• Cecile Corral

Mohawk Sharpens Game Plan

Calhoun, Ga. — Mohawk Industries' soft flooring segment, Mohawk, was not a strong performer for the company during its just-ended third quarter. “We didn't do as well as I'd like to do on the Mohawk side,” said chairman and ceo Jeffrey Lorberbaum on the analysts conference call. Lorberbaum cited a “challenging environment” for the division, with industry units off by about 20% from their peak.

But the unit has potential, he said, emphasizing the company is taking steps “to get it where we'd like it to be.” Elements of the plan include:

  • Carpet price increases. “There is a higher level of promotions and pressures on commodity products in the industry,” said Lorberbaum, noting, “Our raw material costs stabilized during the third quarter — and remain difficult to predict.”

  • Shutting facilities, including a staple yarn plant and a tufting plant — “because of shifts in demand and cost reductions.”

  • Accelerating introductions in key categories and focusing sales and promotions efforts on such promising areas as multi-family, higher-end replacement and commercial — in light of continued slowing of residential demand.

  • New trademarked Mohawk SmartStrand carpet featuring DuPont Sorona corn-based polymer — “an additional feature that adds value to the already successful Premium collection,” Lorberbaum said.

  • Exiting from its flat-weaving business, which was primarily used to make throws but also manufacture red decorative pillows, some blankets and other home textiles accessories.

On a related note, when asked by an analyst about the Mohawk segment's current yarn mix versus a year ago, Lorberbaum said, “The nylon filament and polyester categories are doing better, and polypropylene and staple nylon are doing worse.”

Mohawk Industries reported net earnings of $122 million for the third quarter, down 4.7% from $128 million from the same period one year ago. Sales fell 4% to $1.9 billion.

Year to date, earnings of $328 million were up slightly from $326 one year ago. Sales were off 4% to $5.8 billion.

The company's gross margins have held remarkably steady, while SG&A costs crept up 70 basis points to 17.8% in the third quarter from 17.1% a year ago; costs are up 50 basis points year to date.

Mohawk Industries

Qtr. 9/29 ($millions) 2007 2006 % CHANGE
a. Net earnings and earnings per share in 2007 include a charge of $14.2 million before tax ($0.13 per share) related to plant closings in the Mohawk and Dal-Tile segments.
b. In the third quarter of 2006, net earnings and EPS included a benefit of $8.8 million before tax ($0.08 per share) related to a refund from U.S. Customs.
c. Net earnings and EPS in the first nine months 2006 included a benefit of $15.1 million before tax ($0.14 per share) related to a refund from U.S. Customs..
Sales $1,938 $2,024 (4.2)%
Oper. Income (EBIT) 201 223 (9.9)
Net income 122a 128b (4.7)
Per share (diluted) 1.79a 1.89b (5.3)
Average gross margin 28.1% 28.1%
SG&A expenses 17.8% 17.1%
Sales $5,779 $6,007 (3.8)%
Oper. Income (EBIT) 570 610 (6.6)
Net income 328a 326c 0.6
Per share(diluted) 4.81a 4.82c
Average gross margin 28.1% 27.9%
SG&A expenses 18.3% 17.8%

Cecile CorralCecile Corral | Senior Product Editor, Home & Textiles Today

Cecile B. Corral has been a product editor with Home Textiles Today since late 2000. She covers the area and accent rug, kitchen textiles, table linens, beach towels, decorative bath and decorative pillow categories, as well as some retail subjects.

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