Furniture Brands’ future questioned

By Dennis Seid
Daily Journal

After a dire earnings report, Furniture Brands International finds itself under a microscope.

On Tuesday, the company said it lost $40.8 million in the second quarter as sales fell 4 percent to $255 million.

Securities firm Stifel Nicolaus downgraded the company’s stock from hold to sell. Analyst John Baugh said “some form of liquidation or bankruptcy filing is imminent, as we believe that the value on the equity is $0.”

Furniture Today, the industry’s leading publication, and other media outlets have picked up on the comments and speculated on the St. Louis-based Furniture Brands’ future.

The company is the parent of Lane, Broyhill, Thomasville, Drexel-Heritage and other brands.

Lane employs about 1,500 workers in Northeast Mississippi. A decade ago, it was the nation’s largest furniture manufacturer and supplier, a position Ashley Furniture Industries took over several years ago. Furniture Brands’ sales have declined for eight consecutive years, Stifel Nicolaus noted.

Furniture Brands said it doesn’t comment on analysts’ reports and would not comment beyond what it said in Tuesday’s quarterly earnings report, the High Point (N.C.) Enterprise reported. However, in its 10-Q report filed with the Securities and Exchange Commission on Thursday, Furniture Brands said it was “pursuing various cost reduction initiatives” through a third party.

Among them are “facility consolidation, reductions in force and reductions in controllable costs.”

Furniture Brands also said after a review of its portfolio of brands that it was working on other initiatives “including the proposed sale of underperforming assets and additional non-core assets.”

The company also said it was exploring options with lenders to modify its credit facilities to improve liquidity. An underfunded pension plan and rent and occupancy payments on closed stores and other facilities also are negatively impacting its cash flow, the company said.

“Our continued efforts to improve liquidity include actions to manage inventories to meet current demand, reduce expenses and capital expenditures and extend payments to third parties through delayed payments,” it said.

At the end of the second quarter, Furniture Brands had a cash balance of $8.8 million and a debt balance of $117.7 million. Furniture Brands’ closed at $1.17 on Friday, rising a penny. Its shares dropped 48 percent this week.