Mohawk(US:MHK)2026-02-13 17:02Financial Data and Key Metrics Changes - The company's fourth quarter net sales were approximately $2.7 billion, an increase of 2.4% as reported, but a decrease of approximately 3.3% on a constant basis compared to the prior year [5][11] - Adjusted EPS for the quarter was $2, up approximately 3% versus the prior year, while the full year adjusted EPS was $8.96, a decrease of approximately 7.5% [5][6] - Free cash flow for the year was approximately $620 million, with a stock repurchase of approximately 1.3 million shares for $149 million [6][18] Business Line Data and Key Metrics Changes - Global Ceramic segment had sales of just under $1.1 billion, a 6.1% increase as reported, while Flooring North America sales were $893 million, a 4.8% decrease as reported [14][15] - Flooring Rest of the World reported sales of $737 million, a 6.5% increase as reported, but a 3.5% decrease on a constant basis [17] - The operating income for Global Ceramic was $63 million, or 5.9%, while Flooring North America had an operating income of $39 million, or 4.4% [15][16] Market Data and Key Metrics Changes - Approximately 55% of sales were in the U.S., 30% in Europe, and 15% in other geographies [6] - Housing turnover in major regions remains at historical lows due to affordability challenges and economic uncertainty, impacting consumer confidence [6][7] - In Europe, high building costs and labor constraints continue to impede residential construction, although there are moderate recoveries in Southern and Eastern Europe [8] Company Strategy and Development Direction - The company is focusing on innovative product introductions and marketing actions to stimulate sales in soft markets [9] - Capital expenditures for 2026 are estimated at approximately $480 million, focusing on product innovation and cost reduction [19] - The company anticipates leveraging the housing recovery and improving its position through restructuring and operational improvements [10][31] Management's Comments on Operating Environment and Future Outlook - Management noted that while home renovation remains soft, there is optimism for improvement in existing home sales due to lower mortgage rates and increased housing supply [31] - The company expects competitive market conditions to persist, with pricing pressures likely to remain [30] - Management anticipates that 2026 will be a transitional year with some improvement in remodeling activity and overall sales and earnings expected to improve [31] Other Important Information - The company has initiated numerous restructuring actions and operational improvements that lowered its cost position [10] - The balance sheet remains strong, with gross debt of $2 billion and leverage of 0.9 times adjusted EBITDA [19] - The company plans to continue its stock buyback strategy as part of its financial management [88] Q&A Session Summary Question: Expectations for price and mix in 2026 - Management anticipates continued pressure in the market, with inflation levels similar to 2025, but expects pricing, improved mix, and productivity to help offset inflation [34][35] Question: Inventory management ahead of spring selling season - Inventories were taken down in the fourth quarter, and management believes they are close to where they need to be, with optimism from customers for the year [41][42] Question: Outlook for 2026 and pricing pressures - Management expects price, mix, and volume to improve, with pricing initiatives in place to recover inflation and enhance product mix [59][60] Question: Impact of tariffs and cost management - Tariffs range from 15%-50%, and management has taken actions to offset these costs through pricing and supply chain management [92][93] Question: Pricing stabilization in Flooring Rest of the World - Management noted that geopolitical events are impacting consumer confidence, but targeted price increases are expected to have a slightly positive effect as the year progresses [95]