Mohawk announced net sales for the second quarter of 2023 were $3.0 billion, a decrease of 6.4%, and net earnings of $101 million for the period ending July 1, 2023, compared to net sales of $3.2 billion and net earnings of $280 million for the same period last year. 

Jeffrey S. Lorberbaum, chairman and CEO, reported that typical of housing recessions, higher interest rates and inflation are significantly impacting flooring sales around the world:  

"To manage, we are selectively investing to increase sales and reducing expenses by enhancing productivity, consolidating distribution points and improving administrative efficiencies. In the quarter, we initiated restructuring and integration actions that should save $35 million annually at a total cost of approximately $17 million. We anticipate half of the estimated savings should be realized in the current year, partially offsetting weak residential remodeling activity. In addition, we are limiting future capital investments to those delivering significant sales, margin and operational improvements. In all our regions, we are taking actions to increase sales, including promotions, retailer incentives and selective product launches. The integration of our recent acquisitions is progressing as we combine strategies and enhance their manufacturing and product offering."

Residential remodeling remains the industry's greatest headwind due to lower home sales and deferred home improvement projects. In the U.S., the housing market remains under pressure due to limited supply, high interest rates and continued inflation. Existing homeowners are not moving at historical levels to maintain their low mortgage rates. In the second quarter, new U.S. home starts increased to an annual rate of 1.45 million, the first quarterly increase since the beginning of last year. The company reported sheet vinyl collections are outperforming as consumers trade down to lower-priced alternatives.

"We believe channel inventories have declined and could be at a bottom," Lorberbaum said. "We believe the trend in housing starts will continue and will positively impact flooring shipments in the future.

In the second quarter, our Flooring North America Segment sales declined 8.9% and the segment's operating margin was 3.7% as a result of unfavorable pricing and product mix along with reduced volumes and temporary shutdowns, partially offset by lower inflation.

The U.S. commercial sector has proven more resilient as businesses continue to invest in new construction and remodeling projects, though we are experiencing some mix pressure as customers seek to maintain budgets. The July Architectural Billing Index reflected a stable environment for new projects.

Lorberbaum said:

"At Mohawk, we are taking the necessary steps to manage today's challenges while preparing for tomorrow's opportunities. When central banks shift their focus to a more balanced approach, our business will accelerate as the industry recovers. In all our regions, housing is in short supply, aging homes are in need of remodeling and businesses will invest to grow in more favorable conditions. These factors will create higher growth for flooring, and our investments in capacity expansions and our recent acquisitions will further enhance our results.”