Armstrong Flooring (AFI) - Get Armstrong Flooring, Inc. Report began trading as a stand-alone company this week after being spun off from Armstrong World Industries (AWI) - Get Armstrong World Industries, Inc. Report . Don Maier, CEO of Armstrong Flooring, said now is a good time to be a pure play in flooring considering the growing strength in the residential housing market.
"Our business is actually split 65% residential, so it is very important to us as to what happens in the homebuilding market," said Maier. "But we are 35% commercial as well, so that's also an important segment for us."
Lancaster, Penn.-based Armstrong Flooring is the largest manufacturer of resilient and wood flooring products across North America. The company operates 18 manufacturing facilities in three countries and employs approximately 3,500 workers.
Maier points out that consumer demand for hard-surface flooring is rising, up 4% from 2012 to 2016, according to industry-tracker U.S. FlooReport.
Helping to spur the growth in flooring is a jump in new U.S. housing starts, which have posted a 9% cumulative average growth rate from 2013 to 2015 and are anticipated to continue growing at an 11% CAGR from 2015 to 2017. Meanwhile, existing U.S. home sales have increased at a 2% CAGR from 2013 to 2015 and are anticipated to continue growing at a 5% CAGR from 2015 to 2017.
Finally, Maier points to U.S. nonresidential construction spending, which had a 9% CAGR from 2013 to 2015 and is anticipated to continue growing at a 10% CAGR from 2015 to 2017.
Armstrong Flooring supplies both Lowe's (LOW) - Get Lowe's Companies, Inc. Report and Home Depot (HD) - Get Home Depot, Inc. Report with its flooring, and also offers direct distribution of its products.
Maier said he does not view the major home improvement retailers as direct competitors.
"We use the consumer journey, which is almost always going to involve a stop in one of the big box locations, to our advantage and that helps support our independent retailers as well," said Maier.
Regarding the safety scare that hit Lumber Liquidators (LL) - Get Lumber Liquidators Holdings, Inc. Report after health officials said some of its products raised cancer risks, Maier would not comment on his competitor's troubles. He said he stands by the strength of Armstrong's brand.
"In times of uncertainty when people are not sure about some products coming in from Asia, it is really important to pick a brand consumers know they can trust. And that is Armstrong," said Maier. The drop in petroleum prices is also boosting margins for the company, he added.