Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Mohawk Industries, Inc.

First Quarter 2023 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to James Brunk. Please go ahead.

James Brunk

Dave. you, Thank everyone. Good morning, Mohawk Industries' to investor quarterly Welcome call.

company's Jeff me President Executive Chief the today's second on and guidance XXXX. and are on call Lorberbaum, the you Officer; update Operating quarter Today, Chairman, quarter for Officer. performance provide Joining Chief we'll first and of Chris Wellborn,

Act this are that the forward-looking Securities include statements press and to Exchange defined in I'd filings everyone release periodic and but statements may our like uncertainties to with which that and release those not call and Securities of Litigation various risks limited Reform Private the our press our subject set remind we XXXX, make during including, in forth as Commission. to,

call This a numbers. include may discussion of non-GAAP

any our to refer in of please our release press non-GAAP Form and Investors amounts, to section the of website. GAAP For a X-K reconciliation

to turn the call now I'll for over opening comments. Jeff

Jeffrey Lorberbaum

Thanks, Jim.

net X.X% a $X.X and was quarter the were for the billion, XXXX, $X.XX. on X.X% sales or quarter approximately Mohawk's down constant adjusted reported EPS For of our first basis, as

maintaining earnings mix challenging other with businesses World segments. long-term All more to growth. a short- costs We're exceeded the for managing our and our We Flooring our strategies Rest our are while businesses and and adapting the investing of higher outperforming environment. pricing both expectations of

and housing being impacted construction The commercial mortgage channel projects continues to be stronger new remodeling being by than residential with postponed home rates. higher

merchandising $XXX customer we over new and remains million free improve enhanced balance Our invested strong, to sales. trade We in generated in cash of sheet product innovation, shows flow. strategically

processes and enterprise the We streamlining controlling productivity, costs are continuing across reduce enhancing to administrative expenses. by

and at historical We utilization and at input conservative higher almost the from prices levels, lower are our natural double overhead. costs dramatically, as remain operations gas of they have in utilization all levels. Our unabsorbed Europe, though capacity In decline. their dropped remain competition creating costs inventory increased industry see commitments customers running

wages as improve spending costs consumer rise, We expect energy fall. inflation and to slows

limited Our interest changing budget value and housing modeling inflation provide U.S. persistent are consumer options high supply, and new the home the habits In spending introductions rates their for impacting sales Lower suppressed category. product more market. conscious consumers. have

commercial promotions. marketing new We introductions, business with and targeted our initiatives maximizing are

our is residential the Brazil while more commercial. our Mexican similarly And higher demand reductions better, geographies, affected up business with other than with faces is more and slowing consumer interest economy inventories. holding Though in rates there challenges, slowed

of of track on America segments are Flooring in our business. Rest Flooring and and actions restructuring the improve Our World North results the should

capital process quartz We investments are greatest expanding to our margins growth constrained LVT, countertops, and include significant other products. slabs when porcelain premium that laminate, providing These those insulation economy and the our sales, the limiting category potential recovers. improvements. have We're

Mexico approximately Brazil those geographies. that ceramic and X million, market doubling We existing our in $XXX combined in of sales completed almost acquisitions had share in

production. We increase the our costs, optimize providing developing country, to each satisfy to all to points. offering beginning businesses we're In strategies and broader efficiencies improve using are brands product consolidate reduce combined to price sales and by

continue last the to we improve that bolt-on year. U.S. and acquisitions completed also We small Europe in

the Despite quarter, lower though first gas P&L. a falling electricity inflation costs natural results future energy will benefit remained headwind in flow our prices, and the as through

footprint. -- Our our solar, which green sustainable in both carbon wind strategy reduces includes in production and our of expenses biomass, from carbon investments energy both our

cost in improved Our lowered and our the energy our biomass plants quarter. X results

Italian have reduced reduce European purchased also energy at cost We of the at volatility. extended some future levels energy through been times subsidies second various our to quarter.

our call financial performance. turn Jim over his for of I'll to the review

James Brunk

as was reduction $X.X rebound The remodeling decrease offset in X.X% on acquisitions. compared driven or decrease billion. FX were XXXX, a basis, the residential to for of Thank X.X% QX you, a was pandemic just activity. COVID unfavorable still constant Sales the partially benefiting from reported and quarter over favorable as in mix by by a That's volume which and Jeff. price,

Ceramic unfavorable will in gains. which temporary will impact Gross sales new MD&A was plant volume, of be The of the and had and to of was price, our profit year. call. of productivity after the actual lower construction percentage Global was partially reported items onetime offset strongest decline inflation, detailed of the FX, XX.X% mix be quarter. XX.X% a a in commercial related as XX.X% excluding year-over-year percentage included shutdowns stronger and versus by amounts The XX-Q the the filed with prior larger items, as the due and these

a by favorable inflation, percentage price, in marketing drive driven product was increased expenses, as The was sales, reported. development as of increase primarily volume by FX XX.X% and SG&A to sales unfavorable in dollar offset mix, SG&A employee future productivity costs and initiatives. partially in year-over-year and

in excluding to marketing, million by offset margin, $XX year-over-year Flooring by decline product which associated Operating quarter, previously driven favorable North the world. These and gross charges, was higher margin, are is development reported mix costs other plant related inflation, of and related of gains. with and Flooring X.X%. cash. acquisitions and Rest was and lower million initiatives, productivity in margin similar primarily X.X% shutdowns to new as the the temporary partially Operating investments was and $X America announced charges charges price, in the volumes were mainly Restructuring, and

$XX million, higher Interest to primarily expense year-over-year, interest the was increasing due quarter the rates. for

quarter XX.X% prior was Our the non-GAAP year. the rate in tax XX.X% for versus

full be per share That variations. year expect QX's quarterly and and charges excluding to XX% $X.XX. approximately of tax XX% with XX% us an We to earnings to leads and as be $X.XX reported of rate between XX% to rate the

