Mohawk Industries Reports Q1 Results

CALHOUN, Ga., April 25, 2024 (GLOBE NEWSWIRE) -- Mohawk Industries, Inc. (NYSE: MHK) today announced first quarter 2024 net earnings of $105 million and earnings per share (“EPS”) of $1.64; adjusted net earnings were $119 million, and adjusted EPS was $1.86. Net sales for the first quarter of 2024 were $2.7 billion, a decrease of 4.5% as reported and 5.5% on a legacy and constant basis versus the prior year. During the first quarter of 2023, the Company reported net sales of $2.8 billion, net earnings of $80 million and EPS of $1.26; adjusted net earnings were $112 million, and adjusted EPS was $1.75.

Commenting on the Company’s first quarter results, Chairman and CEO Jeff Lorberbaum stated, “Though economic headwinds are impacting industry sales, margins and mix, our first quarter results reflected the positive effect of actions we are taking to enhance our performance. Our earnings per share rose year over year as a result of restructuring, productivity initiatives and benefits from lower cost raw materials and energy, partially offset by weaker pricing and mix.

Across our regions, market conditions remained similar to the prior quarter, with significant pricing and mix pressure due to industry competition for volume. Though slowing, the commercial channel continues to outperform residential. Residential remodeling remains soft due to low housing sales and the impact of inflation on discretionary spending. Retailers have reported that consumers are reluctant to initiate higher ticket projects, with flooring facing greater pressure since most replacements can be readily deferred.

Our teams remain focused on managing through the near-term environment, realizing sales opportunities, reducing controllable costs and completing restructuring initiatives. We continue to manage our production levels to align inventories with market demand. To stimulate sales, we are investing in new product introductions with enhanced features and merchandising that conveys the value of our collections. Given inflationary pressures in labor, benefits and other items, we continue to take additional actions to reduce our cost structure and improve productivity.

For the first quarter, the Global Ceramic Segment reported a 1.4% decline in net sales as reported, or a 5.0% decline on a legacy and constant basis, versus the prior year. The Segment’s operating margin was 4.7% as reported, or 5.0% on an adjusted basis, as a result of the unfavorable impact of price and product mix and foreign exchange headwinds, partially offset by lower input costs and productivity gains. Across the segment, our investments in new printing, polishing and rectifying technologies are delivering higher value styles and formats to improve our mix. We are introducing decorative innovations with new glazes, three-dimensional surfaces and updated artisanal mosaics. In the U.S., weather caused the suspension of operations at a number of our manufacturing facilities and service centers in January, impacting our cost and revenue. In addition, the U.S. ceramic tile industry has filed a petition against India in response to widespread dumping of ceramic tile in the U.S. market and expects tariffs between 400-800% plus additional duties for subsidies. Other countries where we operate are considering similar actions against India. In Europe, we are seeing robust growth in porcelain panel sales after our recent capacity expansion, and sales have also benefited from our new premium products. In Mexico and Brazil, we are optimizing our sales and improving our operations. We are implementing new distribution and product strategies in each country, so our brands complement each other in the marketplace.

During the first quarter, our Flooring Rest of the World Segment’s net sales decreased by 7.4% as reported, or 5.9% on a constant basis, versus the prior year. The Segment’s operating margin was 9.7% as reported, or 10.1% on an adjusted basis, as a result of the unfavorable impact of price and product mix, partially offset by lower input costs, less restructuring, higher sales volume and productivity gains. Our markets remained soft despite declining inflation. In the quarter, our volumes increased from the prior year’s low levels, which may be an indication of improving trends in our categories. Our results were impacted by pricing pressures as we passed through lower input costs in highly competitive markets. We have completed the restructuring of our residential LVT program with the savings we anticipated. The change is delivering substantial growth in sales of our rigid LVT, which is replacing our discontinued flexible products. In insulation, we have recently experienced material increases and are raising our prices accordingly. In our panels business, margins have declined from cyclically high comparisons due to the underutilization of industry capacity, partially offset by mix improvement in our decorative collections. We have announced selective price increases in panels to reflect rising material costs.

In the first quarter, our Flooring North America Segment sales declined 5.6% versus the prior year. The Segment’s operating margin was 5.0% as reported, or 5.3% on an adjusted basis, as a result of lower input costs and productivity gains, partially offset by the unfavorable impact of price and product mix. Sales improved through the quarter, though many retailers and some of our facilities were temporarily closed in January due to weather. Based on builder optimism, new single-family home sales should improve through the year, positively impacting our flooring business. Commercial sales continue to outperform residential, led by the specified hospitality, retail and government channels. Retailers are embracing our new residential product launches, including PetPremier carpet and our award-winning PureTech resilient planks. We are optimizing sales of our coordinated accessories and rubber trim business, and we are growing our non-woven business with new customers and product expansions. Our West Coast LVT facility is increasing production, and our Georgia LVT restructuring initiatives are being implemented.

