Furniture Brands' Q2 Loss Balloons; Company Begins Review of Business
ST. LOUIS-Furniture Brands International's second-quarter net loss reached $40.8 million, compared to its net loss of $6.8 million in its second quarter of last year.
The increased flow of red ink stemmed from reduced sales and gross margin. Net sales for the quarter, which ended on June 29, were down 4 percent to $255 million. Ralph Scozzafava, the company's chairman and CEO, noted that Furniture Brands is facing challenges "in stabilizing sales and profitability in our wholesale businesses," which are offsetting what Scozzafava termed "solid top- and bottom-line performance of our designer brands and improving sales and order trends at our Thomasville owned retail stores."
Scozzafava said Furniture Brands is conducting a strategic review of its business in the face of the difficulties that continue to beset the company, and has engaged outside advisors in this effort. "The scope of this effort encompasses achieving further cost reductions, pursuing asset sales and modifying our credit facilities in order to improve our liquidity," he said.
Gross margin dived 582 basis points to 18.3 percent. Cost of sales grew on the back of charges related to product rationalization, the deleveraging of fixed manufacturing costs due to the lower sales and additional clearance of older inventory and product that is being replaced, according to the company.
Selling, general and administrative expenses were down 9.3 percent in dollars and 144 basis points as a percentage of sales, to 24.7 percent. Furniture Brands was able to slim down its compensation costs, marketing expenses and expenses related to cost reduction activities.