Overall, strongest billion. as acquisitions. the and X.X% home Global segments. basis. the and Volume on construction performance In were across favorable to decrease Turning outperformed a and had business partially sales commercial all new residential reported X.X% U.S. only as the FX were of declines offset $X.X remodeling. shy by Ceramic, decrease mix, just That's a regions price, constant gains year-over-year

Operating lower by plant in volumes all margin, X.X%, interest the favorable was partially short-term productivity price, due offset and excluding to rates higher gains. and mix geographies, slowing and declining resulting year-over-year charges, economies impacting shutdowns,

We integration results. Brazil, in future are our focusing CapEx growth and of to Mexico products drive acquisitions differentiated on expanding markets, and

sales the Flooring million. in year-over-year In down products businesses, our America, reported very and QX led XX.X% while categories saw were That's the soft XXXX, weakness volumes product commercial residential compared all of an constant North surface We as by strongest laminate year, had versus $XXX a robust basis. decrease on prior to still a as across and segment.

volumes the operating temporary with market due improvement leading to X.X%. the to trading The deferring housing plant margin and down was meet weakening in in Operating margin, excluding to was charges, consumers home shutdowns. budgets, and decline constrained lower projects

initiatives In product invested These as it marketing segment's mix development were and material by in the the headwinds expand partially margins absorbed price, future costs we peak also periods. sales. new addition, were and from productivity compressed prior gains. quarter, to In favorable offset

driven of which housing-related as impacting push Rest with to reported compared the including a World million. to installation energy. the as Flooring business, on maintained declined, sales our and constant significantly That's $XXX of unfavorable basis growth, flooring negatively by X.X% a further X% purchases products finally, positive And year-over-year FX our conserve a decline as

and due the production. partially shutdowns, Operating and from mix volumes to higher temporary offset inflation, margin, plant favorable lower excluding our charges, prior versus price, green was by year benefit XX.X%, declining energy

We restructuring increasing Europe chains of drive and margin are growth. supply executing selective promotion, sales implementing our outside actions and to

full would in prior Corporate million, expect I expense year $XX and approximately be the and with eliminations year million. line were expenses should $XX corporate

year the period with year, over days a Turning the versus $X.X XX to end the $XX versus for at XX Receivables of XXXX. was flow Inventories of billion. improving just just balance billion, $XXX in $X.X cash were of cash use the prior shy DSO the of prior were days of from as sheet. million XX Free but year. million in the

Now excluding prior of the Inventory XXX days the stand XXX the days million end QX improving inventories from acquisitions, of versus XXXX. in but at at year, decreased XXXX. days of versus $XXX impact XXX

and and CapEx debt includes of $XXX at this leverage the $X.X gives X.Xx was and uncertain million. over at EBITDA through was adjusted $X.X market. equipment manage of gross 'XX million, finally, million And just our of year, Full D&A us $XXX Property, forecast plant to billion approximately million. D&A with billion, and CapEx strength $XXX flexibility $XXX QX and

I Now to call over the to review Chris will performance. operational turn our QX

Chris Wellborn

Ceramic Thank segment unique Global many you, their Jim. The economic having each with conditions. own spans countries

commercial economies higher than and being All The home rates. is new as regions interest purchases. up better of construction by strongest discretionary held reduce consumers residential and channel our remodeling impacted slowing are

region. environment, softening are differences customers their significant In each with our inventory this levels in lowering

facing As additional industry in pressures our volumes we competitive are markets. decline,

our cost and we our expenses, in material results. future lagged changes, should which has Our pricing decreases seeing benefit are energy though

in U.S. The than sales ceramic our other performing the greater better is commercial our due sector. markets to

is production reliable favorably domestic which premium particularly benefiting is to imported alternatives. our Our more in alternatives, European compare which our collections, sales, than

expanding multifamily bath immediate to retailers. we distribution our with with and are builder our business in accounts, exterior and opportunities the We commercial are national and are shifting for our force volume, sales and our and collections channels focus increase expanding countertop target delivery. kitchen contractors curated To

countertop reengineering to are our value. to cost We the our enhance quartz lower and entry-level

spending. across the continue our and through environment, costs manage slowing overhead the we To to reduce discretionary including business,

due in maintained to business new anticipated, We inflation due under pressure ceramic remains our to average declined ongoing and partially as higher prices rates. higher demand has selling Our than we interest Europe introductions.

[Technical Difficulty]. Our overall

Operator

stand reconnect. We Please our have speaker lost by we connection. while

Jeffrey Lorberbaum

him? David, you reconnected have

Operator

can now have conference I continue. Chris and brought in, the back Wellborn

Chris Wellborn

to We declined we Pressure anticipated, due higher average to selling due prices maintained higher new interest than has introductions. our as ongoing demand and partially inflation rates.

by quarter Our remodeling. markets with in slowing all down volumes were impacted overall residential the

slows, more aggressive in market the all channels. As is competition becoming

in and energy We benefited in through cost slab continued production the Italian energy sales from quarter offset government porcelain of support impact to our and are growth A subsidies inflation. drop this quarter enhanced fourth specialized helped the to increasing textures. visuals prices

projects containment, We on and continue productivity initiatives. cost R&D to focus including

demand. expect we are progress improved these and our we and reducing Our to markets will continue to with through are slowing, other improve. Sales production trends we ceramic quarter, the markets align as

sizes, product finishes Our launches with unique the new accepted market. XXXX in and polished being are visuals well

the and we to to integration information our marketing of businesses. convert operational acquisitions enable single business progressing sales, our are implementing systems we enhance is plans a year, efficiencies. and operating will improve This to the acquisitions and The as specific

production in priorities spending change has and the fourth contraction levels our energy improved high of costs first energy impacted prices inflation In as European our energy been reduced business Flooring the green higher lower of volume adjusted the as In and business customers' The and housing reduced volumes levels. consumer consumers industry market in budgets. have quarter. shutdowns, compressed Rest our World segment, from our quarter, inventory

increasing are to budgets. constrained We and consumer for more product volume additional options promotions attract expanding

