Mohawk Ind. 3Q sales decline, but earnings soar

HTT Staff -- Home Textiles Today, 11/5/2010 1:37:19 PM

Calhoun, Ga. -Mohawk Industries Inc. Mohawk segment - which includes the Mohawk Home and Karastan businesses - managed to churn a 34% margin gain and a lower-than-expected 6% sales decline.

During the company's third quarter earnings call today, Mohawk Ind.'s chairman and ceo Jeffrey Lorberbaum told investors and analysts the company twice raised prices for some products within the Mohawk segment during in the quarter, which negatively impacted volume.

"We were a little aggressive with our price increases relative to our competition, so we've adjusted those," he said, later adding, "The goal is to recover the cost and make sure we are positioned well."

A bright spot in the segment has been the recent boom in polyester filament products, which have "grown faster than anticipated," he said, adding, "We didn't expect the polyester to gain as fast as it did. That prompted Mohawk to create new styles and price points to build on the trend.

Mohawk is also investing in additional manufacturing and extrusion equipment in the early 2011to support this momentum.

For the third quarter, ended Oct. 2, net earnings were $51 million, up 49%, and earnings per share were 74 cents, which included unusual items that were offsetting.

Sales fell 5.3% to $1.309 billion, representing a 3.8% decrease with a constant exchange rate.

Year to date, earnings were $140 million compared to last year's$25 million net loss, and EPS was $2.03.

Looking ahead, Mohawk Ind.'s expects sales demand and raw material trends from the third quarter to continue through the fourth quarter.

"Next year, we anticipate increased sales growth, higher selling prices and margin improvement as we gain leverage from the changes we have implemented in the business," Lorberbaum said.

Mohawk Ind.'s fourth quarter guidance for earnings is 53 to 63 cents per share. The fourth quarter will include four fewer days compared to the same period last year.