"Our sales have grown at approximately 15% over the prior year period in each of the last three quarters. It appears that improved economic conditions are finally producing positive industry growth"
Jeffrey R. Scheffer, president and chief executive officer

Stanley Furniture Company, Inc. (STLY) reports increased sales and earnings for the second quarter of 2004. Both sales and earnings exceeded management's guidance for the quarter issued in mid-April.

Net sales of $70.7 million increased 15.2% from the second quarter of 2003, marking the ninth consecutive quarter of sales growth over the comparable prior year quarter. Earnings per share grew 50.9% to $.80 compared to $.53 in the second quarter of last year.

Higher sales, increased production levels at the Company's domestic facilities, although at a slower growth rate than sales due to the growth of sourced items, and savings from sourcing initiatives drove the improvement.

Approximately 27% of sales came from sourced items in the first half of 2004. Management expects sales from sourced items to level off around 30% of sales for total year 2004.

Business Outlook

"We are pleased to report our ninth consecutive quarter of year-over-year sales growth," commented Jeffrey R. Scheffer, president and chief executive officer. "Our sales have grown at approximately 15% over the prior year period in each of the last three quarters. It appears that improved economic conditions are finally producing positive industry growth. However, we believe a large portion of our sales growth continues to come from market share gains. The strong first half performance combined with good momentum as we enter the second half of the year has caused us to again raise our sales and earnings guidance for 2004 as outlined below. We anticipate gross profit and operating income margins to contract in the third quarter compared to the second quarter due to inflation in raw materials, wages, employee benefits and energy costs, and tariffs imposed on wooden bedroom furniture imported from China. However, we believe these cost increases will be offset with modest pricing actions and continued gains in operating efficiencies by the fourth quarter.

Our focus is to create exciting designs, produce high-quality product and provide excellent service," Scheffer continued. "Best product is determined by both design and price. Blending efficient domestic manufacturing in highly focused facilities with intelligent outsourcing of certain component parts and finished goods allows us to offer a compelling value proposition. This combination gives Stanley a competitive advantage by offering higher value and well-styled product, without sacrificing our culture of high quality and fast delivery. Our recent market share gains provide encouraging evidence that our customers are responding favorably and that we are executing the strategy well," Scheffer concluded.

Management offers the following guidance for total year 2004:

* Net sales are expected to be in the range of $284 million to $291
million, an increase of 9% to 12% over the prior year.

* Operating income is expected to be in the range of $32.5 million to
$34.1 million.

* The Company's effective tax rate is expected to be in the range of 36.0%
to 36.5% for 2004 compared to 36.0% in 2003.

* Earnings per share are expected to be in the range of $2.95 to $3.10
compared to $2.34 for 2003.

Management offers the following guidance for the quarter ending September 25, 2004:

* Net sales are expected to be in the range of $71.5 million to $74.0
million, an increase of 10% to 13% over the third quarter of 2003.

* Operating income is expected to be in the range of $7.1 million to $7.6
million.

* Earnings per share are expected to be in the range of $.70 to $.75
compared to $.59 in the year-ago quarter.