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Where is Furniture Brands headed?
November 4, 2011
Furniture Brands International executives Ralph Scozzafava and Steve Rolls assured securities analysts in a conference call Thursday morning that the company would have positive free cash flow next year.
This proved to be not very assuring at all to many investors, who sold off the stock in droves that day and sent its share price down more than 25%. Furniture Brands, the largest U.S. publicly held residential furniture manufacturer and importer, has seen its stock price fall by about two-thirds since midsummer.
Raymond James securities analyst Budd Bugatch downgraded the stock to "underperform" (code for "sell") after the company reported its latest quarterly net loss Wednesday evening. In a commentary, Bugatch, a former furniture retailer who says he'd hate to see Furniture Brands fail, used the phrase, "Burning cash. Financial noose tightening."
While there is some speculation that Furniture Brands may not survive long enough to return to profitability, the company could still prove the conventional wisdom wrong. Or it might be sold. The company's well-known brands - Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Maitland-Smith, Hickory Chair, Pearson, Lane Venture - must have some value, even if apparently not all of them are turning a profit.
When Scozzafava, the chairman and CEO, was hired in mid-2007 as vice chairman and CEO-designate to replace Mickey Holliman, who would step down in 2008, he did not foresee what lay ahead. In early 2008 he told a reporter the company was headed for a "huge turnaround" that year. Instead, sales declined 16.3% as the bottom fell out of the housing market and FBI posted a net loss of $385.9 million, partly because of a $202 million non-cash charge to write down the value of goodwill and its trade names.
Furniture Brands' sales have declined and the company has posted a loss every year during the Scozzafava era, which has coincided with the recession and anemic recovery.
But while the industry contracted by 13.6% from 2007 to 2010 (based on Furniture/Today's analysis of the government's consumer spending figures), FBI's sales declined 44%. The company appears to have arrested, if not reversed, that trend this year with sales down just 3.6% from 2010.
Stocks and companies have bounced back before. Investors were basically writing off the whole industry a couple years ago in the depths of the recession, but if you had loaded up on Pier 1 Imports or La-Z-Boy back then you would be sitting pretty today.
If you had bought Furniture Brands at around $1 in early 2009 you would still be ahead at today's price of $1.38 (last I checked), although you would be kind of sad when you realize you could have sold it at $4 three months ago.
Posted by Jay McIntosh on November 4, 2011 |
Comments (9)
December 10, 2011
In response to:
Where is Furniture Brands headed?zebulon k juno commented:
ouch,seen this before non -furniture biz folks ruining great old companies with corporate greed.we should learn a lesson from the demise of great brands like drexel and henredon who look like pulaski now,take heed the people who run the companies into the ground will take as much $$ out before the end comes and it will come soon ,so poorly run these companies are they have no value left and look so old and tired they will sleep with the fishes that giant corp. throw out like dirty water...bye bye great companies ......
December 3, 2011
In response to:
Where is Furniture Brands headed?Anisha commented:
Is that really all there is to it beaucse that'd be flabbergasting.
December 1, 2011
In response to:
Where is Furniture Brands headed?Karess commented:
Hey, sulbte must be your middle name. Great post!
November 10, 2011
In response to:
Where is Furniture Brands headed?Lee commented:
It's time for furniture to be built by furniture craftsman and not business men who only know how to count beans on their laptops.
November 9, 2011
In response to:
Where is Furniture Brands headed?victor pedraz commented:
It is sad to note the FBI went down the same path as MASCO and continued to destroy an Industry once well known for it's ethical standards and quality offerings to retailers and people around the world. This was done solely for $$$ profit and without thought of the industry, factories and labor pools that have now become almost extinct in this country. We are now looking at a skeleton which was at one time salvageable and has now wasted away to nothing.
November 8, 2011
In response to:
Where is Furniture Brands headed?Industry Veteran commented:
Sorry, the title of this blog alone bespeaks of the poor journalism of this publication, which is supposed to be the major publication for the industry. How about doing some very specific investigative reporting on all the incredibly mindless decisions that Scozzafava has made one after another. Henredon is a ghost of its former self along with Drexel Heritage. Lane has totally lost it as far as product salability is concerned. Holliman started this rush to oblivion and Scozzafava will finish it with probably a big payout for himself for having destroyed the best companies in the industry.
Jay, please follow this up with an article entitled "Here are the major moves Scozzafava made along with the reasons he failed. Please include all the lives that he destroyed and how he rewarded his VP of HR such a huge bonus for getting rid of so many employees.
I hope you take this request seriously.
November 7, 2011
In response to:
Where is Furniture Brands headed?Roger commented:
Pity the only one Scozzofava is fooling is the board. The company is run by a man with a background in selling gum. All he has focused on is numbers while he has been there and has done nothing to improve the way the company is run. The businesses are apparently different and cutting costs and "improving the cost structure" does nothing to improve the company's ability to make and sell furniture. Now it is too late to bring in somebody to fix what he destroyed. It will be less than two years before this company is gone.
November 7, 2011
In response to:
Where is Furniture Brands headed?bob urunkle commented:
so obvoius this team is on alosing streak,5 years ,so typical of poor management silly board and what a pity to destroy the famous brands they have.furniture is not just a stock play,you acyually need to know what you are doing.
November 4, 2011
In response to:
Where is Furniture Brands headed?seen this before commented:
Since 2007, Scozzafava has promised better results quarter after quarter. After nearly five years of his leadership, this mixed bag of companies has wildly under performed the rest of the industry. Imagine another publicly traded company which has lost money EVERY year while continuing to proclaim that they're doing the right things to get them to profitability. The Board of Directors of this company must be asleep. So now, it's time to outsource more overseas production and cross their fingers with the same management team? While there may be some companies with value, that value will only be unlocked once Furniture Brands files and they scatter the ashes. It won't be long before the banks pull money due to broken covenants and the swirl down the drain will begin. I've heard you're supposed to bet the jockey, not the horse. If you're betting on this jockey, save your $1.36 a share price and take it to McDonalds and enjoy a large coffee.
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