Floor Covering Weekly May 6, 2013 : Page 1
Vol. 62 No. 9 A Hearst Business Publication May 6, 2013 $4 3 Beaulieu preps for Boe’s retirement with co-CEO Ralph Boe (right) with newly named CEO, president Karel Vercruyssen Great Floors, No. 9 on FCW’s Top 50 list, boasts an expansive showroom in Coeur d’Alene, Idaho. Haleys Flooring & Interiors offers variety. ABC Carpet & Home’s 6th ﬂ oor rug department My Flooring America’s Denton, Texas location Sergenian’s showroom features stylish displays. Hard surface carries retail out of slump Separate retail brands, expanded commercial Sergenian’s grows in Wisconsin and Florida By Janet Herlihy e merger of Sergenian’s Floor Coverings of Madison, Wisc. with Florida-based G. Fried Flooring America in November of 2011, has resulted in a vital, diversi ed business that is ranked No. 40 in FCW ’s 2013 Top 50 U.S. Specialty Retailers report. A member of Flooring America, Serge-nian’s operates a retail store and maintains a second facility that houses commercial Specialty ooring dealers are reporting signi -cant and sustained increases in both store traf-c and store sales across all categories. Growth, they said, is being fueled by rejuvenated new home construction, residential remodel busi-ness and Main Street commercial. “I haven’t been this busy in years,” said 30-year industry veteran Je Kaspin, owner of Monroe Township, N.J.-based A.B. Carpet. Continued on page 23 “ e amount of tra c coming through my door is reminiscent of the good days before the economy went bad. And what’s really amazing to me is how strong business was in January, February and March. Usually we get that kind of push in April through June. I’m already ahead of last year. at’s very encouraging.” With the exception of an occasional dip, monthly increases in new home sales and a trend among homeowners and property managers to remodel with better quality goods is driving sales growth residentially. For breaking news updated each business day, visit us online at www.fcw1.com “We think we’re set up to have a good three sales, administrative o ces and distribution in Madison. In Florida, there are now three G. Fried Flooring America stores — Tampa, Sarasota and Jupiter. All told, sales tallied $25.8 million in 2012, according to Jim Garner, CEO of the parent company Serge-nian’s Floor Coverings, Inc. and the majority shareholder of the business. In 2008, when the recession hit in Wisconsin, the builder business accounted for about one-By Raymond Pina year run,” said Bruce Zwicker, president and CEO, Haines. “Housing is rising and when interest rates go up it will be like throwing rocket fuel on a re with more people trying to buy in while rates are still relatively low. We’re coming out of a depression into a pretty strong recovery.” Construction and renovation of com-mercial spaces such as healthcare facilities, schools and government o ces continue to rise but the return of retail space on Main Street is proving to be the latest opportunity. “With new housing comes new retail construction,” said Diana Borders, principal designer for commercial ooring, Arm-strong. “We’re seeing the retail environment driving a lot of commercial business. But we’re also seeing a lot of hospitals renovating. America is building again.” Hard surface categories have led the charge of increased sales, up some 8 percent the rst quarter of 2013 in comparison to the rst quar-ter of 2012, according to Catalina Research. P e r i o d i c a l Continued on page 23
Sergenian’s grows in Wisconsin and Florida
Separate retail brands, expanded commercial
The merger of Sergenian's Floor Coverings of Madison, Wise. with Florida-based G. Fried Flooring America in November of 2011, has resulted in a vital, diversified business that is ranked No. 40 in FCWs 2013 Top 50 U.S. Specialty Retailers report.
A member of Flooring America, Sergenian's operates a retail store and maintains a second facility that houses commercial sales, administrative offices and distribution in Madison. In Florida, there are now three G. Fried Flooring America stores — Tampa, Sarasota and Jupiter. All told, sales tallied $25.8 million in 2012, according to Jim Garner, CEO of the parent company Sergenian's Floor Coverings, Inc. and the majority shareholder of the business.
In 2008, when the recession hit in Wisconsin, the builder business accounted for about onethird of sales, but the company had a backlog of orders, so it took awhile for the impact to be felt. Garner said, "We were in a strong position. The experience of our management team — seven members who each have 14 to 36 years in the business — helped us survive. In Wisconsin, we got through without having to lay off any noninstallation employees. And those few installers that we had to let go, are now back."
Business began to recover at Sergenian's in early 2011, was even with 2008 rates by the end of 2012 and is now running ahead of those levels, according to Garner. "The first quarter of 2013 in both Wisconsin and Florida have been very good," he added.
The recession hit the G. Fried operation especially hard. The merger was a way for Sergenian's to expand and G. Fried to survive. Previous owner, Rufus Ashby continues as president of the Florida stores.
Since the merger, the economy has improved and G. Fried has also found a new niche to serve. Garner reported, "We now are doing business with Fannie Mae foreclosures. They have found that by fixing up these houses, they will sell faster. We got into it through CCA Global, which has an agreement with Fannie Mae."
Sergenian's has also done some reorganizing in Florida. To beef up its commercial capabilities, the Jupiter location, where most commercial projects are handled, has been expanded and one commercial person has been added in Tampa and Sarasota. G. Fried has hired another person to work on insurance and restoration projects. Garner noted, "Commercial is about 20 percent of the business so far in 2013: Fannie Mae is about 10 percent; insurance and restoration accounts for 30; and, residential retail makes up the remaining 40 percent."
Sergenian's was already a member of Starnet. G. Fried's commercial business is now part of the commercial flooring contractor organization as well.
The company makes an effort to keep the businesses close despite geographical distance. Garner spends about 11 days a month in Florida. "We arrange meetings of staff in each specialized area — commercial, insurance and Fannie Mae — so they can share ideas and strategies that are working."
