American Woodmark topples to 52-week low on sour Q2 and lowered guidance
Shares of American Woodmark Corp. (Nasdaq: AMWD) tumbled to a new 52-week low today after the kitchen cabinet and vanity manufacturer reported bleak results for its second quarter of fiscal 2008 and lowered its guidance for the full year of 2008.
For the three months ended Oct. 31, the Winchester, Va.-based company recorded net of $1.15 million, or $0.08 per diluted share, compared with net income of $9.19 million, or $0.57 per diluted share, in the prior year. Four analysts surveyed by Thomson Financial were on average forecasting $0.37 per share.
Net sales declined 24% to $160.23 million from $210.82 million. Three analysts surveyed by Thomson Financial were on average projecting sales of $167.34 million.
Sales of core products declined 17% in the second quarter, as both remodeling sales and new construction sales waned in comparison with the second quarter of 2007.
Gross profit declined to 17.3% of sales, compared with 20.3% in the previous year.
American Woodmark attributed the decline in gross profit margins to an unfavorable impact of inefficiencies in labor and overhead costs resulting from the impact of lower sales volumes, new product launches, higher medical costs and rising fuel costs. The company said inefficiencies more than offset favorability related to an improved sales mix that resulted from the prior completion of the company's low-margin products transition.
Additionally, American Woodmark said the gross margin rate for the quarter was adversely impacted by a change in the form of the company's sales promotional participation with one of its retail customers.
Looking ahead to the remainder of fiscal year 2008, American Woodmark said it expects that tighter credit conditions and falling real estate prices will continue to erode remodeling and new construction markets until these conditions are resolved.
American Woodmark noted difficult market conditions have directly impacted its business, citing that several new construction customers are experiencing deteriorating financial conditions, including two that recently filed for bankruptcy protection.
As a result, American Woodmark has reduced its sales expectations for fiscal 2008, to a decline of 14% to 18%, compared with fiscal year 2007 results. For fiscal 2008, the company is reducing its earnings guidance to $0.70 to $0.90 per diluted share, compared with $2.04 in the prior fiscal year. Five analysts polled by Thomson Financial were on average projecting earnings of $1.46 per share.
The company said it expects that the factors which led to reduced gross margins during the second quarter of fiscal 2008 will continue to impact gross margin for the remainder of the fiscal year. As a result, the company now expects a gross margin rate of approximately 18.5%. The company expects results for its third fiscal quarter ending Jan. 31, 2008 will approach break-even, and that modest profits will be achieved in the fourth quarter.
Shares of American Woodmark (AMWD) toppled 20.04%, or $4.58, to $18.27 at 1:05 p.m. ET. Shares of American Woodmark have been trading in the range of $18.01 to $46.10 for the past 52 weeks.
