The furniture industry hasn't had a good run lately, so expectations for Stanley Furniture's (Nasdaq: STLY) first-quarter 2008 results weren't high. The stock opened 10% lower following Monday night's release, although it has rebounded a bit since then. What was all the fuss about? That's what we're here to find out.

Sales in Q1 dropped 17% to $62.5 million. Profits on those sales were down, too, but it wasn't because of raw materials costs this time. While those costs were up, they were passed on to customers in the form of higher prices, basically canceling their effect. Rather, reduced production prevented Stanley from using its factories to their full capacity, with the result that operating margins shed 50 basis points in comparison to Q1 2007, ending the quarter at 3.6%.

Attempting to mitigate the damage to per-share earnings, Stanley has reduced its share count by about 640,000 shares (as a weighted average) over the past year. Even so, the reduced profitability on declining sales dropped earnings per share to $0.10 (down a third from last year).

And that's the good news
Relatively, at least. The bad news would be that the last month of Q1 was the quarter's worst. Stanley blamed the trend evident in March sales news for its decision to reduce guidance for the rest of the year. Management now expects sales to remain down about 16% all year long, and for profits to come in between $0.20 and $0.31 per share (including a $0.07 charge).

That's bad news, right?
Yep. Real bad. Then again, we expect bad news out of furniture companies these days. After all, the people who build the houses that hold Stanley's furniture -- builders like Ryland (NYSE: RYL), Lennar (NYSE: LEN), Pulte (NYSE: PHM), and Centex (NYSE: CTX) -- haven't reported a profit in more than a year (sometimes longer). And other home industry companies, such as Home Depot (NYSE: HD) and Lowe's (NYSE: LOW), are also posting year-over-year declines. It's unfair to expect Stanley to do great business in a situation like this.

What's surprising is the fact that Stanley's earning any profit. Surprising, gratifying, and giving hope for the future.

It won't be easy waiting for that future. We've waited so long already:

Fool contributor Rich Smith does not own shares of any company named above. Home Depot is an Inside Value selection. Stanley is a former Hidden Gems selection. The Motley Fool has a disclosure policy.