We controls manage have reduce our and increased to cost inventories. our

We our position. our improve competitive formulations base expanding and supply are reengineering to our

to We to are environment. adapt current executing the our actions restructuring

we anticipate As input greater competitive costs the pressures decline, market. in

As and in the quarter. lower consumers and our was remodeling category most and have residential our projects, flooring are levels LVT Both in impacted laminate production during were the volumes cost deferred quarter, we controlling response.

have begun operations. conversion the restructure LVT of to and from residential We rigid our flexible to the preparing are

Our consumers increased as options sought volume lower sheet costs. to remodeling vinyl in

vinyl We are styling new Eastern sheet facility's at as product production acquisition the efficiencies. we improving enhance our with the updated offering European

and has with market inventory panels the business slowed reductions in channel. Our

and are lower plans. input anticipated pricing, stronger costs biomass than higher margins due energy benefits to from our Our

panels planned our plant acquisition. achieving on of synergies progress French and our making flooring recent our are mezzanine We

energy a polyurethane to products provide Our regulations greater has around best insulation increase, priority. energy the the as this efficiency performed greatest Government continue and segment in conservation category properties. our heat-resistant become

U.K., ahead in the our and integrated ramping is up acquisition insulation new schedule. We and have Ireland facility our of

results and are outperforming additional hard we expanding specified sales. the Australia is offset emphasis increases the introducing residential economies by and residential interest affected and In commercial selectively We're lower projects. the our impacted surfaces. have implementing and soft New and volumes our slowing housing inflation were In Zealand, promotions rates to The sector price market. in higher and in drive inflation both are quarter, to

levels We are to and market demand. adjusting controlling inventory costs

market North Our due deferring Flooring housing has significant budget the by constraints. our consumers or been lending, Many interest and have trading rates industry. improvement and more America investments are inflation, to home segment down challenged restrictive higher which weakened

levels. a As inventory our their managing tightly customers result, more are

which segment's our compressed were costs. due of production not and cover. inventory to costs, from as and peak and volumes lower The we with for earnings did quarter align demand significantly reduced lower material the absorption energy pricing benefited material We

soft lower residential categories. will service and cost on and our commercial Our track restructuring in actions our are

As the To postponing market spending. discretionary cost, demand. we our with reducing strategies capital projects conditions inventory and evolve, control we manufacturing and and are sales adjusting market are reducing

margin utilization quarter our Our cost input second as plant should improved and increases. expand

solid remodeling the with limited this of Index construction year. first most Our Billing sales projects quarter Architectural in and new The remained commercial planning projects softening channels. new indicates continuing in commercial

providing superior with exciting value alternatives. flooring are features options We are to for the green greater neutral deliver that carbon desiring

disadvantaged Developed commercial in gaining designs flooring our traction art new we and artists, in market. disabled are product our business. partnership collections, quickly The offering with and has accessories completed last year complemented fashionable the benefited our acquisition lifting

our in soft than the spending categories discretionary slowing business participation category in the residential, weaker consumer other expanding channel. reduced market. as remains strongest Sales declined we inventory more residential Retailers due multifamily of new this surfaces price softness in The our are housing being and retailers Everstrand proprietary that provide customers. Silk new The design. by well our in product including our accepted SmartStrand are and for new carpet to positively at responded points launches, Polyester superior our systems merchandising accessible collections collections collections to have

U.S. LVT antimicrobial decline. and We're technologies. determine with legislation It ocean requires Labor In value seeing we Asia being is too freight a introductions, the to Imports will the the collections enhanced create. quarter, this higher Force the industry are market competitive Protect early costs disruption from featuring of Act. as with as Web interrupted slows our Protection proof and more still the compliance our

more outperforming budget-oriented as vinyl Sheet sales seek are consumers options.

will to expand Coast we move LVT production ramp-up our continuing is West the plant through as and year. Our

During reduced levels. channels laminate retail customers in as increased a other in waterproof the consumers its alternative. their as acceptance quarter, sales with deferred remodeling our declining Volumes and expanded are inventory our projects

Redwood continue and to taking resistance our waterproof to expect We properties. their superior share due scratch visual, collections realistic

texture premium greater so of the and from they Redwood are and wood products that by signature flooring, Our technology durability. design advances indistinguishable offering value our

our Our recover margins. inflation the us input impacted that costs are help declining, which will

Now I'll Jeff closing return his for the call remarks. to

Jeffrey Lorberbaum

Thanks, Chris.

Banks remodeling operating completely a and industry ago. our Our are their and Around is raising rates as reduce environment sales year These actions interest residential are home industry Central postponed. inflation. new lower world, in volume a than different to slow economies the

focusing though sales The commercial enhanced maximizing could and on the sector performing and distribution rates value. has interest residential, remained differentiated stronger products better and requirements tighter as year than business channels, affect our higher investments service lending We're providing progresses. by introducing and

under and cost structures We optimize anticipate to across are volume spending our results. and proactively We managing industry our our that pressure pricing will markets. remain

demand costs results. along seasonal in expect improve future material We with reduced our to improvement energy

Given these and and between to quarter charges. excluding $X.XX, factors, EPS we restructuring, $X.XX anticipate acquisition be our adjusted other any second

valuations. is this businesses industry homes remaining high, continuing industry -- The downturn down invest their maintaining with unique and to employment

while We capacity we are conservatively innovation, near through managing term, long-term invest the the in and growth acquisitions. product expansions

products, of navigate to sheet term, aging we that all updating homes strong regions and rebound our the as industry the needs. recovery satisfy us the Longer regions, current anticipate occurs the follows. enables across significant the With markets for of strength in when new prepare and balance opportunities our economy. Our increased capturing downturn the require we market construction market housing home and to

be now questions. glad to We'll your take

Operator

[Operator Instructions].

