We believe industry sales growth slowed during the third quarter and is in an uncertain period due to a sharp decline in consumer confidence levels
Jeffrey R. Scheffer, chairman, president and chief executive officer

Stanley Furniture Company, Inc. (STLY) today reported record sales and earnings for the third quarter of 2005.

Net sales of $85.6 million increased 8.6% from the third quarter of 2004, marking the fourteenth consecutive quarter of sales growth over the comparable prior year quarter.

For the first nine months of 2005, net sales of $252.2 million rose 13.3% over the comparable prior year period.

Higher raw material costs, compensation costs, energy costs, freight costs, increased warehouse expense and tariffs imposed on wooden bedroom furniture imported from China are negatively impacting operating income. For the first nine months of 2005, higher sales and increased production levels are helping to offset these higher costs. Operational inefficiencies and lower production levels in the third quarter of 2005 compared to the year ago period also negatively impacted operating margins. While the operating efficiencies are expected to improve, lower production levels are anticipated in the fourth quarter of 2005 versus the comparable prior year period.

"We are pleased to report another quarter of significant market share gains and strong operating margins," commented Jeffrey R. Scheffer, chairman, president and chief executive officer. "For the most recent four quarters our sales have increased 13.1% from the previous four quarter period. We believe the consistent execution of our strategy has resulted in market share gains that continue to drive most of our sales growth. We believe industry sales growth slowed during the third quarter and is in an uncertain period due to a sharp decline in consumer confidence levels. Near term we are focusing on keeping our inventories at appropriate levels while remaining hopeful that this will prove to be a short term disruption in demand. Accordingly, we have lowered our fourth quarter 2005 sales and earnings guidance as detailed below," concluded Scheffer.

Fourth quarter 2005 net sales are expected to be in the range of $81.5
million to $84.5 million, ranging from a decrease of 2.1% to an increase
of 1.5% over the fourth quarter of 2004. For total year 2005, net sales
are expected to be in the range of $334 million to $337 million, an
increase of 9% to 10% over the prior year.