Dixie Group Reports 20% Sales Decline in Q3, Net Loss of $7.2M
Dalton, GA, November 3, 2022-The Dixie Group reported net sales of $71.8 million for Q3 2022, a 20% decline compared to net sales of $89.3 million in the same period last year.
For Q3 2022, the company reported a net loss of $7.2 million, compared to earnings of $6.8 million in Q3 2021.
Net sales for the first nine months of 2022 were $233 million, a decrease of 7.5% from the net sales of $252 million in the same period of the previous year. For the same period, the company reported a net loss of $16.6 million, compared to a net income of $7.8 million in the first nine months of 2021.
Commenting on the quarter, Daniel K. Frierson, chairman and chief executive officer, said, “Our third quarter results were the culmination of the impact of several factors, beginning in the fourth quarter of 2021, that have had an unfavorable impact on our company. As well as a general industry downturn which began in mid-second quarter and extended through the third quarter. The lower sales volume in the third quarter was also attributable to a year over year loss of approximately $8 million in sales with our largest mass merchant retail customer. Our sales with this customer ended in the first quarter of 2022 as the result of their change in strategy to focus on lower price point products. Our sales volume in 2022 has also been negatively impacted by the delay of new product introductions due to supply chain problems and issues with our sample vendors. This caused particular delays with the launch of our new decorative and hard-surface products which meant we have incurred the cost of launching these products but have not benefited from any sales of the products.
"In the third quarter we began a plan to reduce our manufacturing costs. Under this plan, we have consolidated all of our east coast tufting to one plant in North Georgia. We also began relocating our east coast distribution of luxury vinyl flooring from our facility in Saraland, Alabama to our plant in Atmore, Alabama. Our Atmore, Alabama plant will house the LVF distribution and our previously announced joint venture for future LVF production. We will retain office space in Saraland, Alabama for our valued and experienced administrative team located there as we look to sub-lease our warehouse space in the building. The cost of this plan in the third quarter was approximately $1 million. We are implementing our plan to lower both our fixed and variable costs by shutting higher cost assets, reducing staffing and aligning production with demand. As a result of these and other actions our headcount is down by 20% for the year. We are experiencing much lower ocean freight costs for our imported products and lower raw materials costs as we exit the Invista fibers in our inventory. Additionally, we are seeing reductions in raw material costs that should align with our current pricing when our higher cost inventory is depleted. We believe these actions will result in an annual improvement in operating results of approximately $25 million and return gross margins to a more normal level.
"For the early part of the fourth quarter, order entry is running below prior year levels."
Related Topics:The Dixie Group