Stanley poised to grow after 3rd quarter
November 13, 2017,
HIGH POINT – Case goods vendor Stanley Furniture reported third-quarter 2017 net sales of $10.4 million, down 5.5% from the comparable prior-year period.
A net loss of $305,000 for the quarter ended Sept. 30 was a significant improvement compared with a net loss of $2.1 million in third-quarter 2016. Gross profit margins improved to 22.4% from 16.6% comparing the same periods.
“The company missed its goal of slight profitability for the quarter,” said Glenn Prillaman, president and CEO. “Prolonged periods of poor service caused by past sourcing issues are now behind us. The stock availability positions that hindered demand for our products have been dramatically improved, and as a result, sales grew approximately 8% in October over the prior-year same period.”
Prilliman was pleased with the ability to essentially break even in Q3 when it had “little ammunition to grow sales” and noted that. with October’s in-stock position, Stanley is “beginning to see the tide shift on sales.”
More than 90% of the company’s product offerings – the newer of which have been delayed since early 2016 – are either now in stock in the company’s Virginia warehouse or in transit from overseas vendors.
“Over the past 30 days our customers are experiencing the improvements in stock availability as 88% of orders were fulfilled in an average of less than two days,” said Prillaman. “October was the company’s first month, since early last year, when stock availability served customers as expected, and with each positive experience at retail, we expect to regain the customer confidence that grows revenues.”
While third-quarter gross margins remained in the low twenties as they have for the last three sequential quarters, they improved dramatically over the prior-year quarter and nine months due to abnormally high discounting in both the prior-year periods. Margins improved in both periods even with lower sales negatively impacting the absorption of fixed overhead.
Lower discounting and cost reductions were the major factors towards improved results, partially offset by under-absorption of fixed overhead due to lower sales.
“While we missed the earnings results we had expected to achieve in the third quarter due to stock availability, we continue to perform better than a year ago,” Prillaman said. “Additionally, we generated slight income in the month of October as sales growth drove profits.”
Stanley remained debt free at the end of the quarter. Cash at the end of the period, including $631,000 of restricted cash, was $1.9 million, down $3 million from prior year-end.
“The balance sheet has been stressed on a short-term basis due to the sudden influx of so much inventory, all within a short amount of time,” Prillaman said. “After prolonged periods of not having the inventory necessary to serve orders, our inventories increased dramatically all within a few months because we were moving product from one factory to another and needed to continue to order from both for a smooth transition.”
He added that as sales continue to increase, overseas ordering will normalize with customer demand, and Stanley will generate cash.
In addition Stanley announced that its license with Coastal Living will not be renewed at the end of 2017, but the company will continue to serve that lifestyle category.
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