Floor Covering Weekly January 13, 2014 : Page 1

Vol. 63 No. 1 A Hearst Business Publication January 13, 2014 $4 P RE -S URFACES F LOOR C OVERING W EEKLY The Industry’s Business News & Information Resource 2014 Shaw leaves rugs to focus on LVT By Janet Herlihy [Dalton, Ga.] Shaw Industries announced that it will invest more than $100 million to convert its area rug plant in Ringgold, Ga. to produce luxury vinyl tile (LVT). The move takes the manufacturer out of the area rug business while expanding its LVT capability. “LVT is such a good category. We sell it in every channel we work in — retail, specified commercial, multi-family,” said Randy Merritt, president of Shaw Indus-tries. “We plan to make some, but not all our LVT at the Ringgold plant. It will be a phased process. We will continue to partner with our key LVT suppliers for product. The main advantages to making it domestically are better lead times and more flexibility.” This announcement follows a $250 mil-lion investment in other recent expansion efforts in carpet tile, hardwood flooring, yarn extrusion and distribution. The con-version is expected to generate 200 new jobs in the Ringgold area. While the Tuftex division will continue to serve the area rug market, the econom-ics of the rug business do not make it advantageous for Shaw to continue in that Armstrong bets on LVT Eyes wood for future growth, laminate going strong By Amy Joyce Rush [L, P.] 2013 was a year of change, investment and moving forward to a pro table future for many ooring compa-nies. Armstrong was no di erent. Kevin Biedermann, senior vice president, Armstrong Residential Floor Products, leads the residential business for the hard surface ooring company based here. He is forthright and humble when he talks about the invest-ments the company has made and the chal-lenges it faces including the wild ride of wood price increases and the onslaught of luxury vinyl tile (LVT) suppliers in the market. “Like everyone, we are very optimistic. A er a couple of false starts, the return of the building products and ooring industry seems to be real,” said Biedermann in an exclusive interview with FCW. “We see a lot of con dence from our builder partners. Retailers are optimistic. Folks are looking forward to a decent year. Decent means not down: Flat is good; up is great. at’s what we are looking for,” he said. Biedermann noted, however, that like other leaders in the busi-ness, Armstrong used the downturn to prepare for the market to come back. “We put some products in place and we are excited about them. We are ready,” he said. double digits each year over the last 10 years while the U.S. has increased in the low single digits. With everything from energy and transportation costs accelerating at a faster pace than exchange rates Investments and expansion and import fees, it is more Biedermann o en notes cost e ective to produce that Armstrong is publicly here for domestic consump-held and so all that it does tion. And that is “not just is transparent, such as the Kevin Biedermann for hardwood but LVT and building of its new LVT plant other products,” he said. here in Lancaster as well as other strategic Biedermann is careful, however, to point moves and initiatives. Recent investments out that Armstrong is indeed a global com-in U.S. facilities, he said, while right-timed pany. “So I’m based in America and I love for the Made in the U.S.A. revival are simply building global. If it’s more advantageous (to build here) we’ll do it. at’s why we’ve good business. “It’s a terri c story. Most of our plants invested millions in our plants and added are in towns smaller than this, great com-400 people in our wood plant this year, and munities. It is great to have an impact on a announced we are building an LVT plant,” he said. e company’s plants in China now community like that,” he said. It is also good business as it helps to o set produce for that local market. some of the global price increases, he said, e new LVT plant is expected to be running noting that labor in China has gone up Continued on page 30 Continued on page 30 WFCA: Rededicated to specialty retail By Mallory Cruise A new year means new beginnings, new goals and new initiatives. World Floor Covering Association (WFCA) CEO Scott Humphrey, who was previously director of the Shaw Floor-ing Network, said the association already has a number of tactics in place to help strengthen its position as we head into 2014. Humphrey, who will com-plete his rst year with the WFCA this March, explained, “ e WFCA didn’t have any strong direction when I rst joined. For my rst meeting as CEO I ew to California and asked, ‘OK, what is our goal and purpose?’ One of the rst things I did was schedule a meeting for July 1 of last summer with the executive com-mittee to create a new purpose statement. We needed a reason for existing.” While the WFCA works alongside all facets of the industry (including manufactur-ers, distributors, carpet cleaners, inspectors, installers and retailers), it was important for the WFCA to be more focused in 2014. “We have to look beyond Surfaces. And, we have to be more targeted – that’s why we created a new purpose statement. Our pur-pose statement says that the ‘WFCA exists to ensure the success and pro tability of the specialty ooring dealer, and to stand for their common interest,” he said. Ensuring the success of the independent retailer means providing the necessary tools and resources. “I knew if we could get the independent retailer healthy, we could get the manufac-turer healthy which in turn will help the dis-tributors, installers, etc. Installers will tell you, if the retailer is healthy, their job is more secure. Same goes for the carpet cleaners and inspec-tors. We’ve identi ed the hub and wheel, and directed our attention there,” said Humphrey. Training is another key initiative for the Vance Bell Randy Merritt 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 30

