Sourcing shift hurts Jennifer's numbers
By Furniture Today Staff -- Furniture Today, January 19, 2004
WOODBURY, N.Y. — Jennifer Convertibles posted a $1.7 million net loss and a 14.6% drop in same-store sales in its first quarter as a shift in sourcing led to an increased order backlog and a delay in delivered sales.
Total revenue for the 214 store sofa-sleeper specialty chain declined 8.3% to $34 million in the quarter ended Nov. 29. The $1.7 million net loss compared to net income of $503,000 in last year's first quarter.
Jennifer's backlog of sales that hadn't been delivered was $19 million in the quarter, up from $12.7 million a year ago. That resulted from a shift in sourcing of a significant amount of Jennifer's leather upholstery to Asia — primarily China — from Italy, said Chief Executive Officer Harley Greenfield. "It took us longer (than expected) to implement the program," he said.
Operating margins decreased to 30% from 33.8%, mostly due to increased occupancy costs and lower gross margins on certain goods. But Greenfield said he doesn't expect long-term pressure on margins with the sourcing shift.
"We're taking advantage of cheaper labor and the relationship of the dollar to the euro, and the net result is the consumer should get a better value," he said.
Greenfield said Jennifer has seen a recent pick-up in sales, adding, "I am confident we will resume our historical sales growth and return to profitability in the second half of this fiscal year."
A Top 100 company, Jennifer owns and licenses 197 Jennifer Convertibles and 17 Jennifer Leather stores in 21 states.
| Jennifer Convertibles | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are loses or declines. | |||
| Quarter ended 11/29 | 2003 | 2002 | Change |
| (a) Includes service contract revenues of $2.2 million in both periods. (b) Based on average shares outstanding of 5.7 million in the 2003 quarter and 7.8 million in the 2002 quarter. | |||
| Revenues (a) | $34,015,000 | $37,075,000 | (8.3%) |
| Operating income | (1,233,000) | 980,000 | — |
| Net income | (1,691,000) | 503,000 | — |
| Earnings per share (b) | (0.30) | 0.06 | — |
