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Stanley Furniture Reports Second Quarter Sales Decrease

Furniture Industry News Update - Furniture World Magazine
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Article Summary: Operating loss for the first half of 2012 narrowed to $1.9 million compared to $4.1 million in the first half of 2011.


Stanley Furniture Company, Inc.  reported sales and operating results for the second quarter of 2012.

Second quarter 2012 highlights:

  • Net sales were $24.4 million, a 10.8% decrease compared to the second quarter of 2011 and an 8.8% decrease on a sequential quarter basis.
  • Gross margin improved to 14.5% of net sales compared to 12.3% in the second quarter of 2011, after excluding restructuring items.
  • Selling, general and administrative expenses were $4.5 million (18.4% of net sales) compared to $4.7 million (17.3%) in the second quarter of 2011.
  • The company continued the consolidation of its Virginia warehousing operations and recorded a $474,000 restructuring charge.
  • Net of restructuring items, operating loss for the second quarter was $932,000 compared to a loss of $1.4 million in second quarter of 2011.
  • The company reported net income of $36.9 million in the second quarter after recording $39.4 million of income, net of expenses, from Continued Dumping and Subsidy Offset Act (CDSOA) proceeds.
  • As of June 30, 2012, the company’s financial position reflected $47.4 million in cash, restricted cash and short-term investments.
  • Subsequent to quarter end, the Board authorized a $5.0 million share repurchase program.

Year to date 2012 highlights:
  • Net sales were $51.2 million compared to $54.0 million in the first half of 2011.
  • Gross margin improved to 14.0% of net sales compared to 10.8% in the first six months of 2011, excluding restructuring charges in both years.
  • Selling, general and administrative expenses improved to 17.7% of net sales compared to 18.3% in 2011.
  • Net of restructuring charges, operating loss for the first half of 2012 narrowed significantly to $1.9 million when compared to a loss of $4.1 million in the first half of 2011.
  • Capital expenditures and investment in new systems totaled $3.9 million in the first half of 2012.

Overview

“We are very pleased with the ability we have demonstrated to manage our cost structure and reduce our operating losses on lower sales volume”, commented Glenn Prillaman, President and Chief Executive Officer. “We continue to gain momentum with our Stanley brand. While net sales of this product line decreased sequentially as a result of our promotions during the first quarter, they held steady compared to the prior year quarter, our strongest of 2011.

According to our retailers, the value of our Stanley product offerings has noticeably increased since this time last year. Our partnerships with overseas vendors continue to strengthen our service position, a key factor that has hindered sales growth to date. Our plan for the Stanley line is working as profits continue to grow.”

“Our Young America brand remains in transition until later this year when we expect new enhancements to all existing products to be completed and the marketing support for those products will be in place at retail. New product designs should be on retail floors before the end of the year. We believe that the completion of these efforts paired with continual operational improvements will result in a product of significantly greater value in the marketplace boosting sales. In the meantime, we recognize we are sacrificing immediate sales in order to position the Young America brand and its supporting retailers to compete with price-driven, imported product in the long term,” Prillaman commented.

Balance Sheet

Cash, restricted cash and short-term investments at quarter-end were $47.4 million, up from $17.3 million at December 31, 2011. CDSOA proceeds of $39.9 million were received in the second quarter for funds that were previously withheld under the antidumping duty order for wooden bedroom furniture imported from China. Capital investments associated with modernizing our manufacturing facility in Robbinsville, North Carolina were $2.6 million in the first half of 2012. Additionally, the company has spent $1.3 million in 2012 toward new systems. Inventory levels associated with our Stanley line decreased during the second quarter and are down from year-end.


Outlook

The company is projecting a slight increase in net sales from the prior year third quarter and expects a further reduction in operating losses. “We have several encouraging trends in our business. Retailers who have received the initial shipments of our newly-enhanced Young America products have given us very positive feedback. This news reinforces our belief that our long-term plan for the Young America brand positions us well to return to growth. In addition, our Stanley product introduction from High Point’s Spring Market was well-received and is already on its way from overseas to retail floors,” Prillaman concluded.

About Stanley Furniture: Established in 1924, Stanley Furniture Company, Inc. is a leading designer and manufacturer of wood furniture targeted at the premium segment of the residential market. The company offers two major product lines. Its Stanley Furniture brand represents its fashion-oriented adult furniture and competes through an overseas sourcing model in the upscale market through superior finish, styling and piece assortment. Its Young America brand is positioned as the leader in the infant and youth segment and differentiates through a domestic manufacturing model catering to parent preferences such as child safety, color, choice and quick delivery of customized special orders. The company’s common stock is traded on the NASDAQ stock market under the symbol STLY.

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