Mohawk cuts forecasts

Staff -- Home Textiles Today, 3/24/2003 12:00:00 AM

CALHOUN, GA —

With sales hurt by war fears and severe winter weather in much of the country, Mohawk Industries Inc. has cut its earnings forecast for both the first and second quarters, and said first-quarter profits could fall by more than 18 percent.

The company had earlier expressed concern about weakening market conditions, but now says "these concerns are more pronounced than we had anticipated as demand has declined due to geo-political circumstances and harsh winter weather conditions in the Northeast and central U.S."

Mohawk had earlier projected first-quarter earnings per share would be flat to six percent ahead of 2002 levels, but now expects earnings of just $0.60 to $0.63 percent a share, down 18 percent to 22 percent from last year's $0.77 a share. Sales in the first quarter are down about 5 percent, the company said.

To stem the tide, Mohawk said it's raising carpet prices by 5 percent to 8 percent at the end of March, as well as paring labor costs and slashing capital spending.

Higher prices, combined with lower costs and "normal seasonal improvements," Mohawk said, should result in improving results for the second quarter, but still not as strong as originally hoped. The company said earnings per share for the second quarter are expected to come in at $1.05 to $1.15 a share, compared with $1.10 last year.

Responding to the lowered forecast, Dennis Rosenberg, Credit Suisse First Boston textiles analyst knocked down his earnings forecast for this year and next, as well as his share-price target. Rosenberg whittled down his outlook for this year to $4.25 a share from an earlier $4.75, and for 2004 scaled back his earning projection to $4.85 a share from $5.20. At the same time, Rosenberg lowered his 12-month price target for Mohawk shares to $55 from an earlier target of $65.