Furniture stocks tumble in '05
By Larry Thomas -- Furniture Today, January 8, 2006
High Point — Furniture stocks had a rough ride along Wall Street in 2005 as only a handful of the industry's publicly traded companies saw their stock prices rise during the year.
The majority of the 34 U.S. furniture stocks tracked by Furniture/Today had double-digit declines for the year, and 14 saw their prices fall more than 25%.
Only seven companies — four of them retailers — ended the year with higher stock prices than they began it.
Securities analysts who follow the industry attributed much of the tough sledding to declining consumer confidence and depressed operating margins. Such factors can make furniture stocks, which historically have been cyclical, unattractive to investors because they believe stock prices are still moving down.
"I think a lot depends on consumer confidence," said Keith Hughes, an analyst at SunTrust Robinson Humphrey. "It was weak and inconsistent throughout 2005."
Margins, particularly for manufacturers, were hammered by soaring prices for energy and raw materials such as foam and steel.
"For upholstery manufacturers in particular, it has been very difficult for them to push through the needed price increases," said Hughes.
Furniture/Today's stock index, which is tabulated every Thursday, dramatically reflected the downward trend in prices. It peaked at 541.08 on Jan. 6, 2005, and was down almost every succeeding week until hitting bottom at 373.13 on Oct. 13.
A mild fourth-quarter rally, which lifted the F/T index by 6% during the quarter, wasn't nearly enough to offset losses from the first three quarters. The index closed at 433.84 on Dec. 29, a drop of 22.3% for the year.
The biggest individual loser for the year was foam manufacturer Foamex International, whose stock plunged 99.2% as it entered Chapter 11 bankruptcy protection. Four other stocks — The Bombay Company, Pier 1 Imports, Quaker Fabric and Design Within Reach — declined more than 50%.
The three biggest gainers were retailers. Upholstery specialist Jennifer Convertibles soared 68.7%, airbed specialist Select Comfort was up 64.3%, and Williams-Sonoma, the parent company of Pottery Barn, rose 26.3%.
Virtually all of Jennifer Convertibles' gain came in November, when the stock price shot up from about $2 per share to nearly $4 per share. The price leaped nearly 73% in a single day — Nov. 22 — when the once-struggling company announced its second consecutive quarterly profit. The stock closed at $4.79 on Dec. 29, and the price has topped $5 per share in early 2006.
Select Comfort's stock price, which was beaten down in 2004 as the company's growth slowed, also benefited from profitable operations in 2005. It closed at $27.90 on Dec. 29 and has approached $29 per share during the first week of January.
The only other gainers for the year were Knape & Vogt, up 11%; Restoration Hardware, up 10.5%; Stanley Furniture, up 6.4%; and Valspar, up 5.5%.
Upholstery giant La-Z-Boy's stock essentially was flat for the year, declining 0.2% to $13.97. The price dipped below $11 per share in October when polyurethane foam supplies became tight and prices soared, but rebounded later in the year as the supply crunch eased. La-Z-Boy's stock has topped $14 per share in early January, and at least one analyst believes it could hit $16 before the end of the year.
"Prior La-Z-Boy management pursued an aggressive acquisition strategy that boosted revenues, but margins declined for more than a decade. The new management is refocusing the company on its larger, more important business units," said Budd Bugatch, director of furnishings research for Raymond James & Associates.
Canadian furniture stocks tracked by Furniture/Today didn't do much better than their U.S. counterparts. Five of the eight companies had double-digit declines, including manufacturers Shermag and Amisco, down 54.3% and 47.7% respectively.
The biggest gainer was BMTC Group, which was up 29.2%. Rent-to-own specialist Easyhome's stock rose 18.2% and retailer Leon's Furniture was up 2.2%.
