Samson sales, earnings decline in 2007
Company expects challenges to persist this year
Thomas Russell -- Furniture Today, April 17, 2008
DONGGUAN, China — Samson Holding, the parent of Chinese manufacturer Lacquer Craft and U.S. furniture sellers Universal Furniture, Legacy Classic and Craftmaster, reported a drop in sales and profit in 2007.
Sales fell 10.5% to $508.7 million, while net profit declined 46.6% to $55 million. Earnings per share came to 2 cents in 2007, down from 4 cents in 2006.
The company attributed the drop in sales to weak retail demand caused by troubles in the U.S. housing market and the subprime mortgage crisis.
“The U.S. housing market is in its worst state for 30 years,” company Chairman Samuel Kuo said in a report discussing the results. “The number of single family new housing starts is currently running at only one-third of two years ago.”
Samson’s net profit margin dropped to 10.8% last year from 18.1% in 2006, while operating expenses rose to $95.5 million from $84.4 million in 2006.
Samson attributed its profit decline to a number of factors including rising materials costs and competition in China and Vietnam. It also cited rising sales and marketing expenses associated with the Las Vegas Market and Universal’s Better Homes and Gardens collection.
Other factors affecting profitability include rising labor costs in China and the appreciation of the Chinese yuan against the U.S. dollar. In 2007, the exchange rate went from 7.8 to 7.2 yuan per dollar, a 7.1% change. On April 16, it was 6.99 yuan per dollar.
Meanwhile, capital expenses decreased in 2007 to $14.4 million, from $65.2 million in 2006. The 2006 expenses were related to the expansion of its China production and warehouse facilities in Dongguan and Jiashan, China.
The company said that it expects the challenges with the U.S. economy will persist in 2008.
“The question of whether the U.S. is in a recession — or in the process of sliding into this direction — dominates economic analysis and financial reporting views,” Kuo said in the report. “This sentiment surely will affect the prospect of the furniture industry in 2008. On the other hand, we expect that consolidation in the residential furniture industry will accelerate since the industry-wide slowdown does not appear to have hit bottom.”
Still, the company said it is poised to weather the economic conditions.
“We believe the company’s unique business model provides a solid foundation to outperform the competitors during the consolidation,” the report said. “Through our vertically integrated U.S. wholesaler and Chinese manufacturer business model, the company possesses the competitive advantage of large-scale and cost-effective manufacturing facilities in China to support our U.S. customers.”
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Samson sales, earnings fall
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