Springs turns a 2Q profit as sales slump
August 15, 2008-- Home Textiles Today,
Sao Paulo, Brazil – Springs Global turned out of second-quarter profit – albeit small – despite sales declines in three major product categories of business in the United States.
“Our results year-to-date have been impacted primarily by 1) the reduction in net sales caused by the appreciation of the real on our U.S. dollar-denominated sales; 2) increases in gloal commodity and energy costs, partially offset by price increases to our customers; and 3) lower absorption of fixed costs due to reduced sales volumes,” the company said in its filing statement.
Springs Global, the holding company of Springs Global US and Coteminas S.A. – reported consolidated net income for the quarter ended June 30 of 400,000 realis – approximately $240,000. (Note: All U.S. dollar conversions are estimates only, based on an Aug. 15, 2009 rate of 1.63950 realis to the U.S. dollar.) In the year-ago quarter, the company posted a net loss of 75.1 million realis.
The global mill lowered selling expenses by 13% and general and administrative expenses by 37.8% during the quarter. Springs Global also expanded its gross margin from 7.5% in last year’s second quarter to 10.7% in the recent period.
Total sales from continuing operations – Springs Global sold its infant and toddler business to Crown Crafts 10 months ago – fell 15.4% to 734.4 million realis, or approximately $445 million.
Springs referenced the troubled U.S. market and the bankruptcy fillings of three retail accounts – presumably Linens ’n Things (described in the filing as one of Springs Global’s largest customers), Mervyn’s and Boscov’s – resulted in sharp sales declines in three key home textiles categories.
Fashion bedding sales fell 16.1% to 323.0 million realis, approximately $197 million. Sales of bath products tumbled 29.6% to 157.3 realis, or roughly $96 million. Utility bedding sales dropped 25.0% to 94.6 million realis, or about $57.7 million.
U.S. shortfalls in fashion bedding and bath were partially offset by increased sales in Brazil, the company reported.
Springs Global expanded sales of yarn, greige fabrics and finished fabrics by 32.2% to 81.9 million realis, or about $50 million.
Looking ahead, the company warned the retail environment remains challenging. Springs Global will work to reduce costs through the balance of the year by further consolidating manufacturing and warehousing the U.S. and reducing overhead, the company said.