Free Newsletter
CALHOUN, Ga. – Price point increases are on Mohawk Inds.’ agenda as the flooring giant looks to offset raw material cost hikes.
On several occasions during the company’s earnings call, Chairman and CEO Jeffrey Lorberbaum alerted investors and analysts about the price increases being implemented across the business, including soft flooring.
“Our raw materials have risen, and we are increasing prices as necessary,” he said.
Lorberbaum later added: “We are implementing product price increases across the enterprise due to escalating material costs. … We are initiating many price increases across our portfolio which should cover our material costs in the third quarter.”
Price increase efforts already rolled out last year and are continuing this year.
“After implementing residential and commercial carpet price increases, we announced additional pricing actions in carpet and sheet vinyl in May due to unforeseen increases in our raw materials,” he explained. “We anticipate that these increases will cover our costs in the third quarter.”
First quarter results for Mohawk Industries included: a 16.5% jump in net earnings to $201 million, or $2.68 per diluted share, vs. $172 million, or $2.30 per diluted share; and a 2% net sales incline to $2.22 billion from last year’s $2.17 billion.
“Our sales and earnings per share set records for the first quarter with volume, mix and productivity adding approximately $60 million to operating income,” Lorberbaum noted. “Our operating margin for the quarter rose to 12.4%, a 110 basis point improvement over the prior year and the highest first quarter result in the company’s history.”
The Flooring North America Segment, which includes area rug, bath rug and mat division Mohawk Home, saw sales increase by 4% and operating income boost by 22% to a margin of 10%.
“Our residential carpet sales performed well in the period with ongoing strength from our proprietary SmartStrand franchise,” Lorberbaum said. “During the quarter, we introduced SmartStrand Silk Reserve, the next generation of ultra-soft carpet, which has extended our leadership in premium carpet. We anticipate continued sales improvement with our new tufted, printed and woven commercial carpet technologies, and we are extending our design leadership in carpet tile.”
When asked by an analyst about the performance of rugs, Lorberbaum shared his general outlook.
“Carpeting has lost share relative to total growth,” he said. “In the U.S., flooring is expected to grow 3% to 4%, with carpet flat to up a little, plus or minus, who knows.”
Looking ahead to the second quarter, Mohawk Inds. is projecting adjusted EPS of $3.53 to $3.62, including acquisitions.
And in the third quarter, he went on, “Higher pricing and productivity as well as lower currency headwinds should improve our results. As we stated last quarter, this year’s sales growth, prior to acquisitions, will be similar to last year, and our adjusted operating margin will increase slightly. We are investing at record levels with upfront start-up and marketing costs this year to enhance our long-term growth and make Mohawk a more profitable company.”
