Mohawk Industries reported rising interest rates and slower economic growth curbed sales of flooring in the first quarter of 2023 as inflation continued to push up production costs.
First quarter net sales were $2.8 billion for the period ending April 1, 2023, a decrease of 6.9%, from $3 billion for the first quarter for 2022. Flooring North America sales decreased 11.1%.
Earnings fo the first quarter 2023 were $80.2 million, a 67% decrease compared to earnings of $245.3 million in the same period last year.
Commenting on Mohawk Industries’ first quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated:
“All of our businesses are adapting our strategies to a more challenging environment. We are managing our costs while investing in both our short and long-term growth. We exceeded our earnings expectations with the business maintaining higher pricing and stronger mix, and Flooring Rest of the World outperforming the other segments. The commercial channel continued to be stronger than residential with home remodeling projects being postponed and new housing construction being impacted by higher mortgage rates. Our balance sheet remains strong, and we generated $129 million of free cash flow in the quarter.”
Lorberbaum said the company continues to invest in new product innovation, enhanced merchandising and customer trade shows to improve sales.
"Our customers remained conservative with their inventory commitments, and our operations are running at lower utilization levels, creating higher costs from unabsorbed overhead," he added.
Sales in Flooring North America Segment sales decreased 11.1%. The company reports the segment has been challenged by significant inflation, higher interest rates and more restrictive lending, which have weakened the housing market and the industry, and as a result, customers are more tightly managing their inventory levels.
Commercial sales remained solid with new construction and remodeling projects continuing in most channels. The multifamily business remains the strongest category in residential, and we the company is expanding its participation in the channel. The U.S. LVT market is becoming more competitive as the industry slows and ocean freight costs decline. Imports from Asia are being interrupted as the U.S. requires proof of supply chain compliance as part of the forced labor protection act.
Mohawk's West Coast LVT plant is continuing to ramp up and production will increase as we move through the year. Sheet vinyl sales are outperforming as consumers seek more budget-oriented options. During the quarter, laminate sales in retail expanded with its increased acceptance as a waterproof alternative, though volumes in the other channels declined.
