Inquired why the Q3 seasonal sales decline might be more pronounced, specifically if Q2 strength was due to pull-forward ahead of price increases or initial stocking.

Jeff Lorberbaum stated that pre-buying impact was limited due to controlled distribution and customer storage limitations. Q2 strength was mainly from initial stocking of new product placements. He reiterated that Q3 is seasonally slower and any pre-buying effect is factored into the outlook. “Our volume mainly benefited from initial stocking positions of new product placements, and those will obviously benefit us as the business moves forward. And our third quarter is seasonally slower and so any prebuying effect that there could be is factored into our outlook.”

Asked about the drivers behind the surge in Flooring Rest of World revenue growth (from down 4% to up 6% core revenue) and expectations for Q3.

Jeff Lorberbaum attributed the growth to earlier market improvement in Europe (before the war), effective management of pricing and productivity, and successful new product introductions, particularly premium LVT and laminate collections. Nicholas Manthey added that positive price and mix should continue in Q3. “the markets have been showing improvement earlier in the year following the rate cuts that we saw in Europe but after the start of the war, consumer confidence declined somewhat and also inflation affected discretionary income.”

Noticed the emphasis on cash flow and returning capital, asking about any subtle shifts in capital deployment priorities and the philosophy behind share buybacks.

Paul De Cock stated the capital allocation framework remains the same: first, invest in the business (innovation, productivity); second, evaluate profitable growth opportunities meeting strategic and financial criteria; and third, share repurchases will remain an important part of capital allocation. He emphasized that buybacks will remain an important part of the policy. “Our capital allocation framework remains the same. First, we will continue to, first and foremost, invest in our business... We'll also continue to evaluate profitable growth opportunities... And then share repurchases will remain also a very important part of our capital allocation policy going forward.”

MHK

Mohawk Industries (MHK) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Jul 31, 2026

Source: earnings call transcript

Executive summary

Mohawk Industries Q2 FY26 — Strong Performance Exceeds Expectations with Tariff Refunds and Productivity Gains

Mohawk Industries delivered strong Q2 FY26 results, surpassing expectations due to effective execution, new product placements, and tariff refunds. The company is proactively managing costs through productivity gains and new restructuring initiatives, while navigating persistent softness in residential markets and rising input costs. Leadership transition is underway with Paul De Cock taking over as CEO, signaling a continued focus on operational excellence and shareholder returns.

Highlights

Net sales of $3 billion, up 6.8% as reported and 5% on a constant basis, significantly exceeding expectations.
Adjusted EPS of $3.67, including a $0.63 benefit from tariff refunds, outperforming guidance.
Adjusted operating income increased approximately 170 basis points to 9.7% of sales, driven by price, mix, and productivity.
Initiated new restructuring projects expected to reduce costs by approximately $60 million by the end of 2027.
Achieved 2025 sustainability goals, lowering emission intensity by 31%, waste to landfill by 55%, and water intensity by 50%.

Concerns

Residential channels remained soft, and new home construction and existing home sales continue to be affected by affordability challenges.
Anticipate flooring market conditions to remain challenging in Q3, with seasonally slower sales and higher input costs.
Underlying inflation stepped up by $35 million from Q1 to Q2, with a similar step-up expected from Q2 to Q3.

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted EPS	$2.50-$2.60 high materiality	Q3 · FY26	Medium
Adjusted EPS (excluding tariff refunds)	$2.38-$2.48 high materiality	Q3 · FY26	Medium
Capital expenditures	$460M medium materiality	FY26	High
Corporate expenses and eliminations	$55M low materiality	FY26	High
Q3 Adjusted Tax Rate	approximately 22% low materiality	Q3 · FY26	High
Cost reduction from new restructuring projects	$60M medium materiality	by end of 2027 · FY27	High
Cash restructuring costs for new projects	$50M medium materiality	by end of 2027 · FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Global Ceramic Gained momentum with new premium tile and countertop placements in the U.S. Grew volumes and improved market positioning in Latin America. Benefits from tariff refunds included in operating income. Volume growth: approximately 3%Productivity initiatives: $20 millionPositive price/mix: $13 millionUnderlying inflation: $35 million	$1.2 billion	7.9% as reported, 4.6% on a constant basis	—	Adjusted operating income was $99 million or 8.2% of net sales
Flooring North America Sales growth led by volume strength in retail channels with price and mix improving sequentially. Market share increased in both hard and soft surfaces. Benefits from tariff refunds included in operating income. Adjusted operating income increase: $42 millionProductivity: $21 millionUnderlying inflation: $16 million	$976 million	3.1% as reported, 4.7% on a constant basis	—	Adjusted operating income was $111 million, and adjusted operating margin was 11.4%
Flooring Rest of the World Sales growth driven by pricing actions to address higher energy and material costs, along with modest mix improvement. Launching new collections in LVT and laminate to strengthen premium segment position. Insulation and panels businesses delivered strong results. Price and mix contribution: $41 millionIncreased input costs: $23 million	$806 million	9.7% as reported, 6.2% on a constant basis	—	Adjusted operating margin was $97 million or 12% of sales