The flooring industry appears to be at the bottom of this cycle, and we are managing the controllable aspects of our business to improve our results. We continue to reduce our costs through ongoing restructuring actions and additional productivity initiatives. We are aligning production with market demand to control working capital, which increases our unabsorbed overhead. To enhance sales and margins, we are upgrading our product offering with unique features and investing in new merchandising. This year we are completing our LVT, quartz countertop and premium laminate expansion projects to support our products with the greatest growth potential when the market recovers. Our other capital investments are focused on reducing cost, delivering product innovation or maintaining the business. Due to European vacation schedules, our second quarter sales are seasonally higher than the third quarter. Given these factors, we anticipate our second quarter adjusted EPS to be between $2.68 and $2.78, excluding any restructuring or other one-time charges.

Residential flooring sales should lead the recovery as consumer confidence improves, the housing market strengthens, and postponed remodeling projects are initiated. Existing home sales will normalize and are a meaningful catalyst for flooring since homeowners replace it more often before listing a property or soon after completing a purchase. Across our geographies, housing has not kept pace with household formations, and substantial home construction will be required for many years to satisfy those needs. Additionally, as homes age, increased remodeling investments are required to maintain property values. As the world’s largest flooring manufacturer, we expect to significantly benefit from our brand leadership, investments in new capabilities and recent acquisitions as the flooring market recovers. We have the products to inspire consumers, the infrastructure to deliver superior service and the balance sheet strength to invest in opportunities for the business.”

ABOUT MOHAWK INDUSTRIES

Mohawk Industries is the leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. Mohawk’s vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Our industry leading innovation has yielded products and technologies that differentiate our brands in the marketplace and satisfy all remodeling and new construction requirements. Our brands are among the most recognized in the industry and include American Olean, Daltile, Durkan, Eliane, Elizabeth, Feltex, GH Commercial, Godfrey Hirst, Grupo Daltile, IVC Commercial, IVC Home, Karastan, Marazzi, Mohawk, Mohawk Group, Mohawk Home, Pergo, Quick-Step, Unilin and Vitromex. During the past two decades, Mohawk has transformed its business from an American carpet manufacturer into the world’s largest flooring company with operations in Australia, Brazil, Europe, Malaysia, Mexico, New Zealand, Russia and the United States.

Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies and similar matters and those that include the words “could,” “should,” “believes,” “anticipates,” “expects,” and “estimates,” or similar expressions constitute “forward-looking statements.” For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; inflation and deflation in freight, raw material prices and other input costs; inflation and deflation in consumer markets; currency fluctuations; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company’s products; impairment charges; identification and consummation of acquisitions on favorable terms, if at all; integration of acquisitions; international operations; introduction of new products; rationalization of operations; taxes and tax reform; product and other claims; litigation; geopolitical conflict; regulatory and political changes in the jurisdictions in which the Company does business; and other risks identified in Mohawk’s SEC reports and public announcements.

Conference call Friday, April 26, 2024, at 11:00 AM Eastern Time

To participate in the conference call via the Internet, please visit http://ir.mohawkind.com/events/event-details/mohawk-industries-inc-1st-quarter-2024-earnings-call. To participate in the conference call via telephone, register in advance at https://dpregister.com/sreg/10188065/fc2a593c61 to receive a unique personal identification number. You can also dial 1-833-630-1962 (U.S./Canada) or 1-412-317-1843 (international) on the day of the call for operator assistance. A replay will be available until May 24, 2024, by dialing 1-877-344-7529 (U.S./Canada) or 1-412-317-0088 (international) and entering access code #5217402.

⁽¹⁾Includes accelerated depreciation of $8.0 for Q2 2023, ($0.5) for Q3 2023, $2.6 for Q4 2023 and $2.4 for Q1 2024.

The Company supplements its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, with certain non-GAAP financial measures. As required by the Securities and Exchange Commission rules, the tables above present a reconciliation of the Company’s non-GAAP financial measures to the most directly comparable US GAAP measure.  Each of the non-GAAP measures set forth above should be considered in addition to the comparable US GAAP measure, and may not be comparable to similarly titled measures reported by other companies. The Company believes these non-GAAP measures, when reconciled to the corresponding US GAAP measure, help its investors as follows: Non-GAAP revenue measures that assist in identifying growth trends and in comparisons of revenue with prior and future periods and non-GAAP profitability measures that assist in understanding the long-term profitability trends of the Company's business and in comparisons of its profits with prior and future periods.

The Company excludes certain items from its non-GAAP revenue measures because these items can vary dramatically between periods and can obscure underlying business trends. Items excluded from the Company’s non-GAAP revenue measures include: foreign currency transactions and translation; more or fewer shipping days in a period and the impact of acquisitions.

The Company excludes certain items from its non-GAAP profitability measures because these items may not be indicative of, or are unrelated to, the Company's core operating performance. Items excluded from the Company's non-GAAP profitability measures include: restructuring, acquisition and integration-related and other costs, legal settlements, reserves and fees, impairment of goodwill and indefinite-lived intangibles, acquisition purchase accounting, including inventory step-up from purchase accounting, adjustments of indemnification asset, adjustments of uncertain tax position and European tax restructuring.