Stifel Nicolaus Downgrades Furniture Brands Stock to Sell Rating

Clayton-based Furniture Brands is trying to stand its ground amidst being hit with a 12 percent drop after a Stifel Nicolaus analyst downgraded the stock to a “sell” rating, and said he believes the company is heading towards liquidation or bankruptcy, according to the St. Louis Post Dispatch.

By market’s close last Wednesday, Furniture Brands International shares had fallen 17 cents to $1.20 a share, after the company's second quarter earning announcement in which liquidity issues were discussed.

On Tuesday’s free-fall, shares had