Quaker Fabric loss widens in second quarter
Michael J. Knell -- Furniture Today, July 21, 2006
Fall River, Mass. -- Hammered by low-cost imports and sliding sales, then hit by $13.7 million in restructuring and asset impairment charges, upholstery and jacquard fabric producer Quaker Fabrics
Corp. recorded a substantially widened second-quarter loss of $12.1 million, compared with a year-before deficit of $10.3 million.
With imports acting as a drag on the top line, sales tumbled by more than a third, declining by 37.8% to $42.9 million from $68.9 million during the same period last year, a shortfall of more than $60 million. At $34.9 million, domestic fabric sales declined by 30.8%, while international sales fell by 23.4%, to $6.4 million. Yarn sales were hardest hit, down 84.0%, to $1.6 million.
The slide in sales put pressure on margins, which narrowed 250 basis points, or 2.5 percentage points, to 12.2% from 14.7% last year. And the combination of sliding sales and contracting margins generated an operating loss of $3.6 million, 49.0% deeper than last year's $2.4 million.
Providing some relief, Quaker continued to hack away at costs, reducing its overhead by 29.6%, to $8.8 million from $12.6 million, generating a savings of $3.7 million. But when measured as a percentage of sliding sales, costs rose by 240 basis points, or 2.4 percentage points, to 20.6% from 18.2% last year.
Calling the drop in sales “disappointing,” Quaker president and ceo Larry Liebenow noted the company’s strategy includes selling into more upscale domestic markets, and noted Quaker saw “a 66.2% increase in our second-quarter sales into the contract market vs. the comparable period of last year - the successful launch and first sales of our new line of decorative outdoor fabrics to upscale outdoor furniture manufacturers and the jobber and high-end residential markets - and incremental sales to specialty furniture retailers that helped to increase our average selling price per yard."
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