Product announcements

Product	Type	Timeline
Hero rubber flooring	milestone	recently launched
Anti-allergen carpet product	launch	recently launched
U.S. domestic countertop manufacturing line	expansion	recently expanded

Risks & headwinds

Soft residential market conditions Q2 FY26, expected to continue in Q3 FY26

Residential channels remained soft, new home construction market remains pressured, existing home sales continue to be affected by affordability challenges

Mitigation:Proactively managing controllable aspects: enhancing sales strategy, pricing, operational improvements, managing inventory and costs; expanding new product placements.

Higher input costs and underlying inflation Second half of FY26

Higher input costs will flow through inventory and impact on margins in the second half of the year, underlying inflation step up by about $35 million from Q1 to Q2, and we'll see a similar step-up from Q2 to Q3, Q4 to remain elevated

Mitigation:Executing price increases, productivity gains, restructuring actions; additional price increases may be required.

Seasonally slower Q3 sales Q3 FY26

Expect our sales to seasonally drop from the second quarter to the third quarter, seasonal pattern could be more pronounced than in past years

Mitigation:Factored into outlook; driving own results through new product placements and pricing.

Fewer shipping days in Q4 Q4 FY26

4 less shipping days in Q4

Mitigation:Acknowledged as a factor, but no specific mitigation mentioned beyond general operational management.

What to watch in Q3 FY26

Q3 Adjusted EPS (excluding tariff refunds)

Q3 FY26

Current Q2 Adjusted EPS (ex-refunds) was $3.04

Target $2.38-$2.48

Why it matters

This will indicate the underlying profitability trend, excluding one-time tariff benefits, in a challenging market.

Excluding these tariff refunds and any restructuring or other onetime charges, our outlook contemplates a baseline EPS range of between $2.38 and $2.48.

Find out whether MHK delivers this. Inve re-checks your case every morning.

Q&A highlights

Asked about specific product categories and end markets (residential vs. commercial) contributing to Mohawk's impressive share gains, referencing NeoCon.

Jeff Lorberbaum highlighted the success of innovations showcased at NeoCon, including the Hero rubber flooring product which won awards. He noted that new product placements in residential business also contributed to gains, and commercial continues to outperform.

“We also showed our new Hero rubber flooring product that is made with recycled Nike regrind and that product won 3 Best of NeoCon awards.”

asked by Susan Maklari · answered by Jeff Lorberbaum

2 min read 6 chapters

Detailed narrative

Q2 Performance Exceeds Expectations

Mohawk's Q2 FY26 results significantly surpassed expectations, with net sales of $3 billion, up 6.8% reported and 5% constant currency. This outperformance was driven by volume growth, pricing, product mix, and initial stocking of new product placements, alongside a $0.63/share benefit from tariff refunds not included in guidance.

The company believes it outpaced the market and gained share in most regions despite a soft residential market.

Strategic Initiatives and Cost Management

The company is proactively managing its business through enhanced sales strategies, pricing actions, and operational improvements. New restructuring projects focused on operational simplification, organizational realignment, warehouse consolidation, and capacity optimization are expected to reduce costs by approximately $60 million by the end of 2027, requiring $50 million in cash restructuring costs. These are permanent structural improvements to the cost base.

Leadership Transition

Jeff Lorberbaum announced his retirement as CEO after 25 years, with Paul De Cock taking over. Paul, who has worked with Jeff for over two decades, expressed optimism about Mohawk's future, emphasizing continued focus on operational excellence, product innovation, and market leadership, supported by a strong balance sheet and cash flow generation.

Market Conditions and Outlook

Residential channels remain soft, with new home construction and existing home sales pressured by affordability. The commercial sector continues to outperform residential. For Q3, Mohawk anticipates challenging flooring market conditions, seasonally slower sales, and higher input costs, which will flow through inventory and impact margins. Additional price increases may be required in the second half of the year.

Product Innovation and Market Share Gains

Mohawk successfully introduced new collections and expanded product placements, particularly in premium tile and countertop in Global Ceramic, and hard and soft surfaces in Flooring North America. The company's new Hero rubber flooring product, made with recycled Nike regrind, won three Best of NeoCon awards, highlighting its innovation capabilities. These efforts are driving market share gains and improving product mix.

Sustainability Achievements

Mohawk successfully completed its 2025 sustainability goals, lowering emission intensity by 31%, waste to landfill intensity by 55%, and water intensity by 50% from its base year. This achievement was highlighted in their 17th annual impact report.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.