New York, NY, December 12, 2006--Moody's Investors Service placed Furniture Brands International Inc.'s 'Baa3' rating under review for possible downgrade Monday, in light of the company's continuing operating difficulties and downward revision of fourht-quarter earnings guidance last week.
Approximately $400 million of rated debt is affected.
Moody's said over the past couple of years, the company's mid-tier brand, Broyhill, has struggled as Furniture Brands attempts to revise its cost structure and realign its pricing strategy.
"In the past, the strength of Furniture Brands' higher end brands was able to provide a buffer against Broyhill's operating struggles. However, with softness now widespread across all brands, Moody's believes there is a risk that the company's turnaround efforts will take longer than expected and that its operating difficulties will linger," said Kevin Cassidy, senior analyst at Moody's.
Cassidy believes "the continuing operating weakness may necessitate the need for future pricing concessions, as the company attempts to reduce its inventory levels, which have increased across all brands, but most notably in Broyhill."
Moody's said its review will focus on the company's strategy to reverse its negative operating trends and restore credit metrics. In particular, the review will assess Furniture Brands' ongoing cost structuring programs and new product initiatives across all brands to see if they will result in increased sales and margins.
