Daniel Frierson

A weak commercial market is to blame for sales that continue to fall at the Dixie Group, officials said.

Sales during the third quarter at the Chattanooga-based carpet manufacturer were $50.4 million, down 31 percent from $72.9 million reported during the same quarter in 2008, according to the company's earnings report released Tuesday.

Sales for the nine months ending Sept. 26 were $150.7 million, an almost 32 percent drop from the $220.8 million in sales for the first nine months of the previous year.

While the residential market has shown signs of recovery, Dixie Chairman and Chief Executive Officer Daniel K. Frierson, doesn't expect the commercial market to turn around soon.

"We don't anticipate commercial to improve in the fourth quarter or the next year," he said. "It typically lags residential by a significant amount of time."

Commercial product sales were off 38.8 percent during the quarter while residential product sales were down 23.7 percent, said Jon Faulkner, chief financial officer at Dixie. For the nine months, residential sales were down 26.8 percent and commercial was off 38.8 percent.

"In the third quarter, we continue to see weakness in the market," Mr. Faulkner said. "However, the residential market is beginning to turn the corner, but we have yet to see signs of improvement in the commercial sector."

Kemp Harr, publisher of Floor Focus magazine, said there typically is an uptick at this time of year as people replace carpets before the holidays, but the increase in existing home sales and new home starts indicates the market is improving.

"Some of it is seasonal, but I think there is more to it than that," he said.

Dixie also reported bigger losses in the recent quarter of $2 million or 16 cents per diluted share compared to a loss of $833,000 or 7 cents per diluted share during the third quarter of last year.

For the nine months ending Sept. 26, Dixie reported a loss of $38.6 million, or $3.14 per diluted share, compared to net income of $466,000 or 4 cents per diluted share during the same period of 2008.

The company has begun implementing a number of cost savings measures that include combining its three residential carpet units, Masland, Fabrica and Dixie Home, under one roof, in a move that could save $8 million to $10 million in 2010. Dixie also has cut about 28 percent of its work force.

The cuts imposed $563,000 of pre-tax costs in the quarter for facility consolidations and severance expenses.

Mr. Frierson said Dixie should begin seeing savings from the cuts in the fourth quarter, but the company won't fully reap the benefits until 2010.

STOCKS

Dixie Groups stocks closed Tuesday at $2.95 a share, down 2.32 percent from Monday's close.

Source: Yahoo Finance