The Wrap – What I Learned in Flooring Hell
Plus a quick update on the earnings call evasion at Carvana and how management is creating an optical illusion in hopes of getting from here to there.
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▶If the past few weeks of cramming months of shopping for a full fast-track renovation into a few weeks proved nothing else, it’s that while the headline inflation numbers may suggest cooling, it’s not that simple. Examples include…
“Not going back.” That was the common refrain we heard on prices for everything from mirrors to lighting to cabinet handles, natural stone, countertop fabrication, etc., etc., especially for anything bought through a dealer or designer.
What’s more, while overall inflation may be milder, prices are continuing to rise at retail. We kept running into price increases. Like the Thermador appliances that were rising 8-10% on August 1. (It was a real price increase, and we got in two weeks under the wire thanks to the sales guy who reminded us two weeks before the hike.) Then there was the guy at RH RH 0.00%↑ last week who told us prices on some lights we had asked about – but aren’t buying! – were going up by 8% “tomorrow.” (Now, there was a store that was a morgue.)
Then there was flooring, where prices for everything except, it seems, natural stone are downright experiencing their own deflation. And while we blew our tile/marble/quartz budget, it was offset by all other flooring. Such as carpet, where we received a sharp discount off suggested retail on super-premium Mohawk MHK 0.00%↑-owned Karastan “Black Label” wool carpeting. Even the sales rep seemed stunned by the level of the discount, especially on “Black Label,” which debuted last year. Ditto for the CorTech premium-level luxury vinyl plank, which we chose over engineered wood because it was next-to-impossible to tell from the real thing… plus we were able to get it at 60% off list price. (CorTech is owned by Shaw, which is part of Berkshire Hathaway $BRK.) Once again, the saleswoman, who has been in flooring for 30 years, was stunned by both the fact that the carpet was discounted and the size of the discount.
That led me down a flooring rabbit hole into what I affectionately call flooring hell…
Early on, our contractor had suggested we head over to Floor and Decor FND 0.00%↑. I’ve heard what a well-run operation it is, but I've never done any level of research on it. Until, that is, a few weeks ago, when we spent eight hours over two days at a store that was always empty. (To be fair, apparently the parking lot outside tells a different story at 7 a.m. when the contractors show up to pick up their orders.) After buying some samples that we returned for full, easy refunds… we walked away empty-handed.
Our focus there was on marble tile, where their prices were often remarkably better than prices at independent tile retailers. After digging through more than a few sheets of marble tile from the same batch, impressed by the displays, we realized there’s a reason: while all marble has variances from piece to piece, whether it’s small or large tile, the visual differences here were far greater than you might expect from better marble. It’s as if FND gets the cast-offs from quality marble producers by packaging together marble from various batches, rather than from the same part of the mountain – then selling it to big-box stores and Floor and Decor.
Here’s the thing: not wanting my time at Floor and Decor to go to waste, I decided to take a deeper dive into the company. I didn’t get beyond what its management had been saying about luxury vinyl flooring, which upended the industry starting around a decade ago.
The industry’s loss was Floor and Decor’s gain, with vinyl and laminate (blue) becoming its single biggest seller…
While it still is, it has also become the company’s worst performer, turning negative in recent quarters…
In general, Floor and Decor’s growth reflects remodeling, and moving is one of the biggest historical drivers of remodeling demand. With so many people locked into low rates, fewer people are changing homes.
You can see that nowhere more clearly than in vinyl and laminate flooring.
This is where it gets interesting…