Xtra Bold Sophistication carpet by Karastan
Think of the residential carpet segment in terms of the seven-day weather outlook. Today is Monday, and it’s damp and dreary, much the way 2024 has played out; tomorrow (2025) shows signs of improvement, while the weekend (beyond 2025) offers the promise of sunshine returning to the market.
Mill executives are looking forward to that weekend forecast as they grind through another tough year for a category that hit its high-water mark immediately after COVID-19 and has suffered ever since with double-digit declines in sales and volume.
“The residential carpet segment is very weak; it has now moved into its third cycle of year- over-year decline, which started in mid-2022,” said T.M. Nuckols, president of the residential division of The Dixie Group. “Compared to its revenue peak in mid-2021, residential carpet has declined over 25%. That is a significant decline.”
Fabrica Cirrus, made with EnVision Nylon, is featured in The Dixie Group’s Step Into Color campaign.
It’s not difficult to identify culprits for this decline, either. Hamstrung by inflation and high interest rates for 2-plus years now, existing home sales have fallen significantly. In turn, this has impacted the residential replacement carpet subsegment, which has affected residential carpet and multifamily, the two largest subsegments. “Unless you have a flood, fire or other unexpected issue, new carpet for your bedroom or basement is a deferrable purchase, and many would-be consumers are waiting for better days to make that investment,” Nuckols said.
Executives hoping for an immediate jolt following the Fed’s 50-basis point interest rate cut in September will have to be patient. After all, it takes time to turn a ship around, which in this case is the largest flooring segment by volume, accounting for 44.3% of the overall 17.727 billion square-foot flooring market in 2023.
Some executives suggest (hope?) that in the next six months business will return to its baseline and perhaps even rise a bit. Others are not quite there yet. “I am actually optimistic about the next six to 12 months just because interest rates are dropping and inflation has slowed,” said Jamie Welborn, senior vice president of residential carpet product development for Mohawk Industries. “There is pent-up demand out there, and we need to give consumers a reason to spend. The real estate market is the key because we know buying and selling of homes spurs remodel. I think another interest rate cut will give consumers more confidence.”
Count Stanton among those bullish on 2025’s prospects. “The next six to 12 months should be good for carpet as we are seeing a trend toward softening hard surfaces with rugs and a reinvigorated interest in wall to wall,” said Trey Thames, senior vice president of soft surface. “Elevated designs offered in custom-sized rugs cut from broadloom, runners in kitchens, bathrooms, stairs and hallways continue to grow in popularity, meeting that need to further soften the hard surface areas throughout the home. We also anticipate that lower mortgage rates will help single- and multifamily construction and improve new and existing home sales. That coupled with refinancing should equate to more demand for carpet.”
Engineered Floors’ solution-dyed products include twistX products like Valter.
Others are more reserved in their near-term outlook. “We are being conservative with our budgeting efforts for 2025,” said Al Boulogne, senior vice president, residential product & marketing for Mannington, which oversees the Phenix Flooring brand. “We think it may be mid-year before we see any real market recovery. That being said, the activity this fall has been positive and the housing market indicators are starting to show some signs of life. Our hope is that we are being pessimistic and that we will start 2025 strong.”
Warren Whitfield, divisional VP, fibers and residential soft surface for Shaw Industries, took a more macro view. “Lower mortgage rates and more disposable income traditionally translate to an increase in home buying and residential remodel activity,” he said. “Our data indicates pent-up demand is currently not being serviced due to affordability. As these tensions ease, we would expect this pent-up demand to be released and overall flooring sales to improve; however, we would not expect an immediate response after a mortgage rate decrease but rather a gradual improvement through 2025.”
The fight to maintain share
As flooring executives are all too familiar, soft surface’s market share vs. hard surface continues to erode, down 0.7% in 2023 vs. 2022. To put things into greater perspective, 10 years ago carpet made up 63.4% of the market in terms of volume. Fifteen years ago, carpet commanded 67.7% of the market in volume—a difference of 23 percentage points from today’s numbers.
Tarkett Home continues to expand its line using its Cloud 9 fiber. Shown is Marguerita Crystal Cove.
On an encouraging note, mill executives say they are seeing carpet losing less share as a percentage of the market for the first time in a while, a sign that soft surface may be finding its equilibrium. Today roughly 30% of the total residential flooring space is devoted to carpet, according to executives. “While hard surface continues to take share from soft surface, the rate that hard surface is taking has slowed down,” Mohawk’s Welborn said. “We don’t see hard surface taking as much share as it has in the past year but we’re not sure that carpet’s share loss hasn’t bottomed out yet. We can see it going to 27% to 28% in the next five years.”
As flooring becomes hard surface dominant, mills have responded with broadloom offerings that complement hard surface; in some cases, they have developed their own custom rug programs to pair with hard surface. The market share waning has also inspired mills to raise their level of play and meet the demands of consumers. “While hard surface continues to enjoy unprecedented growth in the residential flooring category, it has forced carpet manufacturing to evolve and become increasingly more innovative,” said James Lesslie, president and COO of Engineered Floors. “That’s something Engineered Floors isn’t afraid to do. Whether through fiber technology resulting in advancements in durability, stain prevention or color fastness, carpet will always have its place.”
Outlook brightens
Anderson Tuftex Pet Perfect carpets are designed for the more discerning luxury customers.
The industry forecast for residential carpet gets decidedly brighter beyond 2024. That’s when mill executives expect to see a more favorable housing market with lower mortgage rates unleashing pent-up demand and demographic trends that favor more activity. “We are modestly optimistic that we will see the market bounce back throughout 2025,” noted Travis Cramer, senior director product management, Tarkett Home. “With consumers less frequently moving from their current home, there will be pent-up demand for residential replacement in retail. Carpet also offers unique benefits; its comfort underfoot, acoustical properties and styling with texture and depth are key attributes that continue to drive sales in the soft surface category.”
Longer-term, demographics may play a more meaningful role in carpet’s resurgence, TDG’s Nuckols said. “We have baby boomers downsizing and/ or moving into senior living communities. We have younger generations ready to get into single-family homes. With record immigration occurring in recent years, we have a general population that is increasing in number. All these dynamics put us in position where there is not enough housing available. So, the underlying market forces are in place for a strong rebound.”
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