Dixie shares increase 10.9% as losses narrow despite drop in sales

On the worst trading day on Wall Street so far this year, the Dixie Group boosted its stock value by the biggest amount since January after reporting a smaller loss in the second quarter and a more favorable outlook for the rest of the year.

Shares of the Dalton, Georgia-based floorcovering company jumped nearly 10.9% Monday, or 6 cents per share, to close at 57 cents per share. Although Dixie shares are still down 19.7% so far this year, Dixie CEO Dan Frierson said Monday he expects the company’s profits to improve as it completes a turnaround plan it began two years ago.

“We look forward to completing the Profit Improvement Plan in the second half of 2019,” Frierson said Monday in a conference call with analysts.

The Dixie Group narrowed its losses in the second quarter of 2019 despite a 5.7% drop in carpet sales compared with a year ago.

Dixie lost $1.2 million, or 7 cents per share, from continuing operations in the April-to-June period, which was less than the $1.6 million, or 10 cents per share, loss from comparable operations a year earlier. Adjusted for costs associated with facility restructuring and related inventory impairments, Dixie said it had an adjusted profit of $697,000, or 4 cents per share, in the second quarter of 2019.

Dixie sales totaled nearly $100.4 million in the second quarter of this year, down 5.7% from the $106.4 million in sales a year earlier.

Dixie said its residential sales were down 2.6% for the second quarter of 2019. Residential soft surface products were down 4.1% while residential hard surface sales were up 48% for the company.

“Our strongest residential sales growth was in hard surfaces where we continued gaining traction in the luxury vinyl flooring and engineered wood flooring segments,” Frierson said.

The company took $1.9 million in restructuring costs this spring from costs associated with the closure of west coast facilities, plant consolidation expenses, and inventory write downs for commercial white dyeable products. Without such costs, Dixie would have been profitable in the most recent quarter.

“We have incurred, through the second quarter of 2019, approximately $17.4 million in costs to implement the Profit Improvement Plan, including write downs of related inventory, goodwill and other assets,” Frierson said. “We estimate the total costs of the plan and related costs, once complete by the end of 2019, to be $18.2 million. The total cost reductions of these restructuring efforts, once fully implemented, is approximately $18.7 million annually, as compared to our cost structure in 2017 when we began this process.”

Dixie has combined its Atlas and Masland business into one commercial business, now known as Atlas | Masland Contract.