Dixie Group reports Q3 EPS (15c) vs. (55c) last year

Reports Q3 revenue $68.6M vs. $71.8M last year. Commenting on the results, Daniel Frierson, Chairman and Chief Executive Officer, said, “Despite lower year over year sales comparisons, we continue to see improved gross margins as the result of our plant consolidation and cost reduction efforts that were substantially complete in the first quarter of this year. Our gross margins in the third quarter improved by over nine percentage points to 26.6% of net sales as compared to 17.5% of net sales in the third quarter of 2022. The reduction of net sales for the quarter, down 4.4% from the same prior year period, was the result of constraints in the housing market driven by limited supply, high interest rates and continued inflationary pressure. We believe the overall flooring industry experienced a significantly higher reduction in year over year sales volume, indicating we are continuing to gain market share in our core markets. The residential flooring market remains weak as a result of lower volume in home resales and the deferral of home improvement projects. We continue to manage the controllable aspects of our business through the implementation of productivity improvements, reduction of costs and headcount and restructuring assets where appropriate. All of these measures are focused on lowering expenses, decreasing debt and improving our financial results. The positive results of our facility consolidation efforts over the last year were reflected in the improved gross margins in the third quarter. Our facility consolidations have better aligned production with demand and lowered costs through more efficient absorption of fixed costs and headcount reductions and we have experienced operational improvements in our manufacturing facilities. In order to better position our company strategically, we will start operations on our own extrusion of nylon in the first quarter of 2024. We have taken this action to moderate the impact of any disruptions of raw materials in the future and to lower our costs. In addition to lowering costs and improving operations over the last year, we continue to invest in our growth initiatives which have enabled us to gain market share. Our first initiative has been a continued focus on the growth of our hard surface products by broadening our introductions with particular emphasis on innovative product offerings. Today’s products include SPC, WPC, laminate and engineered wood with appropriate merchandising aimed at gaining retail floor space and market share. Our decorative products initiative encompasses 1866 by Masland and Decor by Fabrica and includes a broad offering of domestic and imported products which allows us a wide assortment of wool and other decorative products that will appeal to even the most discerning customers. We continue to see growth in this category while the industry has not. The third initiative has been an emphasis on innovative polyester products filling price points important to customers seeking affordable fashion. Our DuraSilk solution dyed program, merchandised as the “Elements Collection”, has shown significant market growth this year. In order to drive the performance of these growth initiatives, we have invested heavily in displays and samples throughout 2023. This investment has helped us outperform the market in sales but at a cost. We expect our selling expenses to return to a more reasonable level next year. Despite the investment in many new products, we were able to reduce debt by over $3 million at the end of the third quarter as compared to the end of the prior year. The industry is facing a difficult period as discretionary spending appears to be more focused on experiences rather than purchased goods. Despite this trend, the upper end of the market is outperforming the market in general and our focus on the upper end market continues to be a positive factor in our results. In the first five weeks of the fourth quarter, order entry is slightly better than a year ago.” Frierson concluded.