The Dixie Group on Wednesday reported its first profitable quarter since early 2008 after cutting costs and staff in response to the recession-induced slowdown in sales.
The Chattanooga-based carpet maker made $1.2 million from continuing operations in the fourth quarter of 2010, or 9 cents per share. Restated results showed that Dixie previously lost a net $1.3 million, or 11 cents per share, in the fourth quarter of the previous year.
For all of 2010, Dixie still lost $3.36 million, or 27 cents per share. But last year's red ink total was far less than the $9.8 million, or 80 cents per share, the company lost in 2009.
Dixie said sales rose by 14 percent in 2010 to $231 million, 14 percent more than the previous year. Dixie's revenue gains outstripped the industry as a whole, which grew by less than 1 percent, according to Dan Frierson, chairman and CEO of Dixie.
The company's turnaround began in 2008, when Dixie started slashing costs, reducing inventory, combining operations and chopping its work force by 28 percent, Frierson said.
"The results of these efforts should show up in 2011 with improved operational responsiveness, tighter cost controls and improved inventory and asset leverage," Frierson said.
Cost-cutting and price increases have brought expenses in line with recessionary sales figures, but Dixie has also benefited from a rebound in the high-end replacement carpet market, said Kemp Harr, publisher of Floor Focus magazine.
"The people remodeling right now on the residential side are more affluent," Harr said, noting the company was "also pretty strong in the corporate replacement market."
Demand for the company's modular tile has increased to the point where half of commercial customers request it, Harr added.
Though Dixie carpet is more expensive than competitors', "it's dense, plush and rich looking," Harr said. That appeals to wealthier buyers looking to remodel a house or commercial structure rather than sell it, he said.
This won't be the first time Dixie has transformed itself in response to changing market conditions, according to Kimberly Gavin, editor of Floor Covering Weekly. The company formerly manufactured yarn and thread, but demand dried up in the '80s when the southern textile industry began to fade away, she said.
Following a few years of reorganization and acquisaitions, Dixie had transitioned from a yarn and thread supplier to a full-bore carpet company.
"We see continued growth in the upper end of the residential business return ahead of the general market as evidenced by our results in the fourth quarter," Frierson said. "We are cautiously optimistic that 2011 will be a year of steady growth as we recover from the unprecedented downturn of the last few years."
Dixie Stock closed Wednesday at $4.39 per share, down 15 cents.