first from The Ahlersmeyer question Deutsche comes Bank. with Joe

Joseph Ahlersmeyer

past gives those here, Congrats go cautious results definitive quarter. the us to on year. you own make to to reasons to predictions in be beyond probably to fair emerged expect conceptualize look also also understood. position upcoming And in will you've confidence your means as we it it's the probably those the investors you're and we as well that guidance the But our to reasons the forward but Jeff, recover, contractions start the it's as for realistically. the managing any among that given from continue help business you not that about even said impacting what the predictions the you've business, to the best scenarios headwinds make solid are

we especially, contemplated a actions your necessarily or maybe first your getting end on bit conclusion as your geography? without and business you simply, just when that offer touched But position into So thoughts a on my you've realistically no this is market since there. you've might remarks taken can prepared this recovery, question in how your manifest some specifically, category, to doubt see you by to

Jeffrey Lorberbaum

through When always our a a goes industry you cycle, direction. through go similar

So by out the comes construction housing by going the into reason. is immediately same it's and the out the execute. slows cycle, followed businesses that remodeling then the order and of you first because commercial the the for the can down the it thing cycle, that postpone When it in same longer come residential to new take consumers

remodeling up pick first their should to better. piece and So do

not would still cycle this the of typical be remains employment Historically, down This by is it point, other and strong. significantly, cycles.

increasing. are still wages have You

have people We aging things, mortgage and values, homes These be rates projects limiting support initiated. in is and and short continue housing remodeling supply are to should move. to higher more commercial combined home with

expecting take together, has we just because to and other the cycles under same So all when in be we're on stronger the rebound that not you the compression areas we're this than in discussed. past we've it these been faster side

Joseph Ahlersmeyer

inventory the from with market once. at of choices thoughts. you, respect for around headwinds Thank you and price it's face discussed assume all things make Jim, probably that you'd unrealistic the as business trade-offs recovers, industry to to right. All we've levels. in past, those actually running And share, the production Jeff, the these then and cost, earnings

quarter, we've relationship capacity? maybe made then a choices input And once you any more environment, around but or guardrails markets typical seen pricing cost and market see power investors cost a you've share, to one earnings specific production Mohawk's are beyond around volumes making so in we after annualized the this quarter, able without your next price question particularly any about give recover,

James Brunk

I you with think, would the relationship looking Joe, as materials, between pricing, kind of and you at start to. alluded energy,

cost more that fall in started for weakening with P&L. inflation gradually second through become is and lower the anywhere flow the to for us of it late in industry XXXX from and to it in to would expect X from And more a become half about think If we with takes you months a to price X mix What it, really the benefit kind declining volumes. headwind competition XXXX.

was very it very, it first itself interesting some year comps against was lighting -- with prior in Volume pricing inflation. quarter, the in lower the strong

as had we build normal. not as is, point did indicated, we Another inventory

And our of so it the some be anticipate of in production shutdowns. second terms the shutdowns sequentially. In higher though fewer kind compressed details of would certainly will this items. as XX-Q of the said the bridge all margins, our quarter, improved I and before, we And in

But also growth be would one other the investments. around point

Our installation set future sales these 'XX but improves, to we expansion countertops, are and our constraints, capacity help on acquisitions focused focused are their quartz, businesses. slabs laminate, and on should visibility current investments their us business opportunities with until along investments other postponing up ceramic and They in projects, beyond. LVT, very really

Operator

Wojs comes Our Baird. Tim with next from question

Timothy Wojs

oil-based I think as pricing kind kind it starts energy early like Maybe mean I what North quickly you you expect first inputs then of like But of just do the America, you Flooring had, pretty kind prices? for Or of to would kind the like to pricing do see through you how react it's mechanically question more maybe with that. is in of benefit think energy to I you reacts you example? how immediate? get and to would think some imagine work would that P&L? about prices,

James Brunk

Joe's, P&L. some as the to for now takes just with Well, it through it time flow I said,

QX would for improvement So Flooring that from if input of QX from some about QX North having we from even to to absorb you quarter, -- first material you peak costs. to on be I that, that because expect to think cost. America most the stronger saw in see QX sequentially, of would

But also there obviously, as have we well on So in that's energy materials. the raw inflation.

especially improvement. from competition pressure to to see continue industry steps QX, lower with the volumes. up, would the and So But be that pricing would QX as mix you under

Timothy Wojs

Okay.

say We before. of input normal haven't this costs? to it seen kind would is So it of be fair like just energy inflation type

that's So what trying I'm to ask.

James Brunk

year. saw get trajectory, perspective, some half a in a Yes, is it's it even turn on if I you've QX. QX, in -- perspective, the -- year-over-year in would headwinds we better down, right you'll expect energy And to from year-over-year see back that the turning now it then the the should a from though tailwind stays of

Timothy Wojs

Okay.

bit Good. due And down around that that quarter? up kind up just thought think of do as it is as than is of better much to Okay. the product on mix trading maybe kind held Mohawk's -- you overall thought? you internally the or I not channel in done price/mix, better? consumer that that's mean, kind holding you that Or of mix a something has little then

Jeffrey Lorberbaum

having the a there's future. outguess Well, includes expectations to our which too, we're option, third and

trying we're So our to future guesses and be conservative account. that everything take about

promotions, more mix. turned us, pressure we turned their the drives to a for pricing and next trying going -- run some through this people industry pricing quarter little we of the to we're than to go that, the as by through on but were environment get or assets, lower -- industry. more we always volumes and in in including continue passed competition still So And lower the X we really and out. that There's to decline. input conservative expecting costs The have are expect it to with continued

James Brunk

falling the seeing is imports you which U.S. forget ocean freights, Don't were to of also, cost the reducing

partially the certainly will So dollar weaker offset.

