The 42 members of the National Flooring Alliance (NFA) met in Nashville for the group’s fall meeting where three new board members were elected: A.J. Boyajiian, owner of AJ Rose Carpets & Floors in Weston, Mass.; Deb DeGraaf, co-owner of DeGraaf Interiors in Grand Rapids, Mich.; and Larry Flick, president of The Floor Store in San Francisco. We caught up with the group’s president, Jason McSwain, president of McSwain Carpets & Floors in Cincinnanti, to learn about the group’s NFA’s strategic focus going into 2020.
FT: Describe your approach to this year’s meeting.
McSwain: Each of the members came prepared to share, very specifically, gross profit within retail—just strip out new store acquisitions or openings, strip out your builder and your commercial, and drill down and look at year-over-year retail gross margin as a percent. It’s a metric that helps identify a healthy retail company. If it’s trending down, if it’s trending up, what are the indicators?
To have 42 members prepare in advance helps each one of them really dig into their margin number and explain why it's going up, or why it's going down. Our members can return to their businesses with eight or nine valuable ideas to put in place, study more, or have their finance teams figure out how they can replicate a positive trend shared by fellow member.
FT: What were the takeaways from that exercise?
McSwain: It was encouraging to hear that two or three members had a five percentage point increase. And even in a couple of cases the revenue might've gone down, but their margin went up that much and they are up in total margin dollars—that obviously helps to increase N/I and cover expenses. Those are numbers that most retailers guard and they don’t want to share, but that's unique in our group because they don't mind. It takes humility and trust within the membership for a very solid retailer to share, “Hey, we're down in margin; or revenue, but we understand where it’s coming from.” The group as a whole benefits from one another.
FT: What does the LVT and rigid core business look like among NFA members?
McSwain: A couple of retailers have actually had a significant margin increase because they now sell more LVT and plank products. I think the takeaway on that topic was the misnomer that because you're selling plank doesn't mean your margin has to just drop a couple points. It's across the board in terms of quality. There are a few retailers who focus on high fashion, higher margin products, there are some that are on the other spectrum, and others that are in between.
FT: What’s happening with soft surface?
McSwain: Steve Hendricks of RC Willey [Salt Lake City] had a phenomenal summer working with carpet vendors, particularly working the Stainmaster component, and working within those manufacturers. Overall, it is clear a number of our members value the brand value of a Staimaster nylon 6,6 well-constructed, fashionable product. It allows those members to retain higher Gross profit by selling features/benefits the female consumer values. Tuftex does that well, Dixie does that well, Guilistan and Phenix does that well, and a number of our members want to see more of that. We are asking our manufacturers to continue to create that innovative styling and design with the brand recognition Stainmaster has.
That comes back to margin opportunity. We can get better margins when customers can get excited about the benefits that Pet Protect product could have with pets (as pets continue to take over the house) yet consumers who don't want to sacrifice fashion or design. In general, if consumers move to hard surface, that is generally a lower margin for the retailer. Carpet margins are higher, the simplicity of the install, you're in and out in a day compared to hard surface where you might have a couple of days for install, compounded by trims/transitions. Some members within our group really see the enhanced margin opportunities that occur with a well known fiber system that allows us to be more profitable delivering what the consumer wants: a superior performing carpet for today’s active household.
FT: What’s the group’s take on the hardwood category?
McSwain: Our hardwood committee is transitioning leadership this year from Ian Newton of Flooring 101 [with five locations in around Ventura County, Calif.] to Jason Waggoner from ICC [Indianapolis, Ind.]. There have been very positive developments with AHF and their hardwood platform and what our members can take to market. For us [in Ohio], retail hardwood is a very large component of our retail offering including sand and finish, so I’m very excited to have the focus that AHF—Brian Carson, Steve Staikos and the team—are putting in and how they're already bringing new products that we can sell.
Just like the Stainmaster, a quality hardwood with great visuals adds a layer of profit for the retail salesperson and helps us grow our gross profit. Even AHF would say hardwood is not has glamorous currently; doesn't get as much attention as [rigid core] planks, but for a number of discerning customers, hardwood is a warm, natural, authentic visual that they desire. It's good for the customer and also can be a good return for us. AHF is focused on accomplishing both these.
For more information, visit www.nationalflooringalliance.com.