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Tickers in this Article: LZB, ETH, FBN, TPX, MHK
La-Z-Boy Inc. (NYSE:LZB), the furniture-maker most known for its recliner chairs, recently reported a negative earnings report and forecast difficult prospects in the months ahead. They were not alone. Other furniture makers such as Ethan Allen Interiors, Inc. (NYSE:ETH) and Furniture Brands International, Inc. (NYSE:FBN) joined the unhappy news parade, some being trampled underfoot by the onslaught in their industry.

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Who's to Blame?
It's tempting to say about a lot of companies that it's not their fault falling prices occur, but in the case of La-Z-Boy and the furniture industry the statement can stand true. After all, La-Z-Boy was not to anyone's knowledge hedging on "recliner futures" (I know, there's no such thing, is there?) nor was Tempur-Pedic International Inc. (NYSE:TPX) speculating in sophisticated mattress-based derivatives (again, that I know of). La-Z-Boy was simply building chairs and other common, necessary furnishings that we consumers need, buy and sit in. So, what happened?

Lazy Numbers
La-Z-Boy in its recent quarterly earnings report said it lost $0.17 a share, excluding charges of $64.4 million, while revenue was down 23% to $288.6 million, with business down in upholstery and furnishings. This compares to a positive earnings per share of $0.18, or $9.5 million in net income, for the same quarter a year earlier. Retail sales were down 19% and $9.4 million was charged off in bad retail debts. The company has announced it will close stores, reduce its workforce and suspend its dividend to conserve cash.

Ethan Allen reported better news on January 29, for its second quarter, but not without encountering difficulties. It showed a profit of $0.19 per share, but its sales dropped from $259 million in the previous year's Q2 to $189 million in this year's second quarter. It slashed its quarterly dividend from $0.25 a share to $0.10. Although they are in a somewhat stronger position than La-Z-Boy due to their product mix (which is doing slightly better on a retail basis), they will consolidate manufacturing services and several retail centers and are revisiting their credit agreements as a precaution. (Learn more in Analyzing Retail Stocks.)

Furniture Brands, maker of Broyhill and Thomasville brand, had a dismal earnings report of a net loss in the fourth quarter of $342 million or $7 per share, with sales down 20%. The stock has fallen from $15 in May of 2008 to February 23, 2009 close of $1.65. The maker of traditionally slightly more upscale furnishings has found its earnings punished by a desertion of anything close to a higher-end market in home furnishings.

La-Z-Boy, despite the traditional appeal of the business to middle income consumers, has seen its share price reflect its business falloff as the stock has been trampled down to $1.02 by market close February 23, down from a 52-week high of over $11. This indicates that the stock market carnage in the furnishings industry isn't playing favorites. This despite the fact that La-Z-Boy's earnings until recently have been holding up relatively well in the last several years.

Some Other Stories
Although the three furniture makers, La-Z-Boy, Ethan Allen and Furniture Brands, have all fallen to their low point as stocks, each with difficult and similar though slightly different fundamental stories, Tempur-Pedic, the mattress maker, and Mohawk Industries (NYSE:MHK), the carpeting and flooring company, show that though the home furnishings industry is in rough shape right now, if you are not a direct furniture maker, you are a bit out of the line of fire.

Tempur-Pedic has positive earnings and projections, causing one to wonder why the consumer is so discriminating as to buy a mattress as an essential, but not a chair, apparently regarded as non-essential. Yet, this is not to put too fine a point on it, as Mohawk Industries' earnings appear to be even more robust. So apparently consumers are choosing mattresses and carpeting, but not chairs, sofas or end tables. This is not to be flippant, simply to suggest that though the logic surrounding any home-related products, which furniture and all furnishings certainly are, would dictate that with everything even remotely housing related being nuked, apparently there are a couple of unexpected pockets of resistance, if not safe havens. ( Find out where to turn when looking to invest in a tumultuous market, check out Industries That Thrive On Recession.)

Not So Lazy Future
I think that if La-Z-Boy and some of the others can come through this uber-recession, whenever it may end or at least relent, there is, I dare to predict, a future for chairs. It's not as if there is a terrific over-capacity in the direct furniture and furnishing industry, so perhaps when the bogeyman of recession takes its foot off the neck of the industry, assuming people will still have houses and need to have something to sit on, La-Z-boy along with some if not all the others can make a comeback. When that might be, who knows? The $1 stocks may not be like the banks, yet they look chancy. Again, I boldly predict, though, there is a future for chairs.

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