This story was updated at 8:07 p.m. on Thursday, March 4, 2021, with more information.
Shares of the Dixie Group plunged by nearly 41% Thursday after the Dalton, Georgia-based floorcovering company reported a net loss in 2020 and was cautious in its outlook about the start of 2021.
The stock price of Dixie Group fell by $2.22 per share, or 40.7%, to close at $3.24. The company's stock had more the doubled so far in 2021 before Thursday's earnings report and even with the selloff Thursday, Dixie shares are triple the level of a year ago.
Dixie Group CEO Dan Frierson said sales were $60 million less than plan and the prior year. The reduction in sales, combined with higher sanitation, supply and other costs due to the pandemic, produced a net loss in 2020 of $9.2 million, or 63 cents per share.
In 2019, Dixie reported net income of $15.3 million, primarily due to a $25 million gain from the sale of its facility in Santa Ana, California.
Dixie sales last year totaled $315.9 million, down 16% from the $374.6 million in sales in 2019 and down 22% from the $405 million in sales in 2018.
"The reduction of sales with an operating margin in the mid 20s reduced operating income significantly, probably in the $15 million range," Frierson said. "We also faced additional challenges in our operations as a result of continued absences of people due to COVID-19 and its related quarantine requirements."
Frierson said the company reduced its debt by $10 million last year and entered into a new credit line while also boosting the company's operating profit margin by trimming its staff and other expenses. Dixie also eliminated or deferred $14 million of planned spending last year.
Frierson said carpet and flooring sales are rebounding with more home remodeling and lower interest rates spurring more home construction, especially compared with the depressed levels when the pandemic hit the U.S. economy.
"The abrupt decline of over 50% in sales in April was certainly a shock to our system, but we have been pleased with the recovery in the residential market," Frierson said. "Low interest rates helped drive strong trends in new home construction and existing home sales helped to improve business conditions for our residential segment through the second half of the year, as many flooring retailers emerged from the COVID-19 downturn, and an increasing number of consumers began home improvement projects.
Frierson said floorcovering sales for the first nine weeks of the first quarter in 2021 were down by low single digits versus the same period in 2020, but orders are up mid-single digits.
"Our residential sales and orders are up double digits and commercial orders, on a weekly basis, are better than the second, third and fourth quarters of last year," he said.
— Compiled by Dave Flessner