Mohawk Industries, Inc. (MHK) Fails to Meet Company Guidance
Beginning in April 2017, Mohawk touted its purported “growing demand” for its conventional flooring products and continued to highlight its sales growth throughout the relevant period. Then, on July 25, 2019, after repeatedly reporting financial results that missed analysts’ estimates and the Company’s guidance range, Mohawk revealed sales in its Flooring NA segment were down 7% because “lower demand” for certain conventional flooring products had created excess inventory that impacted Mohawk’s sales and margins. On this news, Mohawk’s stock dropped $27.76, nearly 18%, to close at $128.84. The stock has yet to recover. It appears that Mohawk had been channel stuffing by causing its distributors to take on surpluses of Conventional Flooring Products that were greater than demand to make Mohawk’s sales growth and financial performance appear better than they were.