Shermag sales up, earnings down
By Furniture Today Staff -- Furniture Today, December 9, 2001
SHERBROOKE, Quebec — Despite what it described as a difficult economic environment, Shermag said sales of its furniture products increased 6% in its fiscal second quarter ended Sept. 28.
Total net revenue rose 3.5% from the same period a year ago to C$36.3 million. Earnings, however, declined by a third to C$2.1 million from C$3.1 million a year earlier.
Shermag produces contemporary case goods and upholstery and also operates a sawmill division that supplies the company's own needs and sells to other wood product manufacturers.
Jeff Casselman, president and chief executive officer, said margins were hurt by the weak performance of its Nadeau division, and by higher returns, allowances and discounts in the quarter.
Nadeau also struggled to maintain efficiency as it launched new collections to compensate for the loss of HomeLife, which filed for bankruptcy and is liquidating. In the past year, the U.S. retailer accounted for $C13 million of Shermag's volume.
Despite these challenges, Shermag said its furniture sales — in gross revenues, before returns, allowances and discounts — grew 6% to C$38.5 million in the second quarter.
"Our challenge going forward is to move margins back up. To this end, we have implemented an aggressive cost-reduction plan at all levels of our operations," Casselman said.
He said the events of Sept. 11 have made forecasting difficult, but Shermag's outlook remains positive.
"In October, the company completed a very successful High Point show, even though general show activity this year was greatly reduced," he said. "Shermag presented a strong new product lineup and its relationships with top retailers remain very strong."
Shermag believes the events of Sept. 11 will accelerate the "cocooning" of American consumers. "This, combined with a 40-year low in interest rates, will drive increased demand for residential furniture," Casselman said.
| Shermag (a) | |||
|---|---|---|---|
| Owns Mobilier Shermag, Mobilier HPL, Nadeau and Scanway Chanderic | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 9/28 | 2001 | 2000 | Change |
| Revenues | C$36,282,000 | C$35,059,000 | 3.5% |
| Operating income | 5,347,000 | 6,285,000 | (14.9%) |
| Net income | 2,064,000 | 3,143,000 | (34.3%) |
| Earnings per share | 0.15 | 0.24 | (37.5%) |
| 6 months ended 9/28 | 2001 | 2000 | Change |
| Revenues | C$69,606,000 | C$70,430,000 | (1.2%) |
| Operating income | 8,346,000 | 12,949,000 | (35.5%) |
| Net income | 2,138,000 | 6,738,000 | (68.3%) |
| Earnings per share | 0.16 | 0.51 | (68.6%) |
| (a) In Canadian dollars. | |||
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