Mohawk Industries Q4 Earnings Call Highlights

Core Insights - Mohawk Industries reported fourth-quarter 2025 net sales of approximately $2.7 billion, reflecting a 2.4% increase as reported but a 3.3% decrease on a constant-currency basis, with stable commercial demand offset by weakness in U.S. housing turnover and sluggish new home construction [3][5][6] - The company generated about $620 million of free cash flow in 2025 and ended the year with $856 million in cash and $2.0 billion in gross debt, while repurchasing $149 million of stock [4][14][15] - Management expects improved sales and earnings in 2026, contingent on macroeconomic conditions and interest rate developments, with guidance for Q1 adjusted EPS of $1.75 to $1.85 [5][18] Financial Performance - Adjusted earnings per share for Q4 were $2.00, up about 3% year over year, supported by productivity and restructuring initiatives, product mix, and lower interest expenses [3][6] - Gross margin was reported at 23%, with adjusted operating income of $152 million after $84 million of non-recurring charges [8][9] - For the full year 2025, Mohawk reported sales of approximately $10.8 billion, flat year over year, and adjusted EPS of $8.96, down about 7.5% [14] Segment Performance - Global Ceramic segment showed the strongest year-over-year sales performance, with sales just under $1.1 billion, up 6.1% as reported [11] - Flooring North America sales were $893 million, down 4.8% as reported, primarily due to weakness in residential soft surfaces [12] - Flooring Rest of the World sales were $737 million, up 6.5% as reported, but down 3.5% on a constant-currency basis, with lower residential remodeling volumes impacting performance [13] Cash Flow and Capital Allocation - The company generated approximately $620 million of free cash flow for the year and reported fourth-quarter free cash flow of $270 million [14][15] - Capital spending in 2025 was $435 million, about 30% below depreciation, with plans to invest approximately $480 million in 2026 focused on product innovation and cost reduction [15] Tariffs and Restructuring - Management addressed the impact of U.S. tariffs, which range from 15% to 50%, and emphasized efforts to offset these costs through pricing actions and supply chain optimization [16][17] - Restructuring initiatives delivered about $115 million in savings for 2025, with additional savings expected from new restructuring actions announced in Q4 [17] Leadership Changes - CFO James Brunk will retire in April, with Nick Manthey set to assume the CFO role [19]