Furniture Brands reports 5.1% sales dip, $24.5 million loss
Company makes moves to cut costs, including layoffs
Larry Thomas -- Furniture Today, November 3, 2011
ST. LOUIS — Furniture Brands International said its third-quarter sales were 5.1% below last year's third quarter and its net loss increased to $24.5 million.
The manufacturer and retailer's loss for the quarter ended Sept. 30 was well above the $2.01 million net loss recorded in last year's third quarter. The most recent quarter included charges of $9 million to write down the value of trade names and charges of $7.5 million stemming from recent "cost reduction actions."
In a conference call with analysts this morning, Chairman and CEO Ralph Scozzafava said the actions included cutting about 3.5% of the company's work force. While FBI did not disclose the number of jobs affected, the percentage suggests it's about 300. Scozzafava said the positions were in "back office functions."
Furniture Brands said the cost-cutting moves will save the company $30 million annually. In addition to personnel reduction, the steps included savings in areas such as travel and overnight shipping, officials said.
"We don't like making these decisions but we have to get our company to a point where we are efficient and effective," Scozzafava said.
Sales for the quarter totaled $258 million, down from $272 million in last year's third quarter.
Sales at its company-owned Thomasville retail stores slipped 1.1% to $26.7 million, and the stores' operating loss was reduced to $3.86 million from $4.75 million in last year's third quarter.
The company, which operated 45 stores at the end of the quarter, said same-store sales rose 5%, marking the seventh consecutive quarter of same-store sales growth.
"We operate in a discretionary category and the macro headwinds have had an impact on our operating environment, affecting the buying behavior of our target customers," said Scozzafava. "Our focus has been, and will continue to be, on controlling our controllables. We cannot, and will not, simply wait for an economic recovery."
He said that as has been the trend in recent quarters, FBI's higher-end brands performed better than the lower-priced lines and upholstery sold better than case goods in the third quarter.
For the nine months ended Sept. 30, sales fell 3.6% to $852.1 million.
The nine-month net loss totaled $34.3 million, or 62 cents per share. That compares with a profit of $5.65 million, or 11 cents per share, in the first nine months of 2010. The 2010 period, however, included an income tax benefit of $7.19 million.
Company officials said they expect future cost savings from new plants in Indonesia and Mexico, which came on line this year. Production in the plants will be fully ramped up by mid-2012 and should contribute $10 million or more in annual cost benefits by 2014, the company said.
In addition to Thomasville, Furniture Brands is the parent of the Broyhill, Lane, Drexel Heritage, Maitland-Smith and Henredon brands.