Earnings reports show most companies on rise
Larry Thomas -- Furniture Today, November 19, 2012
The fall earnings "season" for publicly traded home furnishings companies is largely complete, and even though we continue to hear business still is pretty tough, most of the earnings reports were very positive.
With a few notable exceptions like Stanley, Furniture Brands and Chromcraft Revington, the industry's public companies have now strung together three to four quarters of decent sales and earnings growth. They're not back to the levels seen in the mid-2000s, but it's encouraging to see very little red ink on the financial tables that cross our desk these days.
The star of this growth group is a bedding producer - but not the one you might think. It's actually Select Comfort, the vertically integrated producer of the Sleep Number bed that gets the vast majority of its sales from company-owned stores.
Third-quarter sales jumped 23.7% and profits leaped 53% as the company reaped the benefits of closing numerous poorly performing stores the past two years and ramping up investments in brand building, product development, sales training and the like.
For the first nine months of 2012, the results were equally impressive - sales and profits were up 28.9% and 50%, respectively - and the company said it is on target to hit sales of $1.5 billion in 2015. (Analysts are estimating sales of about $944.3 million this year and $1.12 billion in 2013.)
The bedding producer that had been the growth star, Tempur-Pedic, had a sales increase of only 1% for the first nine months of the year (third-quarter sales fell 9.2%), as the company faced increased competition from Serta's iComfort and other non-innerspring products.
Tempur-Pedic's stock price has plummeted from $87.26 in April to a shade under $26 last week, and that probably is the reason Select Comfort shares are still trading at about that same price.
Granted, Select's stock is up about 19% year-to-date, but the shares have pulled back considerably from a peak of $35.24 in April.
Other solid third-quarter performances were turned in by retailers Havertys, Aaron's and Rent-ACenter, and components producer Leggett & Platt. Plus, upholstery and case goods resource Flexsteel had a sales increase of 11.9% and a profit increase of 20.9% in the first quarter of its fiscal year.
The most impressive part of Leggett & Platt's performance was its net income line, which leaped 46.5% as sales grew a more modest 4.4%. The net income jump came without the aid of a one-time cash infusion or other special items.
The company credited the bottom-line increase to its decision to retain spare production capacity as it has reduced its fixed costs in recent years. That allows sales increases to go almost directly to the bottom line because production can be ramped up without the need for large capital expenditures.
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