On the retail side, Sergenian's has taken the practices that worked well in Wisconsin and transferred them to Florida. "We go over the sales numbers and establish budgets with the retail staffs, which allows them to feel empowered. We have a human resources manager who meets with both operations to get everyone involved," Garner said. "We give out bonuses and 401K contributions, because we believe you should share what you've got with those who helped you get there."
While the Florida business is close to being totally integrated with Sergenian's, it is still a work in progress. "There are a lot of policies and procedures, especially regarding inventory and orders that we need to enforce to have more efficient operations," Garner said.
Between both entities, there are about 130 full time employees. Installers are on staff in Wisconsin and subcontracted in Florida.
Buying power is one area the merged companies use to their advantage. Managers from G. Fried and Sergenian's attend Flooring America conventions together. "They each choose what they need for their stores, but we focus on certain suppliers. Our inventory purchases are often coordinated," Garner said.
Advertising services are handled for both companies by the same agency in Madison and accounts receivables for both are administered there as well. "We do as much as we can together," Garner said. "We have implemented the same recycling program in Florida as we have in Wisconsin, although it's not as powerful there yet."
Since the company's founding in 1930 by Ara Sergenian, it has always been willing to change to suit the times and take advantage of opportunities. The business originally focused on Oriental rugs, but when Ara sold it to three of his sons, Marsh, Ron and Paul in 1962, they moved the store and shift ed emphasis to wall-to-wall carpet. Garner joined Sergenian's in 1963, eventually becoming CEO and majority partner with Ron's son, Tom Sergenian, who now serves as president of the Wisconsin operation.
Plans for the future include continuing to grow the business internally with additional staff, according to Garner. In Florida, the growth will primarily be on the commercial side. "We are looking at opportunities for additional locations to gather into the G. Fried fold."
Hard surface carries retail out of slump
Specialty flooring dealers are reporting significant and sustained increases in both store traffic and store sales across all categories. Growth, they said, is being fueled by rejuvenated new home construction, residential remodel business and Main Street commercial.
"I haven't been this busy in years," said 30-year industry veteran Jeff Kaspin, owner of Monroe Township, N.J.-based A.B. Carpet. "The amount of traffic coming through my door is reminiscent of the good days before the economy went bad. And what's really amazing to me is how strong business was in January, February and March. Usually we get that kind of push in April through June. I'm already ahead of last year. That's very encouraging."
With the exception of an occasional dip, monthly increases in new home sales and a trend among homeowners and property managers to remodel with better quality goods is driving sales growth residentially.
"We think we're set up to have a good three year run," said Bruce Zwicker, president and CEO, Haines. "Housing is rising and when interest rates go up it will be like throwing rocket fuel on a fire with more people trying to buy in while rates are still relatively low. We're coming out of a depression into a pretty strong recovery."
Construction and renovation of commercial spaces such as healthcare facilities, schools and government offices continue to rise but the return of retail space on Main Street is proving to be the latest opportunity.
"With new housing comes new retail construction," said Diana Borders, principal designer for commercial flooring, Armstrong. "We're seeing the retail environment driving a lot of commercial business. But we're also seeing a lot of hospitals renovating. America is building again."
Hard surface categories have led the charge of increased sales, up some 8 percent the first quarter of 2013 in comparison to the first quarter of 2012, according to Catalina Research.
And while hardwood and ceramic tile are enjoying increases, the growth of luxury vinyl tile (LVT) has been most dramatic.
"We're selling more of everything but the growth of LVT is exponential. It's off the chart. People that would once have gone with carpet or laminate are going with LVT because it's durable but also stylish, waterproof, quiet and easy to clean," said David Snedeker, floor division merchandise manager at Nebraska Furniture Mart.
LVT is having a significant impact on carpet sales, but it is also eating into sales of traditional felt-backed sheet vinyl in the commercial marketplace — and not because it's cheaper.
"When we're going into a medical office, we tell them LVT costs a little more up front but it's lower on the back end because you're not going to have to strip and wax it. Plus it won't wear like carpet or sound like a laminate or wood floor," said Ed Keller, executive vice president and general manager of Tampa Bay, Fla.-based Bob's Carpet Mart.
Dealers all agree that today's consumer demands value-oriented price points. "The retailer is still fearful about price. The big boxes continue to advertise on price. But the consumer now wants to buy a better product. She loves Home Depot's price but hates its quality," explained Harvey Johnson, owner of Miami-based Mastercraft Flooring.
Specialty flooring dealers, in fact, began experiencing periodical bursts of strong sales in late 2011 only to have their expectations shattered by weeks of slow or no traffic. Now, business has been increasing steadily for three quarters, according to Tom Solomon, owner of Placentia, Calif.-based T&S Carpet & Design Center.
"I opened in 2007 and the trend has been a few good weeks of traffic followed by a few weeks where traffic completely fell off," he said. "But in the last couple of months I've seen business rise to heights I haven't seen before. I'm up over 30 percent the last couple of months."
And with the return of strong growth comes new challenges, particularly related to maintaining key personnel and other resources, added Zwicker. "Everyone is bidding for the same labor pool. There are going to be shortages and related compensation issues to hang onto the best people. We're also already having a hard time keeping up with demand for wood. The demand went from being soft to now competing with other industries domestically and abroad," he said.
Challenges and all, industry executives said they've emerged from the depths of the downturn prepared for what comes next.
"It's not the Gold Rush days but there's a real, true feeling that business is coming back. We've been faced by challenges and we responded to them. We all had to dial back during tough times. We've been conservative and it's paid off," said Art Layton, vice president of marketing, CMH Space Flooring.