Operator

Susan Our Maklari next from Goldman with Sachs. question comes

Susan Maklari

then still relates to can the of move question R&R, that you've But are limited see you environment expecting visibility And balance Europe? U.S. the the as you half. second seasonality you're first housing as thinking to the is, about talk contextually year? My through that appreciating we will maybe operating how this it commercial versus we normal activity, even and more about got

Jeffrey Lorberbaum

the still go -- will As We're down the through part the about, as and economic we better. is new the anticipating housing expecting commercial quarter, and first as with we Presently, pressure are you it same the we've remodeling thing was slowing expecting somewhat to low. plant utilization We which pressure price year. continue to under think the visibility as anticipating growth to be be from somewhat we're under improving being we're mix, stabilizing, just limited. said, be talked with really

in In Europe, wages to seasonality, people States -- high at most through are could is they vacations the And a United the believe that look year. States. always demand you rising is we the these seasonal the demand the costs go energy When outside such quarter remember, because the impact as increase third in and the assuming through were decline normal the an are Europe, we're affected the by people. consumer second higher rate United than then normal

our term, expect from recovery when you we lose longer purchases, we industry, you don't little it A the postpone rebound them.

more right investments, out on cycles, the And prior acquisitions side be we're the create that in in year helping better always put done us so us come it we down, significant this in as a upturn and new now, during from growth be this it's investing then. position which expecting does. a should should which those also we other haven't a And to time, time we're to going in

Susan Maklari

strategic Where initiatives you've under North that the that Obviously, as going taking Okay. But pressure the that in That's been and seen on get the compare there. the helpful. you all And And that's have that segment. thoughts segment? then recently might margin can there. reduced recently, we've America to? to production given what on on been various from more think Flooring you just actions, cost do things how any think further been the focusing out

Jeffrey Lorberbaum

the than to oil people We costs businesses, catch other of impacted the -- segment costs the inventories, the first to the more last the energy raised in it. halves help year. through still trying all Well, the material which up impacted with was and were we

came like we with inventories, the we and did. So anticipated it thing never out high collapsing

turn pricing to we've at the and recovered promotions faster flow the is never We're the flowing peak the causing we're -- are -- in then decreases the the that are the quarter. the material And the will margin the -- see price second us of the through first of the going and categories, expecting last -- of most year. we're in leading as through in to fall lot total to pricing a things recover expecting in help then the we costs categories than So pricing margins the in the help. margin the didn't quarter expand cover the the cost

expecting margin increase should year. the do So businesses the of through go as the rest better and the we we're to in all

Operator

John from comes question next Lovallo The UBS. with

John Lovallo

dollars of SG&A if items, higher little on into guys quarter? looking one spend. investment you you first we anything a But us the think the The than that there in second the percentage was a first sales higher think move some quarter. and maybe could bit just employee SG&A noted as we few were And about I help or quarter SG&A number you And in think repeat? for is a won't as expense including

Jeffrey Lorberbaum

were came getting inventories hitting First, out having limitations were you have of to remember on the We we materials. employees. low. trouble We with were 'XX, comparisons, the

first into low inventories. went we last quarter and with inventories, also had year So of low the customers our

put out new much didn't we as as spend So We and many products. in didn't merchandising. marketing

to that here And go and We're then to it the always putting level. opportunities we're the and year. trying normal come as so down we this first back expect in year, the It's we're the a going through more quarter, heavier we mix to upgrade that in. and new across maximize product and are businesses, categories product in environment the investments in the merchandising

James Brunk

as and administrative to control selling that and we're emphasize the cost, side the balancing the also trying that that with making forward. we go And we the doing marketing sure aspects

John Lovallo

Makes sense.

on talked to Mohawk's Jeff, There's concern And on slow your commercial moderating channel commercial. slowing commercial the right things that any just now first expectation in in quarter. business? I the resilient U.S. that bit. obviously you growing side then And could pretty some here think remaining seeing that, in activity of Okay. the are you signs a Are

Jeffrey Lorberbaum

category, but the it's still There the Hospitality reasonably outperforming other slight is slowing well. in is some categories. doing

there's still see that at You index care well. categories and weakening have and you cycle, some in We architectural strong. education billing performing are we the aren't But the are looking as health other it. like

So we're year, to enter investments of going weaken assuming the have we'll second that it's half see. but the we as lower with to

Operator

question with Stephen comes ISI. from Our next Evercore Kim

Stephen Kim

actions I you describe what your multifamily sort participation could into multifamily was the you're or believe of curious F&A business that if in there. in the increasing mentioned leaning business of kind I you taking were you there?

starts are the appears that, numbers. multifamily And growing, really it national is completions then related from to pipeline still and lagging multifamily the

And products go later so to think tend closer to completion. I in of kind your

So does you this of shape can still from demand ahead mean you? that you'd is demand of that about sort the surge just there how category talk If multifamily in the see you?

Jeffrey Lorberbaum

and people go move you around well slow harder. the will having into jobs as Usually, down get multifamily cycles, as then start to

We haven't here. that seen

So what are the multifamily. low. you still rates The reasonably vacancy have is

parts You still business one going this and have stronger of think we're what maximize the be is more completions the share coming year. of we our in in to to trying

Stephen Kim

can you you of actions around little other are have color increasing changes made Right. of provide that sales would any Any your you describe that specific -- could you kind that? force? kind a If

Jeffrey Lorberbaum

trying multifamily to to they're have side, because value products they the cost rentals. the the In lower control tend of

-- -- broad I'm with We're sheet And as category our a selling. have not always are just we've different to and going and all carpet in a we're offering LVT had the because laminate that into well we not aggressive products it. doing being more broad the So as much vinyl. satisfy selection in

Stephen Kim

on just know secondly, they're looks Okay. bought I the XQ. much acquisition big like closing ones, you've it although not That makes then in you And sense. Elizabeth, active look Vitromex they so and like the pretty been front,

acquisitions. couple So a of questions regarding

of last First million you said think all Vitromex then all, Elizabeth, general quantify secondly, from various in acquisitions in think, of price of for that? What benefit the years, sales businesses? coming you what are and And Can I purchase annualized you spent combined million those the couple $XXX think you've I of annual $XXX on about was kinds. sales. the

