Mohawk profits fall 20% in 1Q
Staff Staff -- Furniture Today, April 23, 2001
CALHOUN, GA — Pummeled by a soft economy and rising energy costs, first-quarter profits at Mohawk Industries Inc. tumbled by 20.0 percent, to $16.0 million from $22.2 million.
Sales at the big floor coverings and home fashions producer slipped by 2.8 percent, to $743.7 million from $765.1 million, despite the added revenues from the recently acquired Crown Crafts woven products business.
Gnawing away at the bottom line, average gross margin eroded by 100 basis points, to 23.9 percent from 24.9 percent a year ago. Gross margin dollars fell by 6.6 percent, to $178.0 million from $190.6 million. "The slower economy and rising energy costs continue to impact our business," said Jeffrey Lorberbaum, president and coo.
Checked by the shortfall in sales, operating costs edged higher by 40 basis points, to 16.7 percent from 16.3 a year ago. But measured in absolute dollars, costs were actually whittled back slightly, by 0.4 percent, to $124.4 million from $124.9 million last year, a cash savings of $437,000.
Weighed down by stalled out sales and weaker margins, operating profits declined by 18.4 percent, to $53.6 million from $65.7 million.
Inventories increased by 12.3 percent, to $389.0 million from $371.3 million, partly due to the slowdown in sales, and also to a build-up to support earlier new product introductions.
Given the continued impact of a sputtering economy on the floor coverings industry and Mohawk's sales and margins, the company warned Wall Street analysts and investors that results for the second and third quarters will fall beneath expectations. Earnings per share for the second quarter will come in 10 to 15 percent beneath year-ago levels, and third-quarter earnings per share will slide by 5 to 10 percent, the company said.
With Mohawk's stock price "at levels below our expectations, we will continue the repurchase program previously authorized by our board of directors. During the first quarter, we purchased an additional 171,000 shares of our stock, and we have purchased 8,916,000 shares since the inception of the program in September 1999. Even with our stock repurchase program and the rollout of our hard surface products, the company's debt to total capitalization ratio improved from 43.9 percent at the end of 2000 to 42.8 percent this quarter," the company said.
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