Oh come on. It wasn't that bad.
Besides, if you're invested in Furniture Brands
Huh? What? Did something happen?
Sure did. In case you've been covering your eyes, unwilling to watch any more of the horror movie that is unraveling the U.S. home furniture industry -- a spinoff from the equally frightening homebuilding flick starring Centex
Yesterday, Furniture Brands chimed in with its own tale of woe. Sales from continuing operations dropped 13%, and shareholders took at $0.49-per-share loss. The good news -- sort of -- was that this loss included $0.53 worth of restructuring charges. Absent those, Furniture Brands would actually have eked out a small profit for the quarter.
Surprise! Good news!
But the company's story gets even better. I might quibble with management calling its balance sheet "strong" (the company carries $68 million more in long-term debt than it has cash in the bank), but I do have to agree with CEO Ralph Scozzafava that he's done a fine job maintaining "strong inventory controls." Reviewing Furniture Brands' balance sheet, it looks to me like the company has slashed inventory by 19% -- nearly half again as fast as sales are falling. That he has managed to do this while improving gross margins 120 basis points is nothing short of amazing. Oh, and the company also pared 24% from its accounts receivable.
Put it all together, and while the company may have lost money as GAAP measures such things, it's generated roughly $30 million in cash profits so far this year. If it can keep that up over the next six months, we could be looking at a stock selling for 10 times free cash flow by year-end. With growth predicted to average 10% per year over the next five years, that's a fair price by any measure.
Is the sound of a crying child music to your ears? Do you turn to the obituaries before the comics? Then you'll love reading more about the furniture industry:
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