Furniture Brands 4Q earnings plunge 88%; sales slip 1.2%
For the year, sales rise 1.3% to $2.4 billion as profits drop 10.4%
Jay McIntosh -- Furniture Today, February 1, 2007
ST. LOUIS — Sluggish sales and aggressive promotional activity sent Furniture Brands International ’s earnings tumbling 88% in the fourth quarter to $2.1 million, or 4 cents per share, the manufacturer and importer reported.
Sales in the quarter were down 1.2% from a year earlier to $586.5 million, and up 1.3% for the year to $2.4 billion. Because of the weak fourth quarter, earnings for the year were down 10.4% to $55.1 million, or $1.13 per share, the company said.
And the current period looks no better. Chairman and CEO Mickey Holliman predicted sales will be off 10% from the strong 2005 first quarter, and is forecasting earnings of 12 to 16 cents per share, compared with 61 cents a year ago.
“Business conditions in the fourth quarter were difficult across all our companies,” said Holliman. “As the quarter progressed, retail conditions materially softened. In an effort to continue with our original plan of inventory reduction, we promoted aggressively and took additional discounts on selected slower-moving products. We also scheduled additional downtime at or domestic facilities.”
Furniture Brands sells under the brands Broyhill, Lane, Thomasville, Henredon, Drexel Heritage and Maitland-Smith.
In a conference call with analysts, Holliman said, “For the coming year, all the brands will demonstrate much more discipline and focus on a few key initiatives…. We currently place too much emphasis on chasing down every sale. We often do so with generous terms, unprofitable promotions and a proliferation of product SKUs. The effect is lower margins and slow cash conversion…. I expect all the brands to focus on cost-cutting initiatives and I expect many of those initiatives will be led by Furniture Brands itself.”
Both the 2006 and 2005 fourth quarters included restructuring, asset impairment and severance charges of 2 cents per share. The 2006 quarter also included another 2 cents because of increased interest expense related to interest rate swaps.
For the full years, restructuring, asset impairment and severance charges came to 10 cents per share in 2006 and 27 cents per share in 2005. The 2006 year also included a one-time accounting gain of 11 cents per share, offset by charges of 7 cents per share in increased interest expense and 2 cents in increased reserves.
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