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The Dixie Group Inc (DXYN) Q1 2024 Earnings Call Transcript Highlights: Navigating Challenges ...

GuruFocus Research
·4 min read

  • Net Sales: $65,254,000 for Q1 2024, down 2.7% from $67 million in Q1 2023.

  • Operating Loss: $857,000 in Q1 2024 compared to an operating income of $306,000 in Q1 2023.

  • Net Loss from Continuing Operations: $2.410 million in Q1 2024, or $0.16 per diluted share, compared to $1.551 million, or $0.11 per diluted share in Q1 2023.

  • Gross Profit Margin: 24.2% in Q1 2024, down from 26.6% in Q1 2023.

  • Selling and Administrative Expenses: 25.1% of net sales in Q1 2024, up from 24.5% in Q1 2023.

  • Interest Expense: $1.5 million in Q1 2024, decreased from $1.9 million in Q1 2023.

  • Inventory Levels: Reduced by $1.2 million from the prior year-end balance.

  • Debt Increase: Rose by $1.9 million from the end of 2023.

  • Unused Borrowing Availability: $15 million under the revolving credit facility at quarter-end.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • The Dixie Group Inc (NASDAQ:DXYN) experienced a slight increase in net sales in March 2024 compared to the same month last year, indicating some recovery.

  • The company successfully implemented a $35 million cost reduction program last year and is in the process of implementing an additional $10 million cost reduction plan.

  • Gross profit margin improved in March 2024, aligning more closely with previous years and expectations.

  • The Dixie Group Inc (NASDAQ:DXYN) has diversified its product sources and begun extruding its own raw materials, reducing costs and ensuring supply stability.

  • The company launched several new products in the first quarter, including 14 new carpet styles, which could drive volume and improve market position.

Negative Points

  • The Dixie Group Inc (NASDAQ:DXYN) reported a decrease in net sales for the first quarter of 2024, down 2.7% from the previous year.

  • The company recorded an operating loss of $857,000 and a net loss from continuing operations of $2.410 million in the first quarter of 2024.

  • High interest rates and ongoing inflation negatively impacted consumer confidence and the home remodeling market, affecting sales.

  • Gross profit margin decreased to 24.2% in the first quarter of 2024 from 26.6% in the same quarter of the previous year due to lower production volumes.

  • Despite cost reduction efforts, the company's selling and administrative expenses increased as a percentage of net sales, indicating ongoing financial pressure.

Q & A Highlights

Q: My remarks, you mentioned that you believe once interest rates come back down the housing market, we'll boost the remodeling activity. But it looks like it's kind of evident that rates aren't coming down anytime soon. How are you going to navigate that? You saved $35 million last year, you're going to save about $10 million. Can you be profitable in this environment? A: (Allen Danzey - The Dixie Group, Inc. - VP & CFO) CHRIS, obviously, we think it is going to be a while before business improved significantly. On the other hand, the upper end of the market is doing better than the market overall. And we're certainly seeing that with our brands, but we've got to continue cutting costs. And yes, we think we can be profitable at these levels. But I will say, obviously a rising tide would certainly be appreciated and helpful, but we've got to get there, whether that it rises or not what's the time horizon for the $10 million savings over the next 12 months or the remainder of the year. That is the $10 million is distributed over the 12 months of the year. We accomplished a good sum of that in the first quarter, we will continue it will impact quarterly as we go.

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Q: Any update on the NASDAQ list? I mean the listing regarding the stock being under a book and do you have an extension on that? A: (Daniel Frierson - The Dixie Group, Inc. - CEO & Chairman of the Board) We do have the extension from the initial deficiency notice that we received at the fourth quarter of last year. The extension is through September of this year. We continue to stay focused on that and we'll continue to make efforts to address that as we go forward.

Q: Thank you. A: (Allen Danzey - The Dixie Group, Inc. - VP & CFO) Thank you, Chris.

Q: With no further questions, I would like to turn the call back to Dan Frierson for any additional or closing comments. A: (Daniel Frierson - The Dixie Group, Inc. - CEO & Chairman of the Board) Latonya. Thank you, and we thank all of you for being with us this quarter. Obviously, this is the slowest quarter of the year. Business activity and activity levels sequentially in the second quarter is certainly better than it was in the first. And we certainly hope and believe that if we can exercise the $10 million cost reduction plan and look forward to visiting with you at the end of second quarter, thank you.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.