From Home Furnishing Business
Stanley Sales Fall 19.8% as Production Woes Continue
Stanley Furniture (STLY) said third-quarter sales tumbled 19.8% as the company continued to experience production delays with a factory in Vietnam that is making its recently introduced products.
The company said the new factory, which was built by Starwood Manufacturing Corp. and dedicated to Stanley production, “did not make the significant progress expected during the quarter,” noting that more than 60% of its order backlog is assigned to this factory.
“Capacity utilization was again hindered by initial production runs of new designs, and costs and delays associated with product quality issues negatively impacting margins,” the company said.
Sales for the quarter ended Sept. 30 totaled $11 million, down from $13.8 million in last year’s third quarter.
The production problems also resulted in a net loss of $2.1 million or 15 cents per share for the quarter. That compares to net income of $391,000 or 3 cents per share in the same quarter a year ago.
“Our wholesale customers clearly see the difficulties we are experiencing getting our overseas operations with Starwood where we expect them to be in order to provide the level of product quality and service they deserve,” said Glenn Prillaman, President and CEO. “Our recent performance is disappointing, but the expected value of our new product from both the Stanley and Stone & Leigh brands at retail remains of great interest to our customers.:
Prillaman said he increasing backlog “demonstrates customer confidence in the company’s ability to overcome initial roadblocks to success with our differentiated overseas strategy.”
He noted that orders and shipments of the Stone & Leigh nursery and youth furniture brand grew again during the quarter.
For the nine months ended Sept. 30, sales totaled $34.8 million, down 20.2% from $43.6 million in the first nine months of 2015.
The nine-month net loss totaled $5 million or 35 cents per share. In the first nine months of last year, the company reported net income of $4.4 million or 30 cents, including $4.8 million in anti-dumping duties.
“As we await the shipment of backlog of newer product, we continue to aggressively promote older products that are immediately available to ship in the quarter, and this is negatively affecting margins,” said Prillaman. “Retail floor sample promotions reported in the prior quarter assisted in prolonging life cycles of older products as we expected, yet the growth of the company now depends upon newer product success within the retail landscape.”
He said sales in the fourth quarter will continue to be hampered by lack of inventory for its newer products, and said margins will remain “well below expected levels.”
He said sales should improve in multiple distribution channels in the first half of 2017.