Companies are expecting turbulent times ahead.
HIGH POINT – As we round the turn towards the end of summer, publicly traded companies are in the midst of quarterly earnings reports and investor calls, and while the results vary from company to company, one thing remains consistent – the future is murky.
Along with the earnings results, a handful of publicly traded industry players have revised their earnings guidance downward for the balance of the year based on changes in consumer behavior, inflation and other macro-economic factors.
Here’s a look at some of the recent outlooks shared by CEOs and chief financial officers during public calls with analysts:
Rob Spilman, chairman and CEO of Bassett Furniture, spun a cautionary tale in the company’s second quarter earnings announcement in June saying the whole home furniture manufacturer and retailer would take a conservative approach to capital investment and strategic in cost cutting.
“While our written sales have been pacing behind the previous year but well ahead of pre-pandemic levels, they have cooled since the beginning of April to a point where they are now comparable to 2019,” he continued. “Nevertheless, we are naturally concerned about all of the negative financial news and the effects of inflation that are weighing on the consumer. We will remain aggressive in our marketing budget allocations to acquire as many new customers as possible while we assess the depth of a potential downturn. The cost cuts that we made in retail have been instrumental in the improved financial results that we have been posting as of late and should allow us to post better results than we did with the more burdensome structure that we operated pre-pandemic.”
Atlanta-based retailer Havertys posted second quarter results this week that saw net income for the quarter slide 5% to $21.7 million from $22.9 million in the same quarter last year.
While Clarence H. Smith, chairman and CEO of Havertys, says consumers are still investing in their homes, he noted that the second half of 2022 could see such spending impacted by rising inflation, market volatility and geopolitical concerns.
The company projects gross profit margins for 2022 will be between 57.7% and 58%. It also noted that fixed and discretionary expenses within SG&A for the year are expected to be between $293 million and $295 million, reflecting changes in previous guidance for marketing spend and increases in selling and delivery costs.
While Hooker Furniture did not offer specific guidance in its first quarter earnings, CEO Jeremy Hoff noted during the call with analysts that there had been “a leveling off of demand with incoming orders down from the meteoric but unsustainable levels we experienced in the past 18 months.” He added that order rates were stabilizing at above fiscal 2020 levels for most of the company’s divisions.
“We are watching inflationary pressures in the economy and believe those are affecting consumers more at the lower price points than at the upper medium and upper price points,” he said.
In its fourth quarter and fiscal year results announcement in June, La-Z-Boy CFO Bob Lucian said the company was on strong footing, but the economic landscape will be challenging.
“We expect current macroeconomic and geopolitical uncertainty and its effect on consumer sentiment will likely cause demand trends to remain volatile for the foreseeable future,” he said. “We are beginning to increase investments in marketing to drive demand for our strong brands to leverage their power in the marketplace, controlling the controllables, and improving our agility to navigate global supply chain disruption.”
He said the company expects 2023 first quarter sales to increase 7% to 10% to between $560 million and $575 million compared to the first quarter of 2022.
Leggett & Platt
Diversified manufacturer and home furnishings and mattress supplier Leggett & Platt saw its second quarter income tumble 15% to $95.2 million when compared with net income of $112.2 million in the same period last year.
In its earnings announcement and in a call with analysts this week, the company lowered its full-year guidance saying it expects sales to be $5.2 billion to $5.4 billion, a 2% to 6% increase over full year 2021. Previously, the company had said it expected sales of $5.3 billion to $5.6 billion for the full year.
“We are lowering our full year guidance to reflect macroeconomic uncertainties, including impacts of inflation, tightening monetary policy and softening consumer demand continuing through the back half of the year,” said Mitch Dolloff, president and CEO. “We expect solid demand in our industrial and automotive end markets to partially offset softer consumer markets.”
The company said the revised guidance reflects volume down low-to-mid single digits, with the bedding products segment down low-double digits; specialized products segment up low-double digits; and, furniture, flooring and textile products roughly flat.
Corte Madera, Calif.-based lifestyle retailer RH issued an announcement revising its forecast saying the “macro-environment has resulted in lower than expected demand since our prior forecast, and we are updating our outlook, particularly for the second half of the year. “
The company adjusted its fiscal 2022 forecast to include negative 2% and negative 5% revenue growth, and predicted second quarter net revenue to drop between 1% and 3%. The company had originally forecast net revenue growth between 5% and 7% for fiscal 2022.
“With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year end, our expectation is that demand will continue to slow throughout the year,” said Gary Friedman, chairman and CEO. “While we anticipate the next several quarters will pose a short-term challenge as we cycle the extraordinary growth from the COVID-driven spending shift, shed less valuable market share as we continue to raise our quality, and choose not to promote our business while we navigate through the multiple macro headwinds, we continue to believe our long-term investments will enable us to drive industry-leading performance over a longer term horizon.”
Hampered by the supply of electronics from China for its smart beds, Sleep Number expects to see delivery constraints in the third quarter, according to David Callen, chief financial officer.
“We are navigating challenges on three fronts: record low consumer sentiment; disruptive timing of electronics supply; and cost pressures from inflation and supply constrained inefficiencies. We are taking prompt mitigating actions on all three fronts. As a result, we have revised our 2022 earnings guidance to $3 to $4 per share.”
At the end of its first quarter, the company updated its full-year 2022 diluted earnings per share outlook to a range of $5 to $6 per share.
Callen said consumer sentiment had dropped since the previous quarter call.
“Our guidance assumes a decline from high-single digits to low-double digits,” he said. “As we believe, given the current environment, where the consumer is, it’s prudent for us not to assume that demand is going to – or that consumer sentiment is going to increase the balance of the year.”
Tempur Sealy International
Tempur Sealy International updated its earnings guidance to an expected range of $2.60 to $2.80 in 2022. At the end of its first quarter, the company shared expectations of earnings per share at between $3.20 and $3.40.
“Clearly, we’re not expecting a very robust back half of the year with units probably declining in the industry,” said Scott Thompson, CEO of Tempur Sealy International. “Call it single digits for lack of a better way of saying it. And whether you call it a recession or whether it’s not a recession, I think our outlook is that at best you’re talking about a flattish, kind of world for the next two, three quarters.”
Bhaskar Rao, chief financial officer, said the guidance contemplates full-year consolidated sales to be consistent with the previous year, and North American and international sales to be both down low-single-digits in the second half of 2022 versus the previous year.