Shaw leaves rugs to focus on LVT

Janet Herlihy

<br /> [Dalton, Ga.] Shaw Industries announced that it will invest more than $100 million to convert its area rug plant in Ringgold, Ga. to produce luxury vinyl tile (LVT). The move takes the manufacturer out of the area rug business while expanding its LVT capability.<br /> <br /> “LVT is such a good category. We sell it in every channel we work in — retail, specified commercial, multi-family,” said Randy Merritt, president of Shaw Industries. “We plan to make some, but not all our LVT at the Ringgold plant. It will be a phased process. We will continue to partner with our key LVT suppliers for product. The main advantages to making it domestically are better lead times and more flexibility.”<br /> <br /> This announcement follows a $250 million investment in other recent expansion efforts in carpet tile, hardwood flooring, yarn extrusion and distribution. The conversion is expected to generate 200 new jobs in the Ringgold area.<br /> <br /> While the Tuftex division will continue to serve the area rug market, the economics of the rug business do not make it advantageous for Shaw to continue in that category, according to Vance Bell, chairman and CEO. “The economics of the rug business today simply do not allow for future growth or encourage further investment. We have been intentional about exiting this business at a time when more opportunities exist for our associates,” he said.<br /> <br /> While the company is officially exiting the area rug business, it will continue to fill orders for new and existing rugs until the yarn inventory is used up. “Tuftex will continue its rug program and Shaw will continue to provide bound rugs from our carpet lines. We want to make it a ‘soft’ exit to give our customers enough notice so it won’t hurt their businesses. We will help them anyway we can,” said Merritt. Most of the 400 associates employed by the Shaw Living Rug Division will have opportunities at other Shaw locations.<br /> <br /> Shaw expects to be manufacturing LVT in Ringgold by the second half of 2015, according to Merritt. By repurposing the rug facility to a new LVT manufacturing site, the company will be able to shorten the timeframe to begin manufacturing the product, utilize an existing facility, and keep jobs in the Ringgold area, according to Shaw. Shaw has been participating in this market for three years, but up until this point has not manufactured LVT.<br /> <br /> “We will continue to invest in businesses where we see future growth and opportunities,” continued Bell. “Over the past few years, we have developed a significant business and market-leading position in the LVT flooring category. This new facility will provide domestic manufacturing for a portion of our product line, allowing us to further enhance our product development, service, and overall customer satisfaction.”<br /> <br /> For the time being, Shaw Living continues to manufacture rugs in Ringgold, according to Susan Rich, Shaw director of corporate communications. “Supporting our customers through this transition is extremely important,” Rich said. “We have available finished goods and yarn inventory to service our customers through a transition period, which may vary by customer,” she noted, adding, “Eventually, Shaw will be selling the rug production equipment.”<br /> <br /> Shaw Living will participate in the Atlanta Rug Market and the Vegas Market at the World Market Center.

