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Cecile Corral

Rug Suppliers Found Plush 2004

Signs Point To Strong Traffic and Sales in 2005 As Well

New York — In 2004, price hikes for raw materials, heightened direct-importing activity by retailers and retail price-point cutbacks represented the most challenging hurdles that area and accent rug players have had to face.

And yet, they managed it. By sacrificing margins, seeking new avenues of business and further developing their products, the industry accrued a 5.3 percent increase in retail sales, bringing the total to $5.9 billion over 2003's $5.6 billion.

At retail, suppliers' hard work paid off, not only driving up traffic and sales but promising growth this New Year as well.

Expo Design Center, based in Atlanta, came off a “great year,” according to Jeanne Love, soft flooring product merchant. The company is currently restructuring that department “to create more excitement” for shoppers.

Earlier this year, Hoffman Estates, Ill.-based The Great Indoors repositioned its rug department to give better exposure to its scatter rug offerings.

Menomonee Falls, Wis.-based Kohl's is seeing continued growth in its area rug business, as well as growth in its scatter sizes, particularly kitchen rugs, said Gary Nickolie, area rug buyer.

While Portland, Ore.-based Fred Meyer “had a very decent year” in 2004 in area rugs and is moving forward with its broad offerings, from flokati to leather, noted Jacque Lemay, rug buyer.

San Francisco-based Restoration Hardware built up the rug offerings for its catalog and Internet divisions in 2004.

And Macy's Home Store, with the launch last fall of its re-invent model, grouped its area rug offerings for the first time by design in response to customers' shopping preferences. “We are looking to grow our rug category (this year),” said Keith Arlinghaus, senior rug buyer.

Keeping the momentum last year and now into 2005 for the category has not been an easy feat, suppliers admit.

Dalton, Ga.-based Shaw Living's Jeff Meadows, division vice president, said he believes the profitability at the manufacturing level “has been severely hurt by raw material price increases.”

Nodding to that is Mike Riley, executive vice president, sales and marketing, Dalton, Ga.-based Sphinx. “We've eaten the margins on price increases for raw materials,” Riley said.

Both Meadows and Wade Maples, president, Scottsboro, Ala.-based Maples Industries, noted that suppliers of raw materials and synthetic fibers raised their prices several times over the year, which caused some damage to their respective rug businesses. In the case of Maples Ind., which is tied with Shaw at second place of the top suppliers, the company reported flat sales — $150 million — for the category last year.

“Nylon prices in 2004 increased six times, growing each time by 4 or 5 percent, all the way to 8 percent, and polypropylene increased five times, also at the same (percentage) rate,” Meadows said. He added that soaring gasoline prices, “which increased by about 20 percent last year,” were another factor in this mix.

Shaw Living, which reported a 3 percent decline in rug sales in 2004 to $150 million, avoided heavier losses by pursuing new business with new distribution channels. “The best way to offset these issues is to pursue new business,” Meadows added. “Generating new business is very important (in this kind of business environment).”

Sugar Valley, Ga.-based Mohawk Home, the top rug supplier, last year reported flat sales for the category, blaming declining price points.

“The customer who used to buy a $299 product, now wants it at $199. To make any increases in sales, you've got to find a way to sell a lot more product,” said Merle Johnson, vice president, marketing. “Any one (of the top rug suppliers) who maintained their business had a great year.”

Mohawk said it has managed to do just that with its tufted rugs, particularly its shag rugs. “You can get all the texture with tufting,” she said. “It's a great look at the right price.”

Couristan, based in Fort Lee, N.J., typically a supplier of higher-end product, has recently added more competitively priced product, including indoor/outdoor synthetic rugs, to its offerings and has also relied on tufted rugs to help it ring sales.

“Tufted goods are going a long way in the handmade category,” said Larry Mahurter, director of advertising and sales. “They help keep prices down, compared to hand-knotted goods.”

He added that suppliers, without sacrificing quality, are finding “more and more ways to produce goods at a lower cost, for example, through new technology in fibers. The customer can still get design and quality but at a better price.”

Others exploring new product offerings to expand their distribution and remain competitive include West Warwick, R.I.-based Natco Home and Saddle Brook, N.J.-based Nourison. Natco, a longtime supplier of synthetic machine-made rugs, this January is launching for the first time a collection of handmade area rugs.

And Nourison has in recent years steadily grown its machine-made offerings.

“The dichotomy between handmade and machine-made rugs is less defined as it connects to pricing,” said Ed Vairo, director of creative marketing. “It's becoming less relevant. Generally speaking, our handmade rugs are more expensive. But our top-of-the-line machine-mades are more expensive than our mid-level handmade rugs.”

As construction becomes less of an issue, other factors have moved to the forefront, said Riley.

“The biggest move we see is the delineation between handmades and machine-mades and between wools and synthetics,” he said. “Now, it's about color, design and quality.”

Distribution Channels
Total 2004 area rug sales: $5.9 Billion

In $Millions 2004 % 2004 $
*Other includes interior designers and military exchanges.
Home textiles specialty chains 5% $295
Single unit specialty stores 1 59
Department stores 5 295
Mid-price chains 5 295
Discount departments stores 23 1,357
Off-price chains 5 295
Variety/closeout 3 177
Direct-to-consumer 7 413
Warehouse clubs 2 118
Carpet/floorcovering stores 9 531
Home improvement centers 9 531
Furniture stores 17 1,003
Gift/home accent stores 7 413
Other* 2 118


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