Mohawk Sharpens Game Plan
October 29, 2007,
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.
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 $5.8 billion.
The company's gross margins have held remarkably steady, while SG&A costs crept up 70 basis points to 17.8% in the third quarter from 17.1% a year ago; costs are up 50 basis points year to date.
|Qtr. 9/29 ($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..
|Oper. Income (EBIT)||201||223||(9.9)|
|Per share (diluted)||1.79a||1.89b||(5.3)|
|Average gross margin||28.1%||28.1%||—|
|Oper. Income (EBIT)||570||610||(6.6)|
|Average gross margin||28.1%||27.9%||—|