Mohawk Industries (MHK) Q1 2025 earnings summary

Executive summary

• Q1 2025 net sales were $2.53 billion, down 5.7% year-over-year, with adjusted EPS at $1.52, supported by productivity gains, restructuring, and a lower tax rate, partially offsetting pricing pressure and higher input costs.

• Flooring North America order system conversion caused a $50 million sales and $30 million operating income impact, but service levels have normalized.

• Tariffs on Chinese imports are expected to add $50 million in annualized costs, with mitigation planned via price increases and supply chain adjustments.

• Inventory increased by $80 million due to pre-tariff imports; free cash flow was negative $85 million in Q1 but is expected to improve.

• 225,000 shares repurchased for $26 million during the quarter.

Financial highlights

• Gross margin was 23.1% as reported, 24.1% excluding charges, in line with prior year; adjusted EBITDA margin was 10.6%.

• Adjusted operating income was $122 million (4.8% margin), down from $163 million (6.1%) a year ago.

• Interest expense fell to $6 million, reflecting lower debt and higher interest income.

• Free cash flow was negative $85 million in Q1, expected to improve for the year.

• Net debt at quarter-end was $1.68 billion; net debt to adjusted EBITDA ratio at 1.2x.

Outlook and guidance

• Q2 2025 adjusted EPS guidance is $2.52–$2.62, excluding restructuring or one-time charges.

• Restructuring actions are expected to yield $100 million in annual savings in 2025, with some savings extending into 2026.

• Management expects continued pricing pressure, soft demand, and inflation, but is optimistic about long-term flooring demand recovery as interest rates decline.

• CapEx for 2025 is planned at $530 million, focused on capacity and cost reduction.