Stanley Furniture Doesn't See Things "Turning Up Any Time Soon"

| About: Stanley Furniture (STLY)

Stanley Furniture (NASDAQ:STLY) reported second quarter of 2008 earnings Tuesday and held a conference call to discuss the results. The company missed estimates on earnings, and reduced guidance for the third quarter of 2008 and full year 2008.

STLY plans to consolidate its North Carolina manufacturing operations from two facilities to one, eliminate two executive positions and offer a voluntary early retirement incentive for some salaried employees.

Financial Highlights

Revenue - $ 59.1 million
EPS – ($0.01)
Cash - $33.8 million
Long term debt - $27.8 million

Updated Guidance

“The revised guidance we provided in last evening’s release… reflects business conditions continuing at current levels and not taking another leg down.”

Full year 2008 loss of ($0.25) – ($0.46) including a restructuring charge of $0.32 - $0.43.

Full year 2008 revenues of $230 - $237 million.

Management Comments

“Business conditions remain extremely difficult. The perfect storm of historically low levels of housing activity, consumer confidence and personal disposal income has us still searching for a bottom in this current cycle. And frankly, we don’t see much out there that would suggest business turning up any time soon.”

Q & A

What does the business look like (long term) in terms of its gross margin potential, SG&A, operating margin potential and returns on capital?

“We think historical gross margins (25-27%) are certainly possible. We would see SG&A in that 13%, 14% going forward.”

Long term - the variability of cost versus the fixed nature of it historically?

“I think it’s safe to say that the actions that we’ve taken today already and those we announced last week will certainly reduce our fixed cost structure and will, when the ultimate rebound does occur, allow more of that to drop through to the bottom line.”

What about the amount of receivables write-downs?

“So far through the first half of the year they’ve been well within our normal write offs and expense level.”

Are there any geographical areas or items that are stronger than others?

“California remains very difficult as does Arizona and Las Vegas and Florida. Those are probably the hardest hit areas at this point and when we talk about our sense that the recovery will be a bit slower, that is due in part to those very large markets probably not recovering at the same time the rest of the country does, whenever that happens.”

Read our previous post on STLY.

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Tagged: , , , Home Furnishings & Fixtures, Earnings
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