The Dixie Group takes its business to the rug. Once a textile concern, the company has evolved into a maker of tufted broadloom carpets and custom rugs, and proprietary yarns used in manufacturing the soft floorcoverings. Its brands, Dixie Home, Masland Carpets, Fabrica International, and Candlewick Yarn, are differentiated by product price and styling. Dixie markets and sells carpets to high-end residential customers, including interior decorators, retailers, home builders, and motorhome and yacht OEMs. Less so, it supplies carpet for the specified (contract) market, such as architectural and commercial customers, as well as consumers through specialty floorcovering retailers. Most sales are made domestically.
The ongoing decline in housing starts, home sales, and commercial construction activity has all but rubbed the carpet maker's business bare. After consecutive year-over-year declines in sales since 2006, the company managed a 14% turnaround in 2010 over 2009, albeit roughly 30% lower than its high in 2006. Year-over-year residential carpet sales led the improvement, up some 18% in 2010.
Dixie's results outperformed the industry; US carpet sales in 2010 increased less than 1% over 2009, or 31% lower than 2006. Although the company suffered its third year of losses, the dip was considerably less than the prior two years. Pointing to a recovery in the high-end carpet market, Dixie's fourth quarter in 2010 marked the first profitable period since its second quarter in 2008.
The company has responded to the industry downturn by restructuring its operations to align with demand. During 2008, and continuing into 2009 and 2010, Dixie consolidated East and West Coast manufacturing operations, slashed headcount, reduced expenses, and trimmed debt. It also altered its lineup by streamlining its three residential carpet businesses into one defined by three brands. Concurrently, the company stepped up carpet prices and worked to offset rising nylon yarn costs by invested in new products that incorporate less pricy raw materials. Its launches have included an upper-end portfolio of wool products, smaller-ticket offerings in its Stainmaster and polyester lines, and a new tufting production technology.
Reorganization, however, has taken a toll on Dixie's cash flow, which plummeted in 2010 to its lowest level in five years, limiting its opportunities. The company's direction is influenced by a few significant owners. Chairman and CEO Daniel K. Frierson and family hold about a 62% stake in Dixie. Robert Shaw, CEO of Shaw Industries, owns roughly 12%. – less