Audio clip
Trevor Haines
Anytime the economy is off, some companies do well and some don’t.
But those that profit might surprise you, Chattanooga business owners say.
Dojo Chattanooga is one business seemingly defying the odds at a time when experts say the economy could be headed toward a recession.
Trevor Haines, owner of a downtown Chattanooga martial arts studio, said services such as his are often the first that consumers cut when the economy is bad.
“It’s definitely (part of) discretionary income,” he said. “I know that seems a little contradictory since I’m still doing pretty well — I feel like I am doing well despite the economy. I think if the economy was better, I would do even better than I am doing.”
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Staff Photo by Allison Kwesell -- Dusty Ruth, left, and his dad, Greg, eat lunch at the Krystal on Lee Highway. Krystal reported record sales of $440 million in 2007.
Businesses providing necessities should weather the economic storm pretty well, a local banker said, while those providing discretionary items may get hurt.
Fast food chain Krystal Co., based in Chattanooga, celebrated a record year for profits and revenue in 2007 with sales of $440 million.
“What we have is momentum,” said Fred Exum, Krystal’s president and chief executive. “These things are not a bunch of accidents.”
While people are still buying those tiny hamburgers, consumers are not as interested in buying flooring products, as shown by Mohawk Industries’ 13 percent drop in carpet sales in its fourth quarter compared to the previous year.
The company’s downturn is another example of the effect of trouble in the housing market.
Recent actions by the Federal Reserve System have helped the sector and things seem to be rebounding, said Terry Todd, Chattanooga president of FSGBank.
“If you look at everything that goes into the housing market, from developers to the labor force to materials, there is a lot of our work force tied to that sector,” Mr. Todd said. “I think the government is going to do what it can to pump up that sector as quickly as possible because they need that sector to be viable.”
Don Oakes, president of Chattanooga-based Mortgage South, said his business was down at the end of 2007 but has rebounded this year and appears to be on the upswing.
Chattanooga-based trucking company Covenant Transportation Group reported a fourth-quarter profit, but for the year the company had a net loss of $16.7 million, or $1.19 per share.
Company President David R. Parker in October said that for the first time in more than 30 years, he loaded his trucks with broker freight.
Companies that continue to keep profits up include Chattem Inc., a Chattanooga-based maker of branded consumer products.
Last month, Chattem shares surged after the company reported its highest annual revenue in its 128-year history and raised its 2008 guidance.
Jabo Covert, vice president of Cleveland, Tenn.-based Check Into Cash, said problems in the economy have had little affect on the nationwide payday advance business.
However, he said rebate checks that will begin arriving in the mailboxes of U.S. households this summer could hurt the lender’s business in the short term.
“We ourselves don’t know how all of this is going to affect us (over the long term), but so far things are steady,” Mr. Covert said.
In the discretionary service sector, Mr. Haines said implementing a “recession proof” business plan — which includes having no employees — has kept his martial arts and personal training business in the black.
“I really try and control my expenses,” he said. “I currently have no employees, and so I am operating on a low overhead formula.”
ECONOMIC PULSE
Share prices of some Chattanooga companies Friday and a year ago:
Advancers
* Chattem Inc. — $77.42; $56.05
* Unum Group — $24.09; $21.75
Decliners
* Mohawk Industries — $74.68; $92.92
* Miller Industries — $11.67; $23.42
* Covenant Transportation Group Inc. — $8.10; $11.83
