Mohawk Profit Jumps on Tariff Refunds as Margins Recover
Mohawk Industries posted adjusted earnings of $3.67 a share in the second quarter, up 32% from a year earlier and boosted by a $0.63 tariff-refund benefit.
Mohawk Industries (MHK) reported second-quarter adjusted earnings of $3.67 a share, up 32% from $2.77 a year earlier, as net sales rose 6.8% to $3.0 billion. The flooring and ceramics maker's results included roughly $0.63 a share from tariff refunds that were not contemplated in prior guidance, and the company has already received about $0.12 a share of additional refunds it expects to book in the third quarter.
The quarter marked a sharp turn from the prior two periods. Net sales growth accelerated from 8.0% as reported in the first quarter of 2026 and 2.4% in the fourth quarter of 2025, both of which showed declines once adjusted for constant days and currency. Full-year 2025 sales had fallen 0.5% as reported, and the fourth quarter of that year saw net earnings collapse to $42 million, or $0.68 a share, from $1.43 a share a year earlier, underscoring how weak the base period was heading into 2026.
Consolidated operating margin expanded to 8.5% in the second quarter from 6.7% a year earlier, with operating income rising to $253.7 million on sales of $2,991.4 million. The Flooring North America segment drove much of the improvement, with operating margin jumping to 10.0% reported, or 11.4% adjusted, from just 0.4% reported and 4.0% adjusted in the first quarter, aided by the tariff benefit and productivity gains.
Global Ceramic sales growth reaccelerated to 4.6% on an adjusted basis from a 0.2% adjusted decline in the first quarter, with segment operating margin rising to 8.2% adjusted from 5.0%. Flooring Rest of World posted a smaller sales gain of 9.7% as reported, down from 12.2% in the first quarter, but adjusted operating margin there still climbed to 12.0% from 9.8%.
Free cash flow more than doubled to $228.2 million in the quarter from $126.1 million a year earlier, pushing six-month free cash flow to $236.0 million from $40.7 million in the same period last year. The adjusted income tax rate rose to 21.1% of adjusted pre-tax earnings from 19.3%.
Mohawk introduced a new cost-reduction program in the quarter, targeting about $60 million in savings by the end of 2027 through operational simplification, organizational realignment, warehouse consolidation and capacity optimization. The program will require about $50 million in cash restructuring costs and capital spending. Net debt stood at $1,066.9 million as of July 4, 2026, with short-term debt rising to $761.4 million from $289.3 million at year-end 2025 as long-term debt fell to $1,155.1 million from $1,741.2 million, reflecting a shift of obligations into the current classification.
For the third quarter, Mohawk guided to adjusted earnings of $2.50 to $2.60 a share, including about $0.12 of tariff-refund benefit, or $2.38 to $2.48 excluding tariff refunds and other one-time items. The company expects sales to decline seasonally from the second quarter, a steeper drop than typical given the strength of the June period. Share buybacks held roughly steady at about 600,000 shares for $60 million in the quarter, similar to the 607,000 shares for $64 million repurchased in the first quarter, both down from the 2025 full-year pace of about 1.3 million shares for $150 million.
The results land amid a leadership transition. Mohawk disclosed on June 11, 2026, that Paul De Cock will become chief executive effective September 30, 2026, succeeding Jeff Lorberbaum, who will remain chairman. The change follows a CFO succession announced in November 2025, with Brunk handing the role to Manthey effective April 1, 2026.