Bestar's sales decline 12% in first quarter

Strong Canadian dollar hurts U.S. business

Michael Knell -- Furniture Today, June 1, 2010

LAC-MEGANTIC, Quebec — The continuing high value of the Canadian dollar dragged down first quarter sales and earnings for Bestar, the ready-to-assemble and furniture component specialist based here, reversing the gains made a year ago.

For the three month period ending Mar. 31, revenues were C$10.1 million, down 12% from the C$11.5 million recorded for the same period in 2009.

The company said C$800,000 of the decline could be attributed to value of the Canadian dollar, which has sat at par with the U.S. greenback for most of the past three months.

Bestar recorded a net loss of C$113,000 or 1 cent per share, compared with net earnings of C$206,000 or 2 cents per share for the prior period.

The company reported that the introduction and promotion campaign behind its latest product offering generated a 21% increase in sales during the first part of the year compared with the fourth quarter of 2009, although sales fell significantly in March.

While sales increased slightly in Canada during the first quarter, U.S. sales - which are more sensitive to the exchange rate - contributed significantly to Bestar's revenue decline.

"Component sales have significantly decreased in comparison to the first quarter of 2009," the company said in a statement. "Since the second quarter of 2009 activity in this sector has not improved. During these slow economic times, our component clients have the capacity to respond to current demands."

To help moderate the impact of declining sales, Bestar said it shut down production for one week in early May and may take other steps, if needed, to ensure inventories are in line with anticipated needs, without adversely affecting delivery cycles.

Looking to the rest of the year, Bestar president and CEO Paulin Tardiff was guarded, saying, "We have just begun to see modest signs of the economic recovery, however, prospects for growth remain limited ... as a large part of sales depends on the rate and strength of the economic recovery in the U.S."

The company is undertaking what it describes as "a strategic marketing initiative to improve our image and update our product line to better serve our present customers while recruiting new ones," Tardiff said.

Among those initiatives is a new packaging method that provides better quality while using totally recyclable materials and not increasing cost. Bestar said it also has introduced a number of "new commercially oriented collections" that should boost sales in the second quarter.