Shares of Dixie Group fell by more than 10.5% Monday after the Dalton, Georgia-based floor covering manufacturer reported a net loss of nearly $4.5 million, or 29 cents per share, on sales of $83.7 million in the second quarter.
The quarterly loss reported Monday brought Dixie’s net loss for the first half of the year to over $7.8 million, or 51 cents per share, compared to a net income of $1.3 million, or 8 cents per share, in the first half of 2021.
Dixie said net sales dropped by 7% in the first half of 2022 “primarily attributable to a $7 million year-over-year loss of sales volume with our largest mass merchant retail customer,” company president Dan Frierson said.
“Our sales with this customer ended in the first quarter of 2022 as the result of their change in strategy to focus on lower price point products,” he said.
Despite the loss, Frierson said “we are excited to announce our formation of a joint venture to begin production of luxury vinyl flooring within our manufacturing plant in Atmore, Alabama. This domestic production will enable us to better serve our customers and more quickly respond to market changes,” he said.
Similar to the first quarter, Frierson said gross margins in the second quarter of 2022 were hurt by rising raw material costs and from “dramatic increases in ocean freight costs.”
“Fortunately, beginning with the end of the first quarter, these freight costs have continued to decline but remain substantially above prior year levels,” Frierson said.
During the second quarter, Dixie launched its new decorative segment programs, 1866 by Masland and Décorby Fabrica, which includes 30 new styles, a brand refresh, and updated merchandising. The new styles began hitting retail stores late in the second quarter, and more products will become available during the third quarter.
But Dixie said in its earnings announcement that the company is seeing “continued softness in the market” during the current quarter with orders running below year-ago levels.
Shares of Dixie’s stock fell by 18 cents a share to close at $1.53 per share in trading on the Nasdaq exchange on Monday.
The Dixie Group announced Monday that its board has authorized the repurchase of up to $3 million of the company’s stock. It is anticipated that a portion of such purchases would be under a plan to be entered into pursuant to Rule 10b-5-1 of the Securities and Exchanges Act.
– Compiled by Dave Flessner