Stanley Furniture Company, Inc. (STLY)

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Stanley Furniture (STLY)

Q2 2013 Earnings Call

July 16, 2013 9:00 am ET


Micah S. Goldstein - Chief Financial Officer, Chief Operating Officer, Principal Accounting Officer, Secretary and Director

Glenn Charles Prillaman - Chief Executive Officer, President and Director


Budd Bugatch - Raymond James & Associates, Inc., Research Division

Steve Hale

Barry George Haimes - Sage Asset Management, LLC

John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

Brad Hathaway

Alan W. Weber - Robotti & Company, Incorporated



Greetings, and welcome to the Stanley Furniture Second Quarter Investor Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Micah Goldstein, Chief Operating and Financial Officer for Stanley Furniture. Thank you, Mr. Goldstein, you may now begin.

Micah S. Goldstein

Thank you, Jesse. Good morning, everyone. Glenn and I appreciate you taking the time to join us as we review the results of our second quarter.

During the call this morning, we may make some forward-looking statements that are subject to risks and uncertainties. A discussion of factors that could cause actual results to differ materially from our expectations is contained in our SEC filings and the press release announcing the quarter results. Any forward-looking statement speaks only as of today, and we undertake no obligation to update or revise those forward-looking statements to reflect events or circumstances after this morning's call. Glenn?

Glenn Charles Prillaman

Good morning, thank you for joining us this morning. The most recent quarter represented a significant milestone for our company's multiyear journey to reposition itself for growth. The office and showroom consolidation, along with the launch of our new enterprise system were the last 2 strategic steps to reposition our company.

As we begin the second half of the year, we have now either completed or are refining the multiple initiatives that we believe have been necessary for growth. Implementing the initial parts of these initiatives have been very disruptive to our customers and our management team over the last few years, and we are glad to have those times behind us. We are now completely focused on the execution of our operating models, which should make us one of the most customer-friendly companies within our market segment.

To be a little more specific, on the quarter, I'll share with you that we entered the quarter concerned about orders. We did not see the kind of demand we wanted to see in our segment in the marketplace. And after we had successfully put both brands in a good service position in Q1, we felt good about our ability to go into market and face customers.

Now the service position we put ourselves in is something we had told you we were working on throughout the previous year, as we had a lot of moving parts in operations, both overseas and in Robbinsville. So when we were in front of customers at the April Furniture Market in High Point, we took an aggressive position on discounting existing designs to gain floor space at retail. I can tell you that worked. While these discounts resulted in a decrease in gross margin, this is a onetime event. And it will allow more customers to see our product, which should drive profitable growth in the back half of the year and into the next.

Our placements on existing goods in the Stanley line are up significantly year-to-date. We remain in a good service position on the Stanley line. And we continue to improve the Young America service position. Although I will tell you that our systems launch did not allow the visibility of either of these service positions for quite a bit of the second quarter.

Other accomplishments in the quarter included the successful relocation of the corporate office, the opening of our new High Point showroom to wonderful reviews of new product and a well-attended furniture market, the introduction of new staff to customers, and we did see shipments and operating performance for the company's Young America brand improve slightly compared to prior year and prior quarter. We have multiple opportunities for sales growth underway there.

Lastly, in May, we did launch, as I mentioned earlier, our new enterprise resource planning system. This is our largest systems initiative ever and our first major upgrade to our systems in over 20 years. It was disruptive. And as we understand any launch to be, we still have glitches in the system that are not allowing us to satisfy customers. But we are, in most cases, effectively in business, acknowledging, invoicing and shipping new orders. We feel strongly about our ability to differentiate not just through product design, marketing and operations, but also by becoming a more efficient and easier company with which to do business.

Micah, why don't you take us through some details?

Micah S. Goldstein

Just some brief comments on finances and operations, and then we'll turn it over for questions. Net sales for the quarter were $24.2 million and basically flat to the prior-year period. Our Stanley brand was down slightly from the second quarter of last year and more significantly on a sequential basis. Although, as Glenn mentioned, we did get some positive order momentum exiting market and grew our backlog during the quarter.

Young America sales grew in the mid-single digits over the prior-year period, and were basically flat on a sequential basis. Young America orders were up over the prior year, but down on a sequential basis, which is a normal Q2 to Q1 trend. Backlog declined during the quarter, but remained higher than it was at this point last year and flat with where it was at year end.

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