You know the quaint, Norman Rockwell-esque newspaper cartoon of the closed storefront door, hung with a cockeyed, handwritten note reading "Closed -- Gone Fishin'?" Ever wonder what lay behind that door?
Apparently, it's the whole darn U.S. furniture industry.
First up
Last week, Furniture Brands (NYSE: FBN ) subsidiary Broyhill announced the closure of its 628,000-square-foot case goods factory in Lenoir, N.C. Although not stated explicitly in the company's press release, subsequent media reports quote Furniture Brands representatives as saying that production of the goods formerly produced at the factory will move "to overseas facilities with lower costs."
From a "buy American" perspective, this looks like unqualified bad news -- more low-cost foreign competition taking its toll on U.S. jobs. From an investor perspective, it's not much better; Furniture Brands anticipates that asset impairment and restructuring costs, plus payment of severance benefits to the laid-off employees, will total about $2 million, and reduce Q1 2007 profits by $0.04 per share.
For context, Broyhill's announcement mirrors those of a whole slew of furniture makers, most notably Motley Fool Hidden Gems recommendation Hooker Furniture (Nasdaq: HOFT ) . Over the last four years, we've watched Hooker close down factories at the rate of roughly one per year, beginning with three plants shuttered in North Carolina, and ending with one in Virginia, leaving the firm with exactly one wood furniture plant remaining in the U.S., the massive 760,000-square-foot facility located in its hometown of Martinsville, Va.
In related news
But Broyhill's not the only firm to announce production cutbacks; what's more, it's not even the latest. That title belongs (temporarily, until the next shoe drops) to yet another Hidden Gems recommendation: Stanley Furniture (Nasdaq: STLY ) , which announced last evening that it, too, needs to downsize. The firm has decided to axe 200 jobs -- nearly half the workforce at its Robbinsville, N.C. plant -- as a result of what CEO Jeffrey Scheffer termed "the industrywide slowdown." No word from Stanley on how the severance costs will affect the current quarter's earnings.
My take on all this bad news: Tell me again, Wall Street, how the slowdown in the housing industry isn't going to hurt the broader economy? I'm all ears.
We've followed this trend most closely in relation to our Hooker recommendation. Read how it's faring in:
Fool contributor
Rich Smith
does not own shares of any company named above.
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