The Rowe Companies Announces Third Quarter Outlook

Furniture World Magazine

The Rowe Companies, a leading furniture manufacturer and home furnishings retailer, announced that, while sales volume exceeded expectations, net earnings for its third fiscal quarter ended August 29, 2004 will be lower than anticipated due to manufacturing productivity below expected levels. This manufacturing inefficiency is associated with time requirements for the implementation of its new Enterprise Resource Planning ("ERP") system and the conversion to lean manufacturing. "While it is not The Rowe Company's policy to give specific guidance, I am making an exception in the interest of good financial communication," said Gerald Birnbach, Chairman and President. Net shipments are expected to be approximately $76.5 million, or an increase of approximately 9% over the same quarter last year. The Company, however, expects to report net earnings for the quarter below analyst estimates. "We continue to be pleased with Storehouse retail demand and Rowe Furniture manufacturing orders," Mr. Birnbach continued. "Operations management in the Rowe Furniture division has been intensely focused on the implementation of our new ERP system and conversion to lean manufacturing, significantly reducing the time available for day-to-day management activities. During this period manufacturing productivity has declined below our expected levels. While it is anticipated that the line management time requirement for conversion to the new system should diminish in the near future at which time our line managers will return to their normal responsibilities, we will not make the conversion until we are satisfied that the system will operate as planned." "Our new ERP system will give us substantial new capabilities in critical areas such as merchandising, and gives us the scale for growth. While we are disappointed that our earnings aren't higher, we know that this kind of a disruption is temporary and not uncommon when undertaking complex technology initiatives," Mr. Birnbach continued. The Rowe Companies operates two subsidiaries in the home furnishings industry: Rowe Furniture, Inc., a major manufacturer of quality upholstered furniture serving the middle and upper middle market throughout the U.S.; and Storehouse, Inc., a multi-channel, lifestyle home furnishings business including 60 retail home furnishings stores. Storehouse makes good design accessible by selling an edited assortment of casual, contemporary home furnishings through its stores located in the Southeast, Southwest and Mid- Atlantic markets, its catalog and over the Internet.