James Brunk

Elizabeth price purchase and over combined. we is you're first right, closed $XXX just the million in So on Vitromex quarter,

ceramic markets year did If Obviously, perspective, from we completed. million a acquisitions it normal you basis in X it Brazil and in to range tighter geographies. the acquisitions Mexico, are other are a on XXXX, the bolt-on little plus step should an they back, annual about in in be given And just sales bit last frame that $XXX conditions. like X we

sales So their prior the from what we year. you gave was

Stephen Kim

Got Elizabeth Vitromex in Elizabeth's million? $XXX and Vitromex you. right, that sorry, including And million, $XXX that's -- excluding and

James Brunk

Yes. it's All $XXX little over a million. in, about

Jeffrey Lorberbaum

in included of were So acquisitions, last small are also then there sales year. but some the

Operator

question comes next Keith from with Truist. Our Hughes

Keith Hughes

necessary inventories in where said quite as had have quarter comments, is function down not the that's you Is of prepared seasonality or just the of first. taking less days kind second a You quarter? second do in the in the and production versus that demand

Jeffrey Lorberbaum

Combination of everything.

First is take that did some inventories down. we

business The is -- improvements seasonal improvement one an are across other, shutdowns where all second from the or we over. expected from the less so there we expect

Keith Hughes

question. other one Okay. And

of to answer turning. in the in half the said another You second year, energy question,

energy in input costs? energy you said about your you talking want talking sure are to favor. think about and make I you're energy, just I turning

James Brunk

speaking about the comment was That the energy. energy. I Keith, on question, was was on

Keith Hughes

some could on Is in view your second of the see deceleration cost? something that half raw the we where What's year? material

James Brunk

should headwind And QX and you well half as competition again, to from and really benefit also go lower if of that's through with take becoming leading with as QX lower. total, volumes you to raw costs and in energy second a In weakening some a materials, that be the the input year. price/mix being declining

Operator

from Michael Our with comes JPMorgan. next Rehaut question

Michael Rehaut

First, to, get incremental tailwind in of bit turning XQ And energy about itself? into from benefit lower how a the thinking about it a half. on in possible, you you're wanted talked back if costs I little quantification just the

So costs, benefit how XQ much flow the do could through expect XQ? versus in what you half? it would And incrementally, kind of would if further energy back quantify into margins you

James Brunk

energy up Well, will sequentially, to quarter. prior pick from the savings the lower-cost QX, think is from energy, I what you're QX of asking the

the So quarter. it second should the -- it will in sequentially, a the quarter first to be quarter compared benefit -- become in

Michael Rehaut

And any benefit? but I to appreciate that, way that quantify

James Brunk

in in we quarter, from saw first perspective headwind you're total of let me year-over-year it terms again, a The put to million. it that $XXX the inflation, going about was the Well, that see.

today. later detail that see you'll So

would than year-over-year second expect I from a that that so the be And quarter. in significantly total inflation perspective lower to

Michael Rehaut

second restructuring dollars expect you're that versus maybe you of then to the And the of quantify terms where percentage the by have -- also benefits just -- any second in how to in in Okay. we what about year-end? the the of any on benefits, way and thinking quarter XXXX in in realization are terms

James Brunk

cost somewhere the plans we we've And that So back, announced if -- you restructuring last early $XX about and million, million million year. total the is so $XXX is only between have step $XXX of cash. X

year. as be the little which our end out million actions go of really That we're the in the a bit Florida And track. XXXX. that Most take rigid. through savings you see around go will for you as over save will America the on phasing little on results this turning Flooring residential annually. of $XX The bit to flexible Rest up in QX longer are of to North a and you America, the year. the QX and So concentrating probably World go in LVT North that through are as ramping you'll Flooring going That and actions

Michael Rehaut

quick in. last Okay. could if One I it squeeze one,

as were sales expect if the quarter's to get you of at quarter? the look you have potentially even turn sales you in of patterns first quarters, today take you sales current As given the fourth or patterns that for positive comps today, trends and X decline next the you rest the to easier year lessen X% each would to

Jeffrey Lorberbaum

you're whether depends looking year-over-year. sequentially It or

down. So it last year, had, you slowed

year-over-year. So as we through go year, the

Michael Rehaut

Jeff? Year-over-year,

Jeffrey Lorberbaum

volume will through the you the year improve with go Yes, year-over-year, comparisons. the as

James Brunk

Yes.

we So the first -- very you will -- little the back difficult half the year, first the year. in then that easier comp to get half bit an and easier have the of as become a a of

we percentages recovery those the in go see that are assume terms of would you the through -- year. as of would half if back the where decrease would we stay you So those you would decrease difference the

Operator

from comes question next Baumgarten Adam Zelman. with Our

Adam Baumgarten

shutting prices I were point? the believe ceramic gas about market those guys some talked at down this seen you reenter Have when European you spiking. natural production competitors competitors

Jeffrey Lorberbaum

The purchasing different competitors have prices declined have gas Each the substantially. of strategies.

costs I down. prices, today. are but So when is under you they the don't the exactly the And market pressure gas purchased Europe, still know because Chris, some the to significantly is add where more? the want demand from consumers

Chris Wellborn

have the say, pricing few other a under Spain, of Well, -- fallen were but that. been we the of been And ones. low out end, producing smaller those ones good have don't really have pressure that low particular that competitors gas. the on there end gone would have places with at I natural None at have would out. It be major the especially market, the visibility competitors yes,

Adam Baumgarten

Okay. then through declines Got imported if capacity bringing you are LVT, some of guys about you talked you us walk just product. U.S. it. given help and could competitiveness now cost guys of your And the just on on just Maybe that Mexico the up?

