Earnings season is upon us and investors are calling upon companies to reveal their first quarter results and to make predictions about the year to come. In April, Mohawk Industries, Inc. announced 2008 first quarter net earnings of $65 million. This was 28% below last year’s numbers. Net sales for the quarter were $1,738 million, a decrease of 6.7% from 2007. While the U.S. economy is slow, and credit has tightened, residential home sales have fallen, and thus have impacted the company.

On the bright side, spending on commercial construction has remained positive. The U.S. credit problems are even impacting Europe with its growth expected to be flat to modest overall. According to CEO and Chairman of Mohawk Industries, “performance for the first quarter exceeded our guidance for the period in a very difficult environment.” The CEO is optimistic due to the fact that the company has survived cyclical downturns in the past. In the meantime, the company is focused on improving productivity and quality, which is always a plus for consumers.

Mohawk is also investing in products and assets to enhance its future. While the company is executing carpet price increases, they should be in place by the end of the second quarter, and will hopefully stabilize. Even during these challenging times, new products are being shipped earlier than in prior years and the focus is on fashion and value engineered products. The company’s new Encycle tile with leading edge technology has benefits that make it more durable, environmentally friendly and economically advantageous. Many initiatives to reduce energy and water consumption are being implemented in Mohawk’s operations, which in the long-run should keep the company in a competitive position relative to its peers.

A new Mohawk consumer campaign is being launched that includes TV, print, and digital marketing that appeals to the design enthusiast. Mohawk is spreading the word that its offers are stylish and innovative while also being “green.” Strong growth in the commercial market is off-setting some of the weakness in the residential market thus allowing the company to advance with its research and development departments. Sales in Mexico and Canada have continued to expand as market exposure expands. Some of this success comes from the sales force being motivated and from new introductions that focus on the better performing commercial and high end remodeling segments. Cost reductions remain an issue of concern, thus initiating an overhaul of manufacturing productivity and inventory management. Although seasonal improvements will benefit the second quarter, it is expected that many of the same challenges will be present in the near-term. In spite of a difficult flooring market, Mohawk continues to modernize manufacturing facilities and create innovative products which will keep consumers coming back for more – long after the industry’s economic environment improves.

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