Simmons sales, earnings slide
By Larry Thomas -- Furniture Today, March 19, 2006
Atlanta — Bedding major Simmons said net sales slid 1.7% last year despite improvements in the fourth quarter that were driven largely by product introductions.
The company said sales for 2005, a 53-week fiscal year that ended Dec. 31, totaled $855.3 million. In 2004, a 52-week fiscal year ended Dec. 25, sales were $869.9 million.
Net income for 2005 was $3.3 million, down from $23.8 million in 2004. The bottom line was hurt by interest expenses, which soared to $70.3 million last year from $44.2 million a year earlier.
Simmons said wholesale bedding sales decreased 2.5% last year to $788.1 million. Bedding units were off 8.3% for the year, but the average unit selling price rose 6.3%.
Charlie Eitel, chairman and CEO, said the bulk of the declines occurred during the first quarter, when the company's highly touted HealthSmart line had to be remerchandised.
"We are starting to gain back some of the market share we lost during the first quarter," Eitel said during a conference call with securities analysts. "We believe our current product offerings, combined with our improved cost structures, make us as competitive as we've ever been."
He noted that in the fourth quarter, net sales rose 4% from a year earlier to $214.8 million and wholesale bedding sales were up 2.2% to $195.6 million. The quarter had 14 weeks, while the 2004 quarter had 13 weeks.
However, the fourth quarter also saw a temporary shortage of polyurethane foam — a key component in mattresses — followed by unprecedented foam price hikes of 60% to 70%.
Eitel said the raw materials cost per unit rose 9.9% in the fourth quarter and was up 10.3% for the year. Simmons implemented its own price increase in November.
During the fourth quarter, Simmons also reorganized its sales force and eliminated numerous sales positions. Eitel told analysts the transition was going well, and said the new sales model should result in improved business and better service to dealers.
"I believe we now have a sales process that makes us more effective," he said. "The morale is extremely good in the sales organization."
Eitel also told analysts the company's "bowling ball" commercials will begin airing in late March, and said heavy airtime is scheduled in the second and third quarters. He said Simmons has budgeted more than $8 million for the advertising campaign.
| Simmons | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 12/31 (a) | 2005 | 2004 | Change |
| (a) 2005 quarter was 14 weeks and 2004 quarter was 13 weeks. (b) 2005 year was 53 weeks and 2004 year was 52 weeks. (c) Includes pretax plant closure charges of $2.3 million in the 2004 quarter, $72,000 in the 2005 year and $3.1 million in the 2004 year. Includes pretax income from licensing fees of $1.7 million in the 2005 quarter, $2.1 million in the 2004 quarter, $9.1 million in the 2005 year and $9.6 million in the 2004 year. |
|||
| Sales | $214,809,000 | $206,557,000 | 4.0% |
| Operating income | 19,667,000 | 19,878,000 | (1.1%) |
| Net income (c) | 458,000 | 4,440,000 | (89.7%) |
| Earnings per share | NA | NA | NA |
| Year ended 12/31 (b) | 2005 | 2004 | Change |
| Sales | $855,276,000 | $869,893,000 | (1.7%) |
| Operating income | 73,509,000 | 79,886,000 | (8.0%) |
| Net income (c) | 3,325,000 | 23,774,000 | (86.0%) |
| Earnings per share | NA | NA | NA |
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