Chris Wellborn

our valued improving price our and And more both it features. efficiencies broad over increase a all our and differentiating for commercial on will LVT, operations offerings have points faster, rigid production residential We're and time. Well, for plant Coast with West service. is consistent flexible. And and we the local are

Jeffrey Lorberbaum

service, government right thing on market the about, moment, going resetting to there's costs stopping it's moving, still supply in to and materials inventory talked really And the a what overall the channels. the is tell we freight and today. there's some significant difficult tough prices the with U.S. marketplace impact and this at as And have the impact about that's shipments on then

Operator

Dahl next The with comes RBC. Mike question from

Michael Dahl

a much supply of the then tell way sitting point? tough at you currently way the you import is of -- ports, have water at kind any has into of can the it market? resolve. stopped And U.S. to I issue around this quantify their how know on could terms dynamic, the stemmed how Jeff, what's follow-up has any just currently with as it's making whether the flow coming insight that, there do from to been domestic ships But to this significantly on in

Jeffrey Lorberbaum

those tell States, the United the one been all stocked. in about That's of only suppliers largest -- you have can thing I products is the

And to going released so the what back be question, others many take reverse get know in. to impacted. know don't is, we don't are what come will side then we the and how And them is

see at the start you're it of mean what to the really have to happens government. and I So just with we're going

Michael Dahl

price/mix conversation. the have had guys to through as during a price/mix referenced than of went closer as have way seen you you quarter, better mean, in you expectations, Got Wondering, pressure. Okay. it. your mentioned evolve price then And I a i.e., to follow-up still seeing kind the that you in was quarter. the you some came forecast that

coming So you through? expected seeing expected? it that better are the initially still is than pressures Or you now you

comp get could question even to in I if year of volume that the the And around better. a as question volumes. as comp second the worse Mike's price/mix kind part gets add will progresses Presumably, to response

the offset that total volume Or standpoint, the So worsening the price we from total costs? get should declines just a mix think better? easier does revenue in also revenues

Jeffrey Lorberbaum

one? to channel how going is were were in know as was how much -- The going as were decline. depressed didn't had they we then we mix, coming was and they we to our to -- inventories the combination both that how part pricing the a answer first declined expected How where wasn't and and of expectations to be. more much other it And much it

pushes The prices more you to capital in, try these investments, people high you depending have pricing volumes. the down. the have really is getting difficult and running where category would and mix you're keep low upon you as investments, as And that which suspect,

on decline. of coming inventory promotions and the the the us. that competition and cost more And to have mismatch between input the as have you flow-through happens then You pricing

the estimate all same at time. So we're things those to trying

James Brunk

That's the bottom line.

you then have you're so just which will of improvement in well -- we you described. sales as also the volume, terms line, have If talking comps as acquisitions the help the in

on So top line. the those helped

Jeffrey Lorberbaum

got year, cost so -- are they Europe too. going expecting use the expecting that through to the the dramatically They're that we Most is high. and because due that people in and over have of go energy heating back consumers substantial improve the of heating demand in homes the their are, energy of as to pulled we decline the

Operator

Eric question Cleveland Our Research. comes next from Bosshard with

Eric Bosshard

Two things.

is favorable a just North did want you had comment what American think all, right? clarify, I on the -- First Jeff, And of in made that half. that view activity viewpoint? seeing supports that hear more to second you that I a I that you are remodel

Jeffrey Lorberbaum

significant do gotten really We as interest more that thought just they moving they with much projects that normally the had at rate. of the might people this that as postponement getting aren't time be comfortable

just through there's have things, -- we're thought And relief some year, go we'll we we our see. as to it was to the level. going at assuming be we in but depressed So a

Chris Wellborn

that, the And I would coming activity about would the Daltile been serious done. And in just the very the add are comment getting projects higher. that centers to has that people be in service

James Brunk

in remaining to strong, last they get back people standpoint probably increasing Eric, if Jeff a And wages from the thing, and one the a different little comfortable remodeling. homes. evolves, then staying would earlier, in bit cycle as consumer come supply that their and confidence is remaining more with said And housing, employment this obviously, they as short

Eric Bosshard

Okay. up doing better, guidance from ago, and sounds secondly, was price/mix ended days was the XX you it your it than And like $X.XX then better assumption.

the had is But and have days, Or of all to predicting next that the appreciate As that in assumption price/mix on it this you Jeff, made terms you XX not how similar your you conservative this XQ? with you've future guess into I comment considered a viewpoint the XQ differently? relative price/mix look XQ, for we easy. guidance is

Jeffrey Lorberbaum

that's the and We this at point most and get passed that. the are of inventory through. The expecting we're to inventory going how the world, question assuming with material of much prices to the was channel around channels aligned we're expecting the raw And but expecting change that -- also? competition, then us, some was going we're XQ the are benefit to is the that

So we're to with economy. general the competition expecting decline . the as increases the price/mix

Operator

Truman Research. comes from Our next Wolfe with question Patterson

Truman Patterson

World, margins XQ. nicely of from Rest on pretty First inflected

doing trends inflection? hoping Europe some can a activity more the I'm help you're mentioned I bit promotion that Rest increased in sales of imagine a you lot North consumer color your a on World margin us little better would and give there. to in You America. Maybe bit just costs reduce that also of you

Chris Wellborn

Yes.

had expanded from We seasonal QX production. our shutdowns. lower So We in the growth. and had green was margin energy fewer QX,

Our and little were pricing better mix than a we expected.

some input Going cost as and selective to competitive our we're decline. implementing And -- forward, the anticipate cost restructuring. control greater We're pressures but we doing lot a promotions. also we're doing