| Year-end furniture stocks ups, downs | |||
|---|---|---|---|
| Percent change in closing price, Dec. 29, 2005 | |||
| Close 1/6/05 | Close 12/29/05 | Percent Change | |
| 1. The Furniture/Today index includes 22 footnoted furniture stocks (Dec. 30, 1988 = 100). 2. American Depository Receipts (ADRs). 3. Prices in Canadian dollars. Source: Data Network, Huntington, N.Y. Information and data herein though believed accurate, is not guaranteed. Data Network is not liable for any inaccuracies. A = American Stock Exchange; M = Montreal Stock Exchange; N = New York Stock Exchange; O = Over the counter; T = Toronto Stock Exchange |
|||
| GAINERS | |||
| Jennifer Convertibles1 (A,JEN) | 2.84 | 4.79 | 68.7% |
| Select Comfort1 (O,SCSS) | 16.98 | 27.90 | 64.3 |
| Williams-Sonoma (N,WSM) | 34.56 | 43.64 | 26.3 |
| Knape & Vogt (O,KNAP) | 12.78 | 14.18 | 11.0 |
| Restoration Hardware1 (O,RSTO) | 5.45 | 6.02 | 10.5 |
| Stanley Furniture1 (O,STLY) | 22.00 | 23.40 | 6.4 |
| Valspar (N,VAL) | 23.67 | 24.98 | 5.5 |
| LOSERS | |||
| La-Z-Boy1 (N,LZB) | 14.00 | 13.97 | -0.2% |
| Ethan Allen1 (N,ETH) | 38.20 | 37.52 | -1.8 |
| Chromcraft Revington1 (N,CRC) | 13.25 | 13.00 | -1.9 |
| Bassett Furniture1 (O,BSET) | 19.20 | 18.01 | -6.2 |
| Furniture Brands Intl.1 (N,FBN) | 24.59 | 22.93 | -6.8 |
| Aaron Rents1 (N,RNT) | 22.95 | 21.31 | -7.1 |
| Aaron Rents (Class A)1 (N,RNTA) | 21.00 | 19.39 | -7.7 |
| CFC International (O,CFCI) | 16.00 | 14.09 | -11.9 |
| Rent-Way (N,RWY) | 7.49 | 6.41 | -14.4 |
| Masco (N,MAS) | 35.41 | 29.98 | -15.3 |
| Leggett & Platt1 (N,LEG) | 27.96 | 23.34 | -16.5 |
| Flexsteel Inds.1 (O,FLXS) | 17.13 | 14.15 | -17.4 |
| Hooker Furniture1 (O,HOFT) | 21.50 | 17.15 | -20.2 |
| Haverty Furniture1 (N,HVT) | 17.68 | 12.95 | -26.8 |
| Rent-A-Center (O,RCII) | 27.05 | 18.63 | -31.1 |
| Culp1 (N,CFI) | 6.85 | 4.70 | -31.4 |
| Natuzzi2 (N,NTZ) | 10.50 | 7.11 | -32.3 |
| Decorize (A,DCZ) | 0.79 | 0.51 | -35.4 |
| Haverty Furniture (Class A) (N,HVTA)1 | 7.60 | 11.27 | -36.0 |
| Cost Plus1 (O,CPWM) | 28.21 | 17.21 | -39.0 |
| Rowe1 (N,ROW) | 4.95 | 2.78 | -43.8 |
| Tempur-Pedic1 (N,TPX) | 21.16 | 11.63 | -45.0 |
| The Bombay Company1 (N,BBA) | 5.91 | 2.94 | -50.3 |
| Pier 1 Imports1 (N,PIR) | 18.36 | 8.81 | -52.0 |
| Quaker Fabric (O,QFAB) | 5.61 | 2.18 | -61.1 |
| Design Within Reach (O,DWRI) | 14.20 | 5.35 | -62.3 |
| Foamex International1 (O,FMXI) | 3.58 | 0.03 | -99.2 |
| CANADIAN COS.3 | |||
| BMTC Group (T,GBTA) | 12.58 | 16.25 | 29.2% |
| Easyhome (T,EH) | 12.70 | 15.01 | 18.2 |
| Leon's Furniture (T,LNF) | 35.25 | 36.02 | 2.2 |
| Sleep Country Canada (T,Z.u) | 23.70 | 21.20 | -10.5 |
| Bestar (T,BES) | 0.48 | 0.31 | -35.4 |
| Dorel Inds. (T,DIIA) | 42.79 | 27.50 | -35.7 |
| Amisco (T,IAC) | 5.35 | 2.80 | -47.7 |
| Shermag (T,SMG) | 8.20 | 3.75 | -54.3 |
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