Dixie misses estimate by a penny, expects better days

Dixie misses estimate by a penny, expects better days

November 10th, 2012 by Ellis Smith in Business Around the Region

In this file photo, a worker at the Dixie Group Eton plant moves a roll of carpet to storage via forklift.

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The Dixie Group missed Wall Street expectations by a penny per share in the third quarter, even as the Chattanooga-based carpetmaker grew earnings to $265,000 from $22,000 in the third quarter of 2011, a profit of 2 cents per share.

Analysts had expected earnings of 3 cents per share.

Even so, better times are ahead for the industry, Chairman and CEO Dan Frierson predicted, "as we have seen positive signs in the housing market beginning to take effect."

Sales for the third quarter, however, decreased $3.8 million to $65.8 million, and year-to-date sales decreased $9.5 million to $195 million. That has led to a loss for the year of $240,000, or 2 cents per share, compared to income of $1.47 million, or 11 cents per share, from the same period a year ago.

Frierson chalked the shrinkage up to a 2011 promotion that the company didn't run this year. The lack of a promotional special led to lower sales, he said.

Adjusting for the lack of a fall sale, Frierson says that Dixie did well during the quarter, even as sales declined compared to slight growth in the rest of the carpet industry.

"We continued our strong residential growth in the quarter with a 6.5 percent increase in product sales, excluding a one-time promotional special in the prior year," he said. "Each of our residential brands had nice increases through the retail and design channels."

Sales shrunk 10.6 percent at the company's commercial and contract business, but Frierson said new manager Lee Martin has a chance at turning things around with a new plan.

"Our business started the quarter slower, but strengthened throughout the period and has continued to be stronger during October," he said.

The wool business was a bright spot during the quarter, with double-digit growth, and Dixie "spent heavily" on research and developing new products.

Dixie also began to bring its newly purchased Colormaster facility into the fold, which will hurt earnings initially but eventually will help the company produce more products more inexpensively. The facility is relatively modern and more efficient than most, analysts have said.

"Our continued emphasis on operational efficiency and the coming integration of the Colormaster facility will help us to expand our product offerings to position us for continued growth," Frierson said.

Dixie, which produces higher-end carpet, expects the upper end of the residential market to continue to improve faster than the housing market as a whole, he predicted.

"We remain committed to being the industry leader in style and design and this investment enables us to continue outperforming the industry," Frierson said.