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Rug Forecast: Cloudy, Silver Lining

Early retail sales this holiday season, at stores and online, are encouraging rug suppliers amidst an oil-price-battered economy and slouching housing market.

Manufacturers in the area and accent rug category have had much to worry about lately. Furniture retailers, a large distribution base for many rug vendors, have been experiencing slow sales. That lethargy is compounded by rising prices for oil-based synthetic fibers used to make many floor coverings, currency exchange woes, and related upswings in manufacturing costs overseas.

With the new year approaching, HTT asked top executives at some of the major rug suppliers nationwide to air their predictions for the area and accent rug business during the first six months of 2008.

Optimism is in the air, but the forecast overall is "cloudy," as John Shepherd of 828 International put it, and "gray" as noted by Dennis Fein of Welspun.

Read on to see others' thoughts on the near future of the rug industry's sales.


Arash Yaraghi, principal

"The home furnishings business is going to slow down in the first six months of next year. There are also going to be challenges next year with the slowdown of real estate and construction industries — this is all hand in hand with our business.

With elections coming up, things could change in the second half.

We happen to have a different picture in our own forecast because of what we've been doing this year with the two licensed programs. Our second offering for the Thomas O'Brien Collection was delivered in September and has been received very well and our projections for it are very good. The Martha Stewart collection's launch at Macy's has been strong. We're receiving very large orders not just from Macy's but other customers on a weekly basis.

So I expect, because of these two developments, that we'll have huge sales in the next six to eight months. We're lucky, in that sense, that we worked very hard in 2006 and 2007 on these projects. We invested a lot of money in design and advertising and promotion as well in factories with samples and all of that. And it's finally paying off."

Capel Inc.

Allen Robertson, vp sales

"Business is going to be tough in the spring — what else can I say, considering the housing decline.

But we think there is a great opportunity for furniture dealers to concentrate more on rugs and other accessory items. People are going back to basics, and they are refurbishing their homes, so they are looking for new rugs and accessories to redecorate and refresh their homes.

That makes our area become more important to furniture dealers: Instead of treating rugs like add-on sales, like it used to be, now the rugs will drive the customers into the stores.

We're trying to give the best value we can possibly offer at moderate price points, but with new fashion colors. We used to use chocolate in our higher-end hand-knotted rugs that sell for $2,000 to $3,000, but now we've added the color to our hand-tufted and machine-made medium level offerings for $500 to $1,000.

We think that is how you motivate people to come into the stores and inspire them to use new color palettes for their homes."


Alex Peykar, principal

"We continue to plan well beyond current forecasts, and expect to place exciting new products, as well as maintain many of our signature and best selling collections in stores worldwide.

In Atlanta, Nourison will introduce unique new machine tufted broadlooms that promise to bring some of the most innovative products to market in 2008. Nourison-owned factories will produce unprecedented constructions, designs and finishes in mid-level to luxury qualities.

While Nourison currently has a comfortable niche in the luxury residential, commercial and hospitality markets, these new additions will lead the way for all of broadloom's rapid growth … Finally, our domestics bath and scatter rugs division is expected to grow as major retailers continue to be added to our client base, and current clients expand sales in store and online."

Brumlow Home

Patrick Moyer, president

"At Brumlow Home, we are very optimistic about 2008. We believe that surface appeal and texture are the keys to area rug innovation right now. We are investing in equipment and yarn technologies that will allow us to bring uniquely styled products to the marketplace."

JLA Home

Gary Shafran, vp, rug division

"We foresee in 2008 a very positive reaction to our new products in handmade, machine-made and accent rugs. We see opportunities in the rug industry, even though there are signs of a difficult economy.

It's really the middle ground that will be most dangerous, in terms of product and pricing.

The right move is to come out with great value at opening price points and innovation at the high end of the market. You need to have value at the bottom and uniqueness at the top for the right mix, and we have that going forward."

828 International Trading Co.

John Shepherd, president

"The first six months of next year are sort of cloudy. How quickly we get out of this credit crunch and housing decline and start to show some renewal [is yet to be seen]. There are a lot of things eating the rug business, so I'd say the first six months will be challenging.

The machine-made manufacturers have all increased their prices or they are trying to, and a lot of that comes out of Belgium so that affects the dollar. Handmade products out of India and China have also gone up and it's mostly because of what has happened to the dollar.

The housing market is certainly a challenge, and gas prices are affecting people's disposable income.

We're looking at quite a bit of new product for January market. Price points are probably going up some, but we're bringing in some very nice product. It's still out there to be had.

We're looking at making additions to our existing product lines in both handmade and machine-made collections.

A new handmade collection is a tufted product and follows the same look and design direction as our Peshawar Grand Trunk Road collection.

It is easier to bring new product at higher prices than it is to raise existing prices.

[Some of] our new prices are higher than what they were six months ago, but they are higher to help us offset the higher manufacturing costs overseas.

Shaw Living

Kim Barta, brand manager

"For 2007 our biggest story has been environmental, and we will continue moving forward with this for 2008. In July, we launched our first recyclable rugs (they are also made with recycled content) — the Premiere and Natural Expressions collections.

