Icahn sees shrinking WestPoint sales into 2009
Staff Staff -- Furniture Today, March 18, 2008
New York – Revenues at WestPoint International dropped 30% but operating losses moderated in the fourth quarter as the company continued to bleed off unprofitable business and felt the impact of a slowing economy.
Those revenue declines will likely continue into 2009, officials said during the earnings call today of parent company Icahn Enterprises.
WPI, the IE division that comprises WestPoint Home, recorded an operating loss of $33.5 million, a 12.3% improvement over the $38.2 million operating loss posted during the same period in 2006. Quarterly revenue dropped 30.2% to $152.6 million from $218.5 million a year ago, as the mill “walked away” from unprofitable business and said it declined to bid at some retail auctions.
For the full year, WestPoint posted a 23% decline in sales, to $683.7 million, from $890.8 in FY06. Operating losses for the full year deepened, however, to $158.5 million, compared to $143.4 million last year, a 10.5% change.
The company noted that WPI maintains a high degree of liquidity, at $231.2 million.
IE executives said both industry pressures and economic forces will largely continue to control the segment’s fortunes.
“The most important things about what’s going on at WestPoint [are] our cost reduction initiatives,” offered Peter Shea, president of Icahn Enterprises, referring to the company’s continued downsizing of U.S. operations. “If you look back over the last two years, that has been the primary reason why we have not been able to maintain the top line. We’ve been reluctant to pursue programs that have been losing money.”
While the impact of that strategy has been moderated by the investment in off-shore production capacity, other factors will tamp down results, he said.
“I think we will see a weak economy, weak pull-through at retail, so I would expect that we’ll probably see some softness off the top line again in ’09,” Shea offered.
WPI is the second largest operating division of IE, after the recently acquired metals business, which produced $834.1 million in revenue last year. IE’s other interests include real estate and investment management. IE currently has $7.5 billion in investments under management and the investment segment recorded $588.3 million in revenue. The firm said it will seek additional opportunities in the distressed company sector in 2008.
For the year, IE reported net earnings of $308 million on total revenues of $2.49 billion.
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