Carpet sales stagnate for The Dixie Group, Mohawk Industries

Carpet sales stagnate for The Dixie Group, Mohawk Industries

August 3rd, 2012 by Ellis Smith in Business Around the Region

Carpet sales fell in the second quarter, as both Chattanooga-based The Dixie Group and Mohawk Industries, based in Calhoun, Ga., reported revenue decreases.

While Mohawk was able to turn the sales slide into an earnings boost, Dixie lost $404,000 during the quarter, or 3 cents per share, compared with a profit of $808,000, or 6 cents per share in the second quarter of 2011.

"Continued uncertainty in the economy has resulted in a softer sales period that we expect may continue throughout the summer," said Dan Frierson, president and CEO of Dixie.

Mohawk's second-quarter sales fell slightly to $1.469 billion from $1.477 billion, though the company said that would actually represent a 2 percent increase on a constant exchange rate.

Earnings at Mohawk, meanwhile, grew to $79 million during the quarter, or $1.14 per share excluding one-time expenses. That bested Wall Street's guess by a penny.

Mohawk's earnings growth represented a significant increase from the second quarter of 2011, when Mohawk reported adjusted earnings of $66 million, or 95 cents per share.

During the quarter, Mohawk fought off sluggish sales and high petroleum prices with price increases, productivity gains and lower debt payments, said Jeffrey Lorberbaum, chairman and CEO of Mohawk.

"Carpet sales for both the industry and Mohawk were approximately flat compared to last year with residential remodeling activity slow," Lorberbaum said. "Selling prices offsetting raw material inflation, productivity gains, product mix improvements and lower interest costs all contributed to our results."

His outlook dovetailed with Frierson's: it was a tough quarter.

"Favorable activity early in the year slowed as we got later into the quarter," Frierson said. "We expect this slower pace to continue throughout the summer months."

As carpet-buying consumers put their plans on hold, Dixie slipped to $66.5 million in sales from $69.2 million in the second quarter of 2011.

But things could always be worse.

Though Dixie's commercial market declined, the carpetmaker saw some sales growth in the residential sector, Frierson said.

"Our strategy of continuing to invest in new products during this slow economic recovery has proven successful," he said.

Mohawk isn't sitting around doing nothing, either.

The flooring giant grew tile sales 7 percent during the quarter in the Mexican market as Mohawk brought its new Salamanca facility online, and Mohawk's Russian facility is steadily increasing production, the company reported.

The company plans to earn between 96 cents and $1.06 per share in the third quarter, despite slowing sales in the second quarter.

Even as the European market slows, "U.S. order rates have shown some improvement as we began the third quarter," Lorberbaum said. "In the U.S. , low mortgage rates and higher housing starts should support future flooring sales."

The Dixie Group ended the trading day with its stock up 17 cents to $3.50, an increase of 5.1 percent. Mohawk Industries' shares increased in value by 25 cents to $66.02, a 0.38 percent increase.