For the first time in -- actually for the first time in its entire reporting history as reported by earnings.com -- Furniture Brands (NYSE:FBN) is expected to post a loss on Wednesday. Wow. Was Q2 really that bad?

What analysts say:

  • Buy, sell, or waffle? Only three analysts still follow Furniture Brands, fewer than half the analysts who were around at the beginning of the year. They split their votes evenly among buy, sell, and hold.
  • Revenues. On average, they're looking for an 11.5% sales decline to $532.3 million ...
  • Earnings. ... and as already mentioned, a loss -- of $0.04 per share.

What management says:
In the interests of getting a chance to answer my own question, I repeat, was Q2 really that bad? Probably it was, if not as bad as previously feared. As I relayed in last month's "Motley Furniture News":

... Furniture Brands (NYSE:FBN) investors got a rare bit of good news last night, as the company released a sales update suggesting that things aren't quite as bad as they were looking last month. While FBI CEO Mickey Holliman cautioned that the furniture biz remains "challenging," he now believes sales for this quarter will decline only 12% year over year, and not the 15% previously predicted. Even better, he doesn't expect to lose more than $0.07 per share, a penny better than consensus estimates. How likely is it that Holliman is right? Pretty likely, I'd say -- the quarter he's talking about ends in just two weeks.

With the analysts now calling for a $0.04 per share loss, though, it appears that either they see things improving even faster than Holliman did -- or else they're setting FBI up for a fall.

What management does:
Still, a loss is a loss. And however big it is, tomorrow's loss seems certain to continue FBI's trend of declining net margins. I suspect we'll see similar declines at the operating and gross margin levels. Even so, FBI is far from the worst player in the furniture space. Its operating margins may lag those of Stanley (NASDAQ:STLY), Hooker (NASDAQ:HOFT), and Ethan Allen (NYSE:ETH), for example, but it's still doing better than La-Z-Boy (NYSE:LZB) or Haverty (NYSE:HVT) -- and Bassett (NASDAQ:BSET) has actually been losing money for a while.

Margins

12/05

3/06

6/06

9/06

12/06

3/07

Gross

22.9%

22.9%

22.9%

22.9%

22.1%

21.7%

Operating

5.1%

4.8%

5%

4.9%

4%

3%

Net

2.6%

2.8%

3.1%

2.9%

2.3%

1.2%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The rapidly deteriorating economics of the U.S. furniture industry finally persuaded Motley Fool Hidden Gems co-advisor Tom Gardner to kick Hooker to the street last month. Should investors do likewise with peer FBI?

Personally, I vote yes. Over the last six months, we've seen sales slide 8% at FBI, but management isn't doing a very good job of managing the downturn. Accounts receivable -- which we'd like to see fall in tandem with, or faster than, sales -- declined only 3%. Meanwhile, inventories (which we'd likewise prefer to see track sales) increased 14% year over year. Not only is this an indication of how the business is going, it also foreshadows a day not too far off when FBI may feel compelled to slash prices on inventories in order to get its unsold wares out of the warehouse -- hurting FBI's already weak margins even more in the process.

Relive (slightly) happier times at Furniture Brands, in last quarter's earnings news:

Stanley Furniture is a Motley Fool Hidden Gems recommendation. La-Z-Boy is a Motley Fool Income Investor selection.

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