Dixie shares rise on hope of better times ahead

The decision by Invista to discontinue its nylon polymer production for carpet fibers pushed up production costs and contributed to a wider loss for the Dixie Group in the first three months of 2022, the company said Wednesday.

But Dixie said sales continue to grow, and with a new nylon supplier, better price adjustments and new products introduced this year, the company expects results to improve in the year ahead.

“Looking forward to the remainder of the year, we believe our new raw material sourcing plan will allow us to have more control of our product offerings over a broader array of price points,” Dixie Group CEO Dan Frierson said in a report on the company’s first-quarter results. “We continue to build stronger relationships with our key retail customers through the development of the Premier Flooring Center concept focused on selling better goods, helping them improve margins and positioning us as a more important supplier to the specialty retail segment.”

The earnings announcement Wednesday helped boost the stock price for Dixie Group in an otherwise down market. Shares of Dixie rose nearly 4.5%, or 10 cents per share, to close at $2.34 a share in trading on the Nasdaq exchange.

Dixie Group, the Dalton, Georgia-based floorcovering manufacturer, reported Wednesday it had a net loss of nearly $3.6 million, or 22 cents per share, on sales of $77.6 million in the first quarter. A year ago in the same quarter when adjusted for the sale of the company’s commercial business, Dixie had a net loss of just more than $2 million, or 14 cents per share, on sales of $72.7 million.

Frierson said Dixie faced “unprecedented price increases” for the nylon used in its carpet fibers by Invista, which decided to exit the business after selling its Stainmaster brand to Lowe’s. Invista’s customers for carpet yarn had also included Bentley Mills, Mannington Mills and for specialty carpets Tarkett, Shaw, Milliken and Mohawk.

“We are working with other suppliers to replace this volume and bring our costs to a more normal level,” Frierson said. “We expect the conversion to be complete by the end of the second quarter.”

Higher shipping costs and commodity prices are driving up floorcovering costs. Frierson said carpet prices, on average, are up about 10% from a year ago and are 20% more expensive than two years ago. But demand is remaining strong.

“Order entry surpassed prior year throughout the quarter with the highest growth occurring within our Masland Residential and Fabrica business and within our hard surface products overall,” Frierson said. “Our Dixie Home business declined due to a shift in strategy by our primary mass merchant customer. Although this change in strategy will continue to negatively impact our Dixie Home business, we have increased our sales in the specialty retail segment by 9% over the prior year, outpacing the market.”

Despite the increase in Dixie’s share price Wednesday, the company’s stock is still down 59.2% so far in 2022.