This would be an interesting stat. We do know they have a synthetic range sold under "cavalier bremworth" so the option is there. That along with their Norman Ellison brand which targets the lower end of the market suggests they are well positioned across the carpet market
Retailing has changed to becoming very brand-aligned. The Cavalier Habitat Collection (high end synthetic) is mostly selling through Flooring Xtra stores. Carpet Court are pushing imported synthetics under "SmartStrand". Godfrey Hirst using the "Flooring Foundation" to try to create a similar exclusivity with other independent retailers.
All of which has made it harder for the consumer to shop around on price using the one product - restricting the price war to "equivalent" products which may vary in texture, colour etc. Overall, this is probably benefiting the retailers rather than the manufacturers at this point.
Retailing has changed to becoming very brand-aligned. The Cavalier Habitat Collection (high end synthetic) is mostly selling through Flooring Xtra stores. Carpet Court are pushing imported synthetics under "SmartStrand". Godfrey Hirst using the "Flooring Foundation" to try to create a similar exclusivity with other independent retailers.
All of which has made it harder for the consumer to shop around on price using the one product - restricting the price war to "equivalent" products which may vary in texture, colour etc. Overall, this is probably benefiting the retailers rather than the manufacturers at this point.
Thanks, Liz.
I think you're getting to the crux of the CAV problem there. It seems to me that the big retail chains are calling the tune rather more these days than was the case when smaller, local firms proliferated. Cavalier had the market recognition then which now has to be shared/competed with the likes of Carpet Court, Number One Carpets and other franchises who import cheaper, synthetic product.
I think you're getting to the crux of the CAV problem there. It seems to me that the big retail chains are calling the tune rather more these days than was the case when smaller, local firms proliferated. Cavalier had the market recognition then which now has to be shared/competed with the likes of Carpet Court, Number One Carpets and other franchises who import cheaper, synthetic product.
If we accept this is true (I'm not arguing for or against this) what impact do people think this will have on CAV? Yes, they may lose some market share. But we are dealing with a cyclical that is at the bottom of the cycle. In my opinion there is an increase in company profit on the cards - it's just how much. Even if we don't get back to the previous top on cycle there is still significant room for the SP to grow. Not to mention the fat trimming that has gone on in the past couple of years.
Retailing has changed to becoming very brand-aligned. The Cavalier Habitat Collection (high end synthetic) is mostly selling through Flooring Xtra stores. Carpet Court are pushing imported synthetics under "SmartStrand". Godfrey Hirst using the "Flooring Foundation" to try to create a similar exclusivity with other independent retailers.
All of which has made it harder for the consumer to shop around on price using the one product - restricting the price war to "equivalent" products which may vary in texture, colour etc. Overall, this is probably benefiting the retailers rather than the manufacturers at this point.
Very true - retail concentration is the big threat to Cav as it has been to many manufacturers in other industries. When a few dominant retailers emerge they tend to rationalise suppliers so they can negotiate the best price (but not choice) for the consumer.
The additional threat here seems to be the retailers importing their own brands direct (not quite equivalent to supermarket home brand but not far off)
My brother recently bought carpet at Carper Court and said he asked about Cavalier/Bremworth and they just kept "ramming SmartStrand down my throat". He would say, "but isn't wool more durable", and they would say "forget wool, this SmartStrand is unbelievable"...
He did some research and bought Cav in the end but they tried and tried and tried to persuade him otherwise. I also have held CAV for a while and am in profit now but the more stories I hear the more I prefer MVN for cyclical building play
The way I figure is people care what brand of taps are in their bathroom whereas carpet its harder to have that brand advantage...
Cavalier has built its business over many years on having an (iconic) premium brand. There are a few companies like this but most are facing challenges as the world changes. They will not survive doing things the way have done for decades - they need to change and adapt to the new way. And invariably the new way is not likely to be as profitable as in the past.
Cavalier makes stuff for buildings - residential and commercial. If their business is similar to others in this sector the split is probably 60% commercial and 40% residential. The commercial segment probably growing faster than residential.
Commercial is both new buildings and the renovation/redecorating of existing buildings. Residential is new houses along with homeowners outing new carpet in.
Historically brand owners like Cavalier were the ones who had the greatest influence on both homeowners and those who chose carpets for commercial buildings (architects, specifiers, designers etc). How good their marketing was created the demand and the premium price people paid.
