As previously noted, we believe wooden residential furniture sales are in the midst of an industry wide slow down that is likely to persist for a while.
Jeffrey R. Scheffer, CEO, Stanley Furniture Company

Stanley Furniture Company, Inc. (STLY) reported sales and earnings for the third quarter of 2006 were slightly below management's updated guidance provided in mid September 2006 (see story).

Net sales of $75.9 million declined 11.3% and earnings per share of $.26 decreased 40.9% from the third quarter of last year.

For the first nine months of 2006, net sales of $236.9 million decreased 6.1% from the comparable prior year period. Earnings per share declined 22.9% to $1.01 compared to $1.31 for the first nine months of 2005.

Stanley said lower margins resulted from lower sales, decreased production levels, and higher raw material, compensation and energy costs. As a result of improving processes and reducing lead times, production levels decreased more sharply than the sales decline particularly in the second and third quarters and led to lower margins due.

"As previously noted, we believe wooden residential furniture sales are in the midst of an industry wide slow down that is likely to persist for a while," commented Jeffrey R. Scheffer, chairman, president and chief executive officer. "Consequently, accurately projecting sales in this environment is difficult because of the limited visibility due to our quick order fulfillment times. While we are disappointed with the sales decline, we believe it is a result of overall industry conditions. We are very pleased with strong cash flow in the third quarter and year-to-date 2006 that has been accentuated by a significant inventory reduction driven by the initial progress from our lean journey."

Near term, Scheffer said the company will focus on controlling costs and inventories, and improving product offerings.