Armstrong bets on LVT

Amy Joyce Rush

<br /> Eyes wood for future growth, laminate going strong<br /> <br /> [LANCASTER, PA.] 2013 was a year of change, investment and moving forward to a proA table future for many flooring companies. Armstrong was no different.<br /> <br /> Kevin Biedermann, senior vice president, Armstrong Residential Floor Products, leads the residential business for the hard surface flooring company based here. He is forthright and humble when he talks about the investments the company has made and the challenges it faces including the wild ride of wood price increases and the onslaught of luxury vinyl tile (LVT) suppliers in the market.<br /> <br /> “Like everyone, we are very optimistic. After a couple of false starts, the return of the building products and flooring industry seems to be real,” said Biedermann in an exclusive interview with FCW.<br /> <br /> “We see a lot of confidence from our builder partners. Retailers are optimistic. Folks are looking forward to a decent year. Decent means not down: Flat is good; up is great. That’s what we are looking for,” he said.<br /> <br /> Biedermann noted, however, that like other leaders in the business, Armstrong used the downturn to prepare for the market to come back. “We put some products in place and we are excited about them. We are ready,” he said.<br /> <br /> Investments and expansion<br /> Biedermann often notes that Armstrong is publicly held and so all that it does is transparent, such as the building of its new LVT plant here in Lancaster as well as other strategic moves and initiatives. Recent investments in U.S. facilities, he said, while right-timed for the Made in the U.S.A. revival are simply good business.<br /> <br /> “It’s a terrific story. Most of our plants are in towns smaller than this, great communities. It is great to have an impact on a community like that,” he said.<br /> <br /> It is also good business as it helps to offset some of the global price increases, he said, noting that labor in China has gone up double digits each year over the last 10 years while the U.S. has increased in the low single digits.<br /> <br /> With everything from energy and transportation costs accelerating at a faster pace than exchange rates and import fees, it is more cost effective to produce here for domestic consumption. And that is “not just for hardwood but LVT and other products,” he said.<br /> <br /> Biedermann is careful, however, to point out that Armstrong is indeed a global company. “So I’m based in America and I love building global. If it’s more advantageous (to build here) we’ll do it. That’s why we’ve invested millions in our plants and added 400 people in our wood plant this year, and announced we are building an LVT plant,” he said. The company’s plants in China now produce for that local market.<br /> <br /> The new LVT plant is expected to be running by second quarter 2015 and will produce for both the residential and commercial markets. “It is a pretty big investment (some $35 million) and we are pretty excited about the dynamic. It just makes sense. And being local gives you a much quicker design cycle, much less inventory. You don’t have to have it on the water,” said Biedermann.<br /> <br /> The company is also looking to make additional investments, particularly in wood, according to Biedermann. “We’ve been talking about what we would do to insource more, and, depending on our growth, to increase capacity. We’ve also invested in the sheet business. We feel good about that.” Armstrong made further investments in its Alterna groutable tile plant as well as in line capacity.<br /> <br /> The impact of rising wood prices<br /> One of the biggest challenges for the industry’s largest wood flooring provider has been the deluge of price increases that began more than a year ago. Biedermann said that the lumber market is massive, but fragmented and complex. While flooring accounts for one third, “I don’t believe for a second we are significant enough to push a price one way or another. There isn’t one single flooring company that swings the market.”<br /> <br /> One issue that will take time to rectify is the demise of many of the small family- owned mills during the downturn. Armstrong used to buy from some 600 different mills back in 2006/2007. That number is now under 300.<br /> <br /> “These will come back but it’s going to take time,” he said. “The demand is going to continue with not a wide change in supply. All combined, we believe that lumber will not come down in 2014 and absolutely could go up.”<br /> <br /> Armstrong, in fact, recently announced a 6 to 10 percent price increase. “The majority of price is the wood. I can’t get more efficient with my labor or coatings,” he explained. “It is something, as an industry, we need to pay attention to. You can't take 10-, 15-, 20-, even 30 percent raw material increases and not look at raising prices. You just won't be in business. We are public — our margins are brutal. It’s not like we are profiting over this. We are not even close to recouping the inflation we’ve had and we’ve had six price increases.”<br /> <br /> Armstrong has responded to these pressures in the way it sources product. “We have four solid wood plants in four different parts of the country that draw from four different wood markets,” he explained.<br /> <br /> The good news is that these price increases have not had a negative impact on consumer demand for hardwood. “We’ve seen retail prices probably go up between one and two dollars. What that means is someone spending $5,000 to do a room with a wood floor; it might cost them another $500. Significant, but is it all that relevant that they are not going to put wood in their home? Probably not. So we haven’t changed the way we market it.”<br /> <br /> Armstrong, with Bruce and Homer- Wood brands, has product across all price points, though, Biedermann said, the company sees better goods filling today's market needs. “We’re sticking with premium grades where you can still make a bit of money. We are looking at what is the standard and better wood,” noting that wider widths are getting attention at retail. As well, the company’s American Scrape product is also receiving positive retail response, he said.<br /> <br /> A diverse portfolio<br /> Armstrong has been a leading player in the commercial market with what Biedermann said is “decades of experience specifying for end-users and architects.” That history will keep Armstrong a key LVT supplier as the flood of new vendors for the category enters the market, he said.<br /> <br /> “It is a technical, complicated category and we sell multiple products so you can't just be in the LVT game. It’s supported with research, installation expertise. So on the commercial side, I feel very good. It’s hard for new entrants to be relevant. We sell the full portfolio. I think competition is good, but all products are not the same — quality matters, trust matters, scale matters.”<br /> <br /> Laminate is doing well for the company as it keeps its focus on upper-end retail and design. “What we really want is the ‘Wow’ factor and to differentiate ourselves. Our advantage is we don’t have large plants to be filled. We look for partners that have phenomenal facilities. We have more SKUs than anyone else at retail. And when you look at Architectural Remnants and other recent introductions, that’s what we get excited about. Our laminate business is up. It's a significant business for us.”<br /> <br /> New leadership, long term goals<br /> Company president Frank Ready retired in 2013 and then company CFO Tom Mangas took that seat. Biedermann remains head of residential while Dominic Rice continues to lead commercial. Things, said Biedermann, will stay the course.<br /> <br /> “Armstrong has been around for generations and will continue to be. Our teams are unchanged. I’ve known Tom Mangas for three years and he is in it to win it,” said Biedermann.<br /> <br /> With his eye on growing residential, Biedermann has some targets for this year, mainly driving business to the dealer and captivating the consumer with the Armstrong brand.<br /> <br /> “We’ve done a lot on the product side. Our journey now is to bring it all together — how do we drive leads to our website and to the retailers’ door and provide opportunity to excite the customer; to educate them about choices and value? We believe we can do it better,” Biedermann offered. “The march now will be to integrate products so retailers can talk to consumers about their project, lifestyle and talk to people about the difference. A lot of it isn’t at all the economics, it’s more about what’s appropriate for the project,” he said.

