The Dixie Group soared back to pre-recession prosperity in the third quarter with a 37 percent jump in sales from the third quarter of 2012, as Americans' fondness for soft carpet and wool fibers returned with a vengeance.
The earnings announcement Wednesday sent Dixie's stock soaring $1.87 to $12.97 per share, a market-beating 16.85 percent increase that ticked down slightly from a high during the day of $13.77. That's the highest level at which its shares have traded since early 2007, and a remarkable one-day rise that made Dixie one of the the top 10 fastest-growing stocks in the U.S. on Wednesday.
The company sold $90.2 million worth of carpet during the quarter, and made $1.43 million, or 11 cents per diluted share. Those sales levels are well above the high-water mark set before the 2008 recession, the company announced, marking a return to health for the Chattanooga-based carpetmaker that has been a long time coming.
"All of our product categories were up, showing the broad nature of our market momentum," said Dan Frierson, chairman and CEO of The Dixie Group. "Movement of soft fibers such as Stainmaster, TruSoft and the introduction of SolarMax has helped separate us from much of the competition."
The market as a whole grew more slowly, Frierson said, sticking to high single-digits growth, which analysts expect to keep rising. At Dixie, residential sales grew 35 percent during the quarter, and commercial products sold at levels almost 40 percent higher than during the same period last year, Frierson said.
"As we look at this year in the first quarter business began to improve and our sales were up 20 percent over the previous year. During the second quarter, we began to feel the momentum of the industry improvement and our sales were up 26 percent. During the third quarter, we were able to get more of our new products to market and our sales were up 37 percent," Frierson said.
The carpetmaker's long-time CEO, who called this recession the worst he's ever seen, chalked up much of Dixie's success to investments the company made in its manufacturing technology, in hiring new sales people and in new designs over the last couple tough years. Dixie launched a new brand during the quarter, Avant Contract, to focus on the commercial office market, where sales are picking up.
"Clearly, we really began investing back in the business before a number of our competitors did," Frierson told analysts on a conference call to announce the results. "And quite honestly, it did have a negative impact on our profitability there, the last couple of years. But we think it was well worthwhile doing, looking at the business strategically in long term, and we are getting to the point where it is beginning to show up on the bottom line as well."
Frierson felt confident enough about the company's results to predict a good fourth quarter as well, anticipating that the company's sales will remain strong, despite competition from Shaw Industries and Mohawk Industries, who are "as competitive as they've ever been," he said. Frierson predicted increased sales in the commercial modular carpet tile market, and upper-end residential sales, despite what he called "potential macro-economic issues."
"Obviously, we are very pleased with the sales increase, and we continue to see strength in the fourth quarter as we did in the third quarter," he said. "Our objective in the fourth quarter and going forward is to bring more of that increase in sales to the bottom line."
-- Contact staff writer Ellis Smith, firstname.lastname@example.org or 423-757-6315