Shermag 1Q revenues drop 31%; loss cut
By Michael J. Knell -- Furniture Today, September 10, 2007
Sherbrooke, Quebec — Shermag cut losses in its first quarter, but sales continued to drop as the full-line producer and importer said it remains hampered by soft retail environments in Canada and the United States.
In the three months ended June 29, Shermag reported net revenues of C$29.3 million, down 31% from the comparable period last year. The net loss was C$3.9 million, or 29 Canadian cents per share, better than the C$4.4 million, or 33 cents per share, loss posted in last year's first quarter.
President and CEO Jeff Casselman attributed the sales decline to "a challenging economic environment for furniture, combined with the company's decision to increase its selling prices in U.S. dollars to better reflect the costs of domestically manufactured products."
Shermag's sales to Canadian retailers fell 15.7% to C$12.9 million in the quarter, while sales to U.S. retailers, in U.S. dollars, plunged 39.3% to $16.4 million. In Canadian dollars, the value of those exports fell 40% to C$18.3 million.
The continued strengthening of the Canadian dollar versus the U.S. greenback had a negative impact of C$300,000 on Shermag's bottom line, compared to the first quarter last year.
Casselman noted the company's gross margin remained consistent with last year's first quarter, which he attributed to "progress in implementing our transformation plan."
"The company's transformation plan, which includes consolidation of domestic manufacturing, increased use of global sourcing, and a move towards better quality and higher-priced domestically made-to-order products, is improving our gross margins," he said. "However, current unfavorable market and exchange rate conditions require additional initiatives to further reduce expenses to reflect the reality of our revenue and gross margin levels."
Casselman said inventories of finished goods were reduced by C$2.1 million year-over-year, while inventories of raw materials were cut by C$1 million, and work-in-progress by C$500,000. Selling and administrative expenses were reduced to C$6.4 million from C$7.3 million the year before, he said.
