Three months ago, in the course of writing up Furniture Brands'
Guess what? That's precisely what happened.
When Furniture Brands reported its Q1 results Wednesday evening, the numbers looked both worse, and better, than expected. Take the 13% sales decline. It was worse than the 10% that Holliman predicted back in February, but better than the 15% he subsequently warned of in March. (Thank heavens for the power of lowered expectations.) Sadly, the earnings number came in right on target with March's prediction. Simply put, profits imploded this quarter, down 90% year over year to $0.06. And even if you back out several one-time items -- restructuring charges and arcane accounting for "interest rate swaps" and the like -- the decline still exceeded 80%.
Granted, this is an industrywide phenomenon, as evidenced by the news next door at Haverty Furniture
Indeed, a loss looks inevitable this quarter. Although the firm has made progress in working down its inventories, they continue to stand 13% higher than one year ago. This means that Furniture Brands will likely need price cuts to shift goods from the warehouses to customers' homes. Meanwhile, the slide in sales is draining operating efficiency. The company's 13% decline in sales went woefully unmatched by a basically flat number for selling, general, and administrative costs.
Long story short: Better break out the hide-a-bed, furniture investors. It's going to be a long, cold night.
What did we expect out of Furniture Brands last quarter, and what did it produce? Find out in:
- Foolish Forecast: Uncomfortable Furniture Brands
- Furniture Brands Struggles
- Furniture Brands Feels the Pain: Fool by Numbers
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Fool contributor Rich Smith does not own shares of any company named above.