Dixie Group quarterly report shows turnaround

Dixie Group quarterly report shows turnaround

May 13th, 2011 by Ellis Smith in Business Around the Region

High-end carpet maker The Dixie Group reported first-quarter profit Thursday of $644,000 on sales of $66 million, marking a huge turnaround for the Chattanooga-area company.

Dixie lost $2.5 million in the first quarter of 2010, and its carpet offerings took a beating during the recession when customers chose less-expensive options - when they were buying at all.

While Dixie's strong posted returns could signal that the carpet industry finally is recovering from the U.S. housing crisis, not everything is back to normal, said Kemp Harr, publisher of Floor Focus Magazine.

What Dixie's results mean, he said, is that the commercial market is doing better, and higher-end goods are selling better than standard goods.

"It would be safe to say that carpet has leveled off, it's no longer on the decline," Harr said.

The carpet industry as a whole grew 2.3 percent over the year, while Dixie increased sales about 22 percent, Dixie CEO Dan Frierson said.

"The first quarter of 2011, like the second half of 2010, saw improvement in the commercial sector while showing poor results for the residential sector," he said.

Residential carpet sales were dragged down by still-low housing starts, the difficulty of getting credit and bad weather, he said.

"Although severe weakness in the housing industry and tough credit conditions will likely persist throughout this year, we expect improved sales volumes during the second quarter as a result of the normal seasonality of the carpet industry and the strength of our business," Frierson said.

Commercial carpet sales, on the other hand, jumped 18.6 percent on strong demand for modular carpet tile, compared with an industrywide commercial sales growth of 7.7 percent, the company estimated.

Demand for Dixie's wool and Stainmaster-branded products is especially high, Harr said.

Harr estimates that the commercial market, and especially the commercial replacement market, could be up as much as 8 percent at present.

Dixie shares closed up 13 cents in trading Thursday to close at $4.51 per share.