WFCA: Rededicated to specialty retail

Mallory Cruise

<br /> A new year means new beginnings, new goals and new initiatives. World Floor Covering Association (WFCA) CEO Scott Humphrey, who was previously director of the Shaw Flooring Network, said the association already has a number of tactics in place to help strengthen its position as we head into 2014.<br /> <br /> Humphrey, who will complete his first year with the WFCA this March, explained, “The WFCA didn’t have any strong direction when I first joined. For my first meeting as CEO I flew to California and asked, ‘OK, what is our goal and purpose?’ One of the first things I did was schedule a meeting for July 1 of last summer with the executive committee to create a new purpose statement. We needed a reason for existing.”<br /> <br /> While the WFCA works alongside all facets of the industry (including manufacturers, distributors, carpet cleaners, inspectors, installers and retailers), it was important for the WFCA to be more focused in 2014. “We have to look beyond Surfaces. And, we have to be more targeted – that’s why we created a new purpose statement. Our purpose statement says that the ‘WFCA exists to ensure the success and profitability of the specialty flooring dealer, and to stand for their common interest,” he said.<br /> <br /> Ensuring the success of the independent retailer means providing the necessary tools and resources.<br /> <br /> “I knew if we could get the independent retailer healthy, we could get the manufacturer healthy which in turn will help the distributors, installers, etc. Installers will tell you, if the retailer is healthy, their job is more secure. Same goes for the carpet cleaners and inspectors. We’ve identified the hub and wheel, and directed our attention there,” said Humphrey.<br /> <br /> Training is another key initiative for the WFCA in 2014.<br /> <br /> “We’re developing state-of-the-art online training. But we’re not in any way trying to take away from buying groups. Manufacturers already have good training, we’re just filling in the gaps,” said Humphrey.<br /> <br /> In fact, the WFCA is also placing a strong emphasis on co-existing with other organizations like the Carpet and Rug Institute (CRI), National Wood Flooring Association (NWFA) and the Resilient Floor Covering Institute (RFCI), to name a few.<br /> <br /> “Instead of discussing what’s not working, I want to get together to fix things. We’ve been in dialogue with other groups and associations on how we can get together to find a common ground and show the industry that we’re invested in fixing industry-related problems,” said Humphrey.<br /> <br /> The WFCA is also opening a new office in Dalton. “Now we have offices on both coasts. We’re centrally located which keeps us vital to the industry and allows us to reach out to different manufacturers and organizations,” said Humphrey. “We are refocusing on membership, our direction and what we exist for.”<br /> <br /> Lobbying for the Marketplace Fairness Act<br /> WFCA is also strengthening its stance in D.C., championing for the Marketplace Fairness Act and leveling the playing field for brick and mortar retailers when it comes to paying sales tax.<br /> <br /> “We have great lobbyists that represent us in D.C. who have helped us secure meetings with congressmen and congresswomen to discuss the reasons why the Marketplace Fairness Act is important for brick and mortar retailers. They shouldn’t be penalized for taking taxes, Internet sales should be taxed as well,” Humphrey stressed. “We got the Act through the Senate and we also got the Act into Congress too. We’re challenging Washington to understand the impact the Marketplace Fairness Act will have on retail. And, people were shocked to find out how many specialty retailers had gone out of business in the past 7 years,” he said.<br /> <br /> Another focus for WFCA in 2014 is its new magazine, Premier Flooring Retailer (PFR). Focused on its members, According to Humphrey, PFR is set to, “1. Enhance communication. During the recession, we saw 25 percent of our retailers go out of business. 2. Improve professionalism. Our members are already professional, but we want to help them stand out from the competition even more. 3. We want to help our members be more profitable.”

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