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Stanley 4Q profit of $1.2 million is first in three years

Jay McIntosh -- Furniture Today, February 1, 2012

STANLEYTOWN, Va. - Stanley Furniture reported its first quarterly profit in three years with earnings of $1.2 million or 8 cents per share in the fourth quarter as officials cited improved operating performance.

The profit reversed a loss of $8.3 million or 73 cents per share in the 2010 fourth quarter. Sales of $24.6 million for the case goods manufacturer were down 11% from a year earlier.

The company said that excluding funds from the Continued Dumping and Subsidy Offset Act - also known as Byrd funds, collected from duties on imports of Chinese wood bedroom furniture before October 2007 - and a restructuring credit, Stanley would have posted a loss of $1.7 million in the fourth quarter. That compares with a $5.4 million loss excluding CDSOA funds and a restructuring charge in the same period a year earlier.

Stanley's improvement reflects the progress the company has made since a dramatic change in its production strategy in recent years. It ceased U.S. manufacturing of its Stanley Furniture adult case goods line in late 2010, going to an all-import model. It also has shifted its youth product line, Young America, to fully domestic production in Robbinsville, N.C.

"Last year was transformational for our company as we and our customers dealt with the challenges associated with product line and operational restructuring. We are very pleased with our improvements over the previous year as our financial results reflect the impact of our strategic decisions to align operations with customer demand for differentiated product," said Glenn Prillaman, president and CEO.

"Sales results reflect both the lack of dependable service to our customers caused by each product line transitioning into new operating models, as well as the sluggish retail environment for case goods furniture in the premium segment," he said.

For the full year, 2011 sales of $104.6 million were down 23.6% from 2010.

The net loss for the year was $5 million or 35 cents per share, compared with a loss of $43.8 million or $4.11 per share in 2010. Excluding the CDSOA income and restructuring charges, the company said the net loss improved to $8.6 million in 2011 from $23.6 million in 2010.

In a conference call with analysts, Prillaman said that based on internal progress in the company, Stanley should reach operational profitability and start generating cash sometime in the second half of this year.

Officials said the Stanley Furniture line became profitable late last year and should continue to be this year, as the company and its retail customers get more comfortable with the import product. After the changes in the past year, Prillaman said he expects sales will improve as the company ramps up its inventory and returns to a normal promotional calendar for Stanley this year.

With Young America, the company will continue to focus this year on improving efficiency and reducing costs at the Robbinsville plant, while improving service and introducing product to justify the price points of the all-domestic line.

"We have not completed the transition of our Young America product line and have not yet become a profitable domestic manufacturer," Prillaman said. "We believe we are roughly half of the way through this journey and, when completed, we will have an Internet-age brand ready for the younger consumer supported by a product offering difficult to duplicate from Asia.

"As a domestic operation, we are in control of our effort to create a flexible manufacturing footprint that enables a more favorable cost structure, shorter lead times and higher inventory turns. Significant improvements in our Robbinsville facility have been made to date and will continue throughout the coming year," he added.

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