Ever since The Motley Fool's signature service for small-cap investors -- Motley Fool Hidden Gems -- began providing its members daily updates on its stock recommendations, I've faced a dilemma.

On the one hand, Hidden Gems Daily is without question a great service for our subscribers, and it's truly unique among stock-picker publications. But from my perspective, it's a bit too good -- often leaving a Fool like me with little original to say about a company's earnings release. That was the case again when Stanley Furniture (NASDAQ:STLY) reported its Q3 earnings on Tuesday, and my Foolish colleague over on the Hidden Gems team, Jim Gillies, published a veritable tome of analysis on the results. (Go here to read it if you're a member.)

Not content with covering the basic revenue and earnings news (down 6% and 23% year to date, respectively), margins (still falling), and cash flow from operations ("the only bright spot"), Jim went on to review the company's tragicomic history of repeatedly overpromising and underdelivering on its earnings projections this year. He also discussed whether Stanley has a defensible moat to protect itself against low-cost rivals from China, and he calculated the firm's valuation. All of which left yours Fool-y with precious little to write about.

Except for one thing
About the only thing remaining to discuss about Stanley's results is working-capital management.

As you can guess from Jim's assessment that Stanley scored its only real success in the realm of cash flow, the news here was good. Setting up our benchmark at the level at which sales are down so far this year -- 6% -- we see that Stanley did a fine job of managing its slowdown this quarter. Accounts receivable came down 7%, so the firm continues to collect its bills on time. And Stanley sold down its inventories by a healthy 18% -- much faster than sales slowed.

With CEO Jeffrey Scheffer predicting that the current "industrywide slowdown" will likely "persist for a while," it's hard to overemphasize the importance of management showing an ability to batten down its working-capital hatches and weather the storm. The above numbers show that Stanley's done a fine job of doing this. To put its performance in context, though, let's look at how its competitors have done.

Year-to-Date Sales

Q3 Accounts Receivable

Q3 Inventories













Like Stanley, Bassett is keeping close watch on sales trends, holding inventories in line with sales trends, and actually improving on bill collection. Unlike Stanley, fellow Hidden Gems pick Hooker's performance pretty much stinks. As for the rest of the companies in this industry, well, we'll want to keep a close eye on them, too -- but they haven't reported their most recent numbers yet. If you're interested in this industry, though, mark your calendars with the following dates:

  • Ethan Allen (NYSE:ETH) reports on Monday ...
  • Furniture Brands (NYSE:FBN) on Wednesday ...
  • Haverty (NYSE:HVT) on Oct. 30 ...
  • and Masco (NYSE:MAS) on the 31st.

For more furniture Foolishness, check out:

Fool contributor Rich Smith does not own shares of any company named above.