World Economic

CLAYTON — The coffee, pastries and fruit were arrayed on a table in a conference room, sweet munchies to follow Furniture Brands International’s annual meeting. This was not a celebration, but nor was it a wake. And that fact alone was cause for some optimism. Furniture Brands was still standing.

"We’re going to be here," Chief Executive Ralph Scozzafava said after the 11-minute meeting held three weeks ago. He meant that one of America’s biggest furniture sellers would be around for the long term.

Only a few months ago, Furniture Brands’ staying power was being called into question. The parent company of Lane, Broyhill and Thomasville was losing a "two-front war" against a brutal economy and sapped morale, one analyst wrote in November. Whether it would "make it to the other side" was up for debate, another said in March.

As furniture sales fell through the floor, Furniture Brands was forced to write down the value of its assets. It dipped into the red and hasn’t yet climbed out.

But Furniture Brands executives say the company has made big changes to stay one step ahead of the deteriorated economy and set itself up for a recovery.

"Overall, we’re a stronger, leaner company with greater capabilities," Scozzafava told analysts and investors this month.

Furniture Brands has cut lackluster products, worked to improve its marketing and shored up its balance sheet. Its net debt — debt minus cash — was $68 million as of May 6, the lowest in more than 20 years. The company says it will save as much as $75 million by cutting expenses from previously-announced restructurings.

"Thank heavens that they took these aggressive steps when they took them, or else they’d be forced to take much more drastic action today," said Jerry Epperson Jr., a furniture industry analyst in Richmond, Va.

Investors’ sentiments have shifted "dramatically" toward companies such as Furniture Brands, which would benefit when the economy turns around, Stifel Nicolaus analyst John Baugh wrote this month. The company’s cash reserves and expected cash flow "should fend off near-term financial pressures."

The company’s stock is down roughly 72 percent from a year ago. But since a low point of 70 cents on March 20, shares have bounced back to above $4.

Still, the challenges for Furniture Brands range from the major to the seemingly mundane cheap payday loans. It posted a $4.2 million loss from continuing operations in the first quarter as its sales dropped 25 percent. And the company still hasn’t been able to get all of its divisions on a similar information technology system. It is bracing for a rough second quarter.

"We’ve got more work to do," said Scozzafava.

Furniture Brands is not alone in its struggles. Competitors such as Bassett and La-Z-Boy also took write-offs and adjustments that hammered their financial results. Across the country, new furniture orders were down 22 percent in the first two months of the year compared to the same period a year ago, according to Smith Leonard, an accounting and consulting firm based in High Point, N.C.

At Furniture Brands, the tough times have fallen on employees. In December, the company said it would cut about 1,400 jobs, amounting to 15 percent of its domestic work force. Earlier this month, the company laid off 250 people from furniture plants in North Carolina and Mississippi.

The attitude among furniture companies is, "see if we can hang on and wait until things turn around," said Ken Smith, managing partner at Smith Leonard. "It’s been tough on just about all the public companies."

Meanwhile, the marketing team at Furniture Brands — newly stocked with folks from outside the traditional furniture industry — is changing its approach.

Lane and Broyhill, the company’s mass-market brands, are pretesting new products before they hit showrooms, giving the parent company more insight into the demographic profiles of potential buyers. That would be a major breakthrough in the furniture industry, which is very traditional and lags behind other consumer products industries in its understanding of potential customers for new products, Epperson said.

"This is a major new development," he said of Furniture Brands’ sharper research. "Other people have talked about it, but they’re actually doing it."

It won’t immediately turn Furniture Brands’ business around. But, Epperson said, "these are the kinds of things that, in the long run, will set apart Furniture Brands International."

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