Furniture Makers Shares Fall on La-Z-Boy Results, Raymond James Downgrades
NEW YORK (AP) — Shares of leading home furniture makers fell sharply on Wednesday, a day recliner maker La-Z-Boy Inc. reported a quarterly loss and gave a bearish forecast.
Furniture shares also were pressured by a wave of downbeat calls from brokerage Raymond James, which cut its rating on several furniture makers due
to the prospect of higher interest rates, spurred by recent comments from Federal Reserve Chairman Ben Bernanke.
La-Z-Boy shares led decliners, sliding $2.05, or 14.6 percent, to $12.04 on the New York Stock Exchange, where it was among the biggest percentage losers in midday trading.
Shares of Furniture Brands International Inc., one of the biggest residential furniture makers, fell 63 cents, or 3 percent, to $20.44. Ethan Allen Interiors Inc., a leading furniture store retailer, fell 85 cents, or 2.3 percent, to $35.83.
After Tuesday’s close, La-Z-Boy reported a fiscal fourth-quarter loss of $10.3 million, or 20 cents per share, on sales of $508.4 million. Wall Street’s average forecast called for a profit of 30 cents per share on sales of $545.8 million.
The quarter’s results were reduced by a large writedown of goodwill, and one less week of sales from the year-earlier period. La-Z-Boy also forecast current-quarter results that fell short of analysts’ consensus view.
“Results of our latest retail checks indicate demand for furniture remains weak,” UBS analyst Margaret Whelan wrote in a client note. “Given the summer is traditionally slow, we do not expect a pickup until fall, at best.” The investment bank also called La-Z-Boy’s sales “disappointing.”
Separately, Raymond James cut its ratings on La-Z-Boy, Furniture Brands International and Ethan Allen, citing recent comments from Fed chief Bernanke indicating the central bank will likely continue raising interest rates.
“Comments by new Federal Reserve Chairman Bernanke suggest that it may yet be some months before this cycle of Fed hikes ends, and business conditions are still reasonably soft given the higher costs of energy and somewhat moderated level of consumer confidence,” Raymond James analyst Budd Bugatch wrote in a client note.
“These newer realities cause us to conclude that, while the risk-reward prospects of these issues are still favorable over the next six to 12 months, the appropriate investment for those issues that are exclusively tied to residential furniture is modestly less robust,” Bugatch added.
On Monday, Fed chief Bernanke said inflation was at the “upper end” of a range consistent with stable prices, raising market expectations that the Fed will raise the target on short-term interest rates to 5.25 percent at their next meeting on June 28. His comments sparked a near 200-point drop in the Dow industrials, followed by another 47 point decline on Tuesday.
Raymond James lowered its rating on La-Z-Boy, Ethan Allen, Furniture Brands and Stanley Furniture Co. to “Outperform” from “Strong Buy.”