Truman Patterson

cycle Okay. of primarily Perfect. Do residential view you the side? on And or positioning in and you're in the picture getting big of enjoy 'XX XXXX here kind trend think then guidance on some volume and everything. Jeff, XXXX, think through help volumes? can kind how not the necessarily us that for expecting the company Always I'm with the the we're declines looking of for eye here. just storm your hoping you might improvement in

right see still here healthy actions, now. I'm with head because lot a Fed gains your there's and wage inflation, pretty to a is but at job war just in parts of wage job trying there's and growth clearly, -- moving Europe, where

wrap to that. around want kind head just my I So of

Jeffrey Lorberbaum

One housing and What, is end lowering going improvement as start guess, views One the to what that as is that year know you I with the down the in different start to economy. the parts. of multiple slow what's the on whole well year, going the the and going there's to of cycle. is Fed rates the next I first happen is do, economy at

it's rates you up to take longer. they're occur. when second longer, tell can't keep to going it's going to and The I says going

every volume in hasn't back consumers this. that of and close pull economy that out reacted affected people in way the that been now that of And much. to because first back rest the is know time in postpone look, the they like downturn a increases postponed rates a downturn as We're a months industry the as interest X go I that if houses by happens, years really the these don't of for We've things. this X purchases. their you the substantially all historically, coming

occur, going it's So normal. be looking when it does that greater to we're that than

categories and We expect growth are categories comes that all constrained we and it the investing up. growth, the are as highest benefit in those get out of to

Truman Patterson

of the Perfect. In And year there just the X view, side. normally? follow-up on or resi a R&R downturn kind years typical a your

Jeffrey Lorberbaum

is to I and shorter. mean, longer typically, they general some go range, XX from XX go the months

Operator

next Jefferies. question Ng from with Phil Our comes

Philip Ng

more about from think bottom little like feels the the regions, pick up will markets comments pricing products think your standpoint, things that general a could back the any have other more prices little When you half. markets, a And recovery potentially view Jeff, more and on your you in within up about faster. where have or significantly? you fall that here then in things beat end concerns demand particular

Jeffrey Lorberbaum

before ago, X the costs, But go by I started. which they so they're we still Europe if energy around were Happy double they were world. impacted back we mean was started. XX, XXx where what go you to months

to the How war dramatic. the it's in guess. figure with on So been to impact hard that energy and Europe going on, has what's

generally up going The in some U.S. XX% wages the are are wages we we're or other the higher that increase than is more side in that's the is Europe, know There seeing there. countries different,

year. on assuming this going we're So have as better increase, it's as that to they their go the get through consumption. impact wages it's less we that possible And

The the -- off markets, the rates gone every and residential substantially in are other commercial everywhere. all downturn. as all of is similar the trailing. they've being them a market, All fell through in raised interest The

moving is China. Mexico, have problems with up economy in the Some areas the as we better. of held like There's things

turned in So our market, been the Mexican go it inventories And but through. down turned changes the instance, later. market Brazilian is in in doing huge the we for last the as The better. quarter, there's channel later, marketplace, down

So interconnected years. past different, they aligned XX is each the been have it but and more is world closely one they're whole XX, like than looks the more in

Philip Ng

any pricing In where you markets products you more see -- or pressure?

Jeffrey Lorberbaum

capital slow to typically, we find in investments, us, ways large again, -- pass on the we down, the There's pricing and margins And try decreases as of markets to pressure have where unabsorbed of lower all through cycles. the minimize them. the all overhead. in markets as And prior work

So I this be different one. don't see any it

Philip Ng

up ceramics been business good Pricing up from very pretty held in And strong. holding it. here Got What's your You see and well. now. business strength? particular has relative that has

from You've had nice a umbrella inflation. pricing

energy or that you are how freight Now things? pricing from prices prices the have about and on pressure container imports come ocean ceramic of side thinking competition down,

Chris Wellborn

better side, Well, we one ceramic on performed than to have our commercial. the markets a other in mix due ceramic of U.S., the greater

the alternatives, imported that the production And has also and is our versus curated reliable, premium focus and been developed collections with more used kitchen reliable Our imports, markets Italian exteriors, increasing collections. we're commercial us. and multifamily builder been we're and We've helped on our enhancing bath domestic have than that's or channels. .

insulated high-segment, to offset said which mid- coming are as have no freight, of has the year little. Having more it imported us But partially do with by dollar. through go weakening will decreasing prices We sales with pressure imports we be that, the a ceramic our the under has which doubt, in been down.

Operator

The Jadrosich Bank of with America. next from comes Rafe question

Rafe Jadrosich

given pricing you to on comments I opportunity of And your restrictions, wanted on remind on side? domestic there? Maybe how higher there LVT LVT a compare just the us on competitors? additional to or Can imports that production, follow-up your gain and the China. sort is are share import does to if from some there just the exposure restrictions of Chinese

Jeffrey Lorberbaum

China problem local raw of materials limited, it's China. some from this raw extended of the fairly the affecting producers. and also imports the out Our but are They've use outside to China, countries that's causing not the supply and only materials of the with surrounding thing back

Rafe Jadrosich

it. Got

revenue? typical between project like starts when is would of what's expect can Then overall? So hire on us that lag in actually Okay. have remind you a products And That's you Europe then is to when commercial go your your helpful. the any commercial today, we on U.S.? and to exposure And then exposure relative your an commercial there when commercial, regional impact difference if time the in? slowing

James Brunk

Well, percentage it basis, different segment. from by a runs

ceramics with in next or commercial over U.S. more have its so World. America in We exposure in in North me, largest the then XX% could would be Rest commercial Flooring global in the exposure of ceramic have in Flooring U.S. that especially in excuse ceramic business And of limited being or the -- the in

Jeffrey Lorberbaum

which later years X XX The depends because take commercial sales off to fall and typically it can complete. anywhere from on months projects. They to

at falling you have these off. to year commercial residential all tends fall sectors the this going projects have is are pieces. that after because about for business So It And least the in hospitality starts off still really not different a different one up started. like

environment. an So unusual it's really

Operator

This concludes for over closing session. turn our I question-and-answer like to would Lorberbaum remarks. any to conference the Jeff

Jeffrey Lorberbaum

Thank joining you environment, you results when you improves. us. of and joining very much. our for to economy investing optimize appreciate us. Have a we're current navigating Thank good We're We all the day. the

Operator

today's for you concluded. now has conference Thank presentation. The attending

You may disconnect. now

Mohawk Industries (MHK) 28 Apr 232023 Q1 Earnings call transcript