The rules gave changed. The influencers are now, as pointed out a few posts ago, the power is now with distributors and retailers, and with the architects and specifies. They are the ones who 'influence' the purchaser based on what is best for them. The manufacturers like cavalier are slowly losing control of their brand. The distributors and retailers are screwing them down on price and other things, ie margins are diminishing, even on their premium products. Somebody also pointed out the rise of channel/distributor exclusive brands. Just imagine when the likes of Bunnings get into carpets to see what will happen to market dynamics (they sell heaps of carpet tiles now so carpet not that far away)
All this is compounded by the demand for high value stuff like Bremworth is falling, both from an affordability perspective and the wide range of synthetic products available at much cheaper prices.
The commercial segment is highly competitive - price is everything in most cases. The Cavalier rep might be calling on architects and specifies touting why they should use Bremworth for their clients but so are the competitor reps and I know that Geoffrey Hirst outgun Cavalier in Australia. Even when it's get specified price comes into play. I would say this segment, even though the largest part of the market, is also the segment that has the lower margin.
So Cavalier (like others) are losing control of their premium brands - cheaper substitute products and the growing power of their distributors and retailers. Inevitability not really a good place to be in.
A cyclical play so Where are we in the current cycle. In NZ commercial activity is above average, new residential activity is still below average (even though 50% off the bottom of the cycle) and homeowners redecorating is pretty buoyant. Aussie is a bit tough but not desperately so in commercial segment. So on balance cavalier should be doing ok at the moment (definitely not bottom of the cycle stuff) with some upside.
Are Cavalier winning in market place? In Aussie I thing Hirst taking share. They have been slow to respond to meeting the market demand for cheaper products (anything below the high cost of Bremworth is cheaper) so are losing out there as well. And probably finding it hard to manage al the demands of their distributors etc.
So a good investment? They are good brand but struggling but will make an acceptable profit but not to the degree that may have been seen years ago, margins will continue to come under pressure. I wouldn't pay much more for CAV than what is worth today, and even that is not guaranteed to make acceptable returns.
Bored as today so just sharing as how I see it.
One thing which puzzles me. Carpet is generally purchased laid - who actually pays for the carpet laying? Comes out of the retailer margin or do they screw the consumer and add on heaps to cover the cost?
Carpet only a portion of Furniture, carpet and Homewares retail sector but how these sort of shops are going is probably indicative of how carpet retailers are going .... and a bit of a guide as to CAV slaes
Charts below from Stats NZ Retail Trade Survey and that sector.
As with a lot of home related industries the mid 00's were a boom time (bubbke) and an extraordinary event.
Long term trend is a better picture where these retailers are now .... about average/normal eh
And that long term trend line is only 0.8% pa .... not a particularly good growth rate eh and it is actual dollars of the day. Low growth from substitute/cheaper products? a bit of price deflation? homeowners not doing redecorating as often as they used to (new furniture and carpets every 15 years instead of 10?)
Great post winner. A very good argument - I have a couple of thoughts I'd like to add
Cavalier's earnings have hit a bottom and bounced back with their last announcement - this suggests that the cycle is only beginning for them (or they have been hit seriously hard and lost a lot of market share etc and are actually mid cycle - I doubt this though).
There is the Christchurch rebuild which is by no means a minor factor. From what we see on the news this hasn't started yet. I am a consultant in the industry and our company stands to get a lot of new design work from Chch, but none of this has begun yet.
Australia are still lagging, and even with reduced market share CAV still stand to benefit from the improved economy when it happens. My concern here is if it takes too long. Lets hope the election acts as the catalyst people think it will.
CAV has put in place significant cost cutting measures while they have been struggling which will also have a positive impact.
All things considered - I still think even if CAV don't hit the highs of the bubble they still stand to significantly improve on where they are now. I think we are in for above market returns for the next few years as a minimum.
CAV still puzzles me ... they should be making more than they are.
New residential builds are up 50% over the last 2 years .....currently 6000 odd extra homes a year than 2 years ago. Carpet sales up?
Commercial work, ESP the sectors that are likely to have carpets. Heaps busier than 2 years ago. Carpet sales up?
Carpet retailers in nz look they doing pretty well at the mo compared to 2 years ago. CAV selling more carpets?
Ok, Aussie a bit weak but commercial not that bad and new home building hasn't collapsed.
To me they should be selling more carpet than a few years ago but they ain't.
In the annual results they talk about growing volumes ...maybe margins are pretty shot still.
Residential construction going from 19000 homes a year now to 25000 a year home in 2 to 3 years time. Will CAV sell mor carpet? Or are the competitors going to keep on beating them?
I fear that competitors are winning.
Market heaps better than 2 years ago .... CAV not doing better. Market to be heaps better in 2 years time ......CAV do better.. You would hope so but there seems to be something holding them back.
I see CAV priced at the mo to both grow and to improve margins ....chances of that happening?
Prob wrong again but something not right at the mo.
Reply With Quote
Originally Posted by Lizard
Bookmarks