Q1 revenues inch up, profits take dive

By Janice Chamberlain -- Kids Today, 6/1/2006 12:00:00 AM

In the first quarter of 2006, total revenues for the eight companies on the Kids Today vendor scorecard inched up as aggregate net profits plummeted. Total revenues for the juvenile home products suppliers increased 4.3% to $1.8 billion from $1.7 billion in the comparable 2005 period and net income fell 21.6% to $69 million.

Taking first in revenue growth is Martha Stewart Living Omnimedia, which posted a nearly 60% surge to $61.8 million. Ethan Allen was second with a double-digit gain of 15.5%.

Martha Stewart Living attributed the revenue jump to every business showing strong year-over-year growth, and the company expects revenue increases in the coming months.

"Our merchandising segment is poised for takeoff with several new and exciting initiatives," said Martha Stewart Living President and CEO Susan Lyne. In April the company announced an agreement to develop a new line of merchandise exclusively for Macy's.

At Ethan Allen, Chairman and CEO Farooq Kathwari said the company was pleased with its progress and attributed it to the relocation of stores to larger and more prominent locations; major investments at retail to increase the professionalism of management teams; the impact of new product introductions; enhanced advertising and marketing programs and faster delivery of products to customers. He added that more than 80% of Ethan Allen's product offerings are new within the past three years.

Looking at revenue dollars, Ethan Allen once again led the way, adding nearly $36 million to its coffers, compared with first-quarter 2005 results. Martha Stewart's addition of more than $23 million in revenues put it in second place.

Furniture Brands International recorded a 21.9% increase in profits in the latest quarter, jumping from $24.8 million a year ago to $30.2 million. Both periods included restructuring charges.

"We were generally pleased with the results of the quarter," said FBI Chairman and CEO Mickey Holliman. "We continued to see mixed results between our brands, with weakness in one being offset by strength in another."

Only FBI and Ethan Allen managed profit improvements, with the balance of the scorecard reporting losses or lower profits from the comparable 2005 period.

Return-on-revenues varied from company to company, but as a group, companies saw their ROR score increase to 4.8% from 4.1% a year ago.

For the third consecutive quarter, RC2 again had a positive ROR score, but was edged out by Ethan Allen for first place. Ethan Allen's score was 7.5%, with RC2 coming in at 7.2%.

In gross margin improvement, Martha Stewart Living outpaced the competition with a 9.9 percentage point improvement. Bassett Furniture was not far behind, with a 5.6 percentage point gain.

Across the board, leaders of the eight companies on the scorecard said they were optimistic about the future, believing their companies positioned well for the future.

Kids Today's first-quarter vendor scorecard is based on the financial results of eight publicly traded companies with fiscal quarters ending from Feb. 25 to April 1, 2006.

Crown Crafts had not yet released its earnings statement as of publication time.

Gross margin percentage

	2006 GM%	2005 GM%	Pct. Pt chnge
1. Cost of goods sold represents production, distribution and editorial costs. 2. Includes depreciation expense of $3.5 million in the 2006 quarter and $3.4 million in the 2005 quarter. Source: Company reports and Kids Today market research
Martha Stewart Omnimedia1	48.1%	38.2%	9.9%
Bassett Furniture	32.0	26.4	5.6
Ethan Allen	50.5	47.8	2.7
Furniture Brands Intl.	23.3	23.4	-0.1
Dorel	22.4	23.1	-0.7
Stanley Furniture	23.7	24.7	-1.0
Chromcraft Revington	19.6	23.6	-4.0
RC22	46.5	50.9	-4.4
TOTAL	29.8%	28.8%	1.0%

Kids vendor scorecard

		revenue in millions			net income in millions			return on revenues
Retailer	Qtr. ended	2005	2004	change	2005	2004	Change	2005	2004
1. Includes pretax restructuring charges of $744,000 in the 2006 quarter and $6.5 million in the 2005 quarter. The 2005 quarter also includes a $1.1 million pretax charge for executive severance charges. 2. Includes licensing and commission income of $6.1 million in the 2006 quarter and $6.3 million in the 2005 quarter. 3. Includes net losses from discontinued operations of $123,000 in the 2006 quarter and $132,000 in the 2005 quarter Source: Company reports and Kids Today market research
Furniture Brands Intl.	3/31	$661.4	$641.6	3.1%	$30.21	$24.81	21.9%	4.6%	3.9%
Dorel	3/31	451.02	471.92	-4.4	24.2	27.2	-11.1	5.4	5.8
Ethan Allen	3/31	267.1	231.2	15.5	20.0	17.9	11.5	7.5	7.8
RC2	3/31	103.5	96.5	7.3	7.5	7.8	-4.3	7.2	8.1
Bassett Furniture	2/25	86.5	80.8	7.1	2.3	2.4	-2.3	2.7	2.9
Stanley Furniture	4/1	83.5	83.0	0.7	5.4	5.8	-6.4	6.5	6.9
Martha Stewart Omnimedia	3/31	61.8	38.7	59.9	(6.8)3	(19.2)3	—	-11.1	-49.6
Chromcraft Revington	4/1	45.9	44.7	2.8	1.1	2.3	-50.0	2.5	5.1
TOTAL		$1,760.8	$1,688.1	4.3%	$83.9	$69.0	-21.6%	4.8%	4.1%