Mannington claiming material injury by reason of below market value multilayered wood flooring products being sold on U.S. soil. The case also claimed that the products were being subsidized by The People’s Republic of China.<br /> <br /> The hard-fought battle went to Washington in October of 2011 for a final hearing and in November, a final affirmative determination was made. Also in October 2011, the DOC determined separate rates, which applied to the majority of Chinese imported engineered hardwood, of 3.31 percent for antidumping and 1.51 for countervailing. The rates, which are currently being appealed by both sides, are also subject to annual reviews.<br /> <br /> To be clear, the court is only reviewing the record that exists and is limited to the specific issues that the Court of International Trade has directed the ITC to review, according to JeffLevin, counsel for CAHP.<br /> <br /> “The commission conducts a ‘mini investigation.’ It’s a much different animal than what went on first go around in fall 2011. The ITC can’t just start over again. It is limited to the re-examination of the specific issues the court remanded on,” said Levin. “One is whether the ITC correctly identified all U.S. manufacturers of multilayered wood flooring and one is whether or not the Commission correctly and comprehensively evaluated other economic factors that may have contributed to the injury aside from cheaply sold products. They can’t collect new evidence.”<br /> <br /> Levin further clarified that the ITC can’t collect new evidence unless it finds that it did not correctly identify all of the relevant producers. In that case, he said, the ITC would ask for the missing companies’ operational and financial data. “I do not see that happening as there are no other producers out there that the ITC missed,” he added.<br /> <br /> This process is just beginning and neither side is clear about exactly where this review will take the case. It was also ordered that the parties must file a proposed scheduling order on or before Oct. 31, 2013 for the submission of comments on the remand results.<br /> <br /> Both sides will participate in the process — the ITC will likely ask for commentary from both parties. “What typically happens is that the Commission asks for additional briefing from the parties and puts together determination and sends it back to the court and the court will ask for briefings on remanded determination,” noted Levin. “I’m quite confident that the commission has more than enough on the record to support initial determination and reach the same conclusion.”<br /> <br /> Legal counsel for the Alliance William Perry feels otherwise, stating, “We are confident that the Commission, which includes several new members, will see that when all the economic factors are considered, that imports are not a cause of injury to the domestic industry. The Commission will now have to use a higher causation standard and consider the greater economic condition in the United States, including the fall of the housing market, on the U.S. industry.”<br /> <br /> Root causes<br /> Following the 2011 proceedings, both sides began the appeal process. In addition, the Alliance for Free Choice and Jobs in Flooring took the whole case to the Court of International Trade in New York City in January 2013. While the CAHP appealed for rates to be calculated higher, the mandatories on the opposing side and members of the Alliance appealed for lower rates, the current remand is for injury only and does not affect rates.<br /> <br /> Key points to be argued include the exclusion of hardwood plywood from proceedings and whether or not it was imports that caused American suppliers material damage or if economic conditions were responsible.<br /> <br /> The Court documentation dated March 20 stated, “On remand the Commission shall reopen the record to identify domestic hardwood plywood manufactures and evaluate whether they make product that is used for flooring.” As a result, the Commission may issue questionnaires to domestic hardwood plywood manufacturers.<br /> <br /> The court also ordered that the Commission reconsider the impact of the subject imports on the domestic industry — whether the presence of imports was indeed the cause of injury or were the economic conditions of the time the overriding factor.<br /> <br /> “We appealed the case in its entirety. We still feel the determination is missing several points and they needed to be considered,” Jonathan Train of distributor Swiff-Train and president of the Alliance, told FCW. “This is fairly unprecedented. We are proud that our Alliance has stuck together and we have a large support from the industry trying to ultimately end this case.”<br /> <br /> Since the initial filing and proceedings, two of the commissioners have changed — one on either side of the vote. And new mandatories have been identified during the annual review process: Armstrong Wood Products Kunshan Co., Ltd.; Fine Furniture; and, Nanjing Minglin Wooden Industry, according to DOC documents.<br /> <br /> Armstrong, which owns the Kunshan plant and is the largest U.S. supplier of hardwood, was not mentioned in the initial proceedings.<br /> <br /> Armstrong said it was notified about a month and a half ago that it was being named a mandatory. According to Armstrong World Industries’ vice president of hardwood products Milton Goodwin, “We are prepared whatever the outcome. We remain neutral. As a mandatory, we just provide answers to their questions. We will cooperate and we feel we will be treated fairly by the Commerce Department.”

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