The designs, colors and 'green' story have been very well received. But the story has evolved into [something bigger] now that all of our nylon area rugs are now recyclable

The rugs ship with a POP tag that retailers can place on the rug, drawing the consumer in and bringing awareness that the product is recyclable. The rugs also have a label on the back that tells our 'green' story of recyclability as well as direct the consumer to Collection Centers, which will take the rug and return to Shaw's EverGreen Recycling Facility, where the rug's nylon is then converted into new nylon for production of new carpet and area rugs.

In terms of design, the magic word is transitional. Contemporary continues to grow in popularity for younger customers, where some experimentation can be done without jeopardizing sales to a great extent.

But transitional designs — including florals scrolls, damasks and paisleys — bridge traditional to the contemporary and represent the largest group of customers. These are all images that can be tiled together in a patchwork arrangement.

Traditional rugs are a mainstay, but of late, the trend has been to create color combinations that are unusual that play up today's recent color trends — for example, brown and blue, coral and brown or the green and brown. In short, the best way to describe design direction is "casual."

Maples Industries

Arnold Stevens, vp

"If retail sales hold up, I think we're in a really good position to do well in the first six months of next year. As for the balance of all of 2008, who knows? I just think this is the type of environment, with all of the different things going on, that makes it very hard to predict for the full year.

Being a salesperson, I'm always going to be very optimistic by nature.

We think our Invista Comforel Two Point 99 fiber products are really going to do extremely well. That is the fiber a lot of retailers are looking at in terms of bath rugs and everything else. Comforel is getting placed at retail and will be important to help push the growth of the bath rug category.

In accent rugs, people are buying into texture and pattern, and some of that trend is spilling over into bath, also."

Mohawk Home

Jim Quist, vp sales

"In spite of a very difficult retail environment, we are projecting 8% to 10% growth in our rug business in 2008. Our link to the hard surface growth at Mohawk provides opportunities to leverage our brand and retail position.

We continue to enjoy a strong market share position, and we are expanding into new channels of distribution, like the furniture and rug dealers.

We see additional opportunities for growth as retailers have 'cleaned up' their inventories during 2007 and appear to be ready to move forward with new programs as we enter 2008."

Oriental Weavers USA

Mike Riley, president

"As I'm sure most in our industry have seen, the declining housing market, rising oil prices and devaluation of the dollar have certainly created challenges for the home category in 2007. We've all felt it, and while the situation is likely to continue into 2008, companies who are able to adapt to the market and are financially strong will remain the industry leaders.

While we do not expect an increase in 2008 industry sales, we are projecting our sales up and are counting on the continued weak economy to stress the inventories and operational levels of our competitors. We will continue to invest in people, product and inventory to weather the storm.

Style, service and value are absolutely necessary in today's retail environment. Consumers are looking for rugs they will keep around a lot longer, and as a result, expect more in both quality and service. They're willing to pay more for the right product and are less likely to change area rugs as frequently, meaning turns at retail must be maximized.

Sphinx is answering this call by continuously putting out new products in trend-setting colors and patterns that are made to last and offer live-ability for today's active households. Also, we've increased inventory so as to offer immediate delivery on nearly every product we make.

In this time of economic uncertainty, most companies really tighten up inventories which results in weaker service levels, especially in smaller to mid-sized companies. This is an advantage for us as we believe in the opposite approach. We are committed to 96% or better service levels at all times. At the end of the day, service and performance rule and the economy will not change that."

United Weavers

Diane Carleo, director of marketing and sales

"2007 has been a basically flat year for us with just a modest increase in sales. In spring of 2008, we're expecting a slightly higher increase simply because we've invested heavily in additional product qualities, designs and new outlets for our products.

Our creative marketing has placed medium-priced, machine-made olefin rugs in stores that have never sold rugs before. Unfortunately, the average top-selling retail price point continues to drop every year — $249.99 was good for a machine-made, then $199.99 became the standard, and now $149.99 to $169.99 is what many buyers are asking for. The problem is, raw-materials and freight have been rising and the industry as a whole is getting squeezed.

We're introducing a new collection called Traditions. It is an eight-color heat-set polypropylene with a soft plush yarn. A 6-by-9 is set to retail for $169.99. The collection come sin five sizes and 30 designs, which concentrate mostly on traditional and transitional looks.


Dennis Fein, director of floor covering sales and development

"The outlook for the next six months is a little gray. There are a lot of ups and downs in the stock market, a lot of ups and downs with petroleum.

And when you look specifically at the rug business, you've got a situation where all of the synthetic rugs are directly tied to petroleum. Right now it's hard to say because we're seeing a great start to the kick-off at retail of the holiday season, with strong sales at the stores and online. So, hopefully [economic issues] are not affecting the consumer the way some might think.

Whenever there is uncertainty in the economy, what will generate business is creativity and innovation. That will be what 2008 will be about, if we are to create demand for consumer purchasing.

We're working on a lot of different ideas for our new bath rug line — some will come to fruition at February market, some are performance-based concepts that will take more time to develop.

We're trying to think outside of the box, being a new player in this business, doing our entry into the category in February."

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