Springs Global Sales Down 15%
Furniture Today Staff -- Furniture Today, December 4, 2006
With U.S. consumers shunning home fashions as they head to the malls, stretching every dollar to make up for rising gas and higher interest rates on credit cards, Springs Global, perhaps the world's largest producer of home textiles, saw sales drop off by 15.1% between the first and second fiscal quarters, to $520.8 million as of June 30, from $613.7 million on March 31, a scary drop of $92.9 million.
At the same time, the company formed by the marriage of Springs Industries and a Brazilian textiles producer, Coteminas, recorded an operating loss of $1.4 million during the second quarter, compared with an operating profit of $11.3 million during the first three months of the year. Springs Global officials were asked to provide clarification of the financial results, but had not responded by press time.
Putting operating profits under heavy pressure was a punishing combination of eroding margins and higher costs. Average gross margin thinned by 70 basis points, or seven-tenths of a percentage point, to 10.7% from 11.4% during the opening quarter. At the same time, operating costs, when measured as a percentage of dwindling sales, climbed by 140 basis points, or 1.4 percentage points. When measured in actual dollars, though, costs actually declined by 2.4%, to $57.4 million from $58.8 million, the savings generated by stringent cost controls.
The Springs Global results were made public last month as part of a filing by its publicly held Brazilian parent, Coteminas. Because of different accounting standards used in Brazil, and different accounting terminology, it was not immediately possible for Home Textiles Today to calculate net income or assess the impact on the bottom line of such items as currency exchange or interest costs.
Putting the Springs Global earnings under even more pressure, inventories grew by 1.7% between the first and second quarter, even as sales fell off at a double-digit pace. .
Following the merger of the two companies, Coteminas and Springs into Springs Global, and a subsequent renegotiation of sale terms, Coteminas, according to the filing, owns 61.7% of Springs Global, while Springs' shareholders control a 38.3% stake.
|Second qtr. ended 6/30||First qtr. ended 3/31||% change|
Dollar amounts converted from Brazilian reals using the Federal reserve Bank rate of exchange effective on the 6/30 close of the second quarter and the 3/31 close of the first quarter.
|Average gross margin||10.7%||11.4%||—|
|Foreign exchange variation||(1,457)||(16,666)||—|
|Loss of capital with subsidiarySprings Global US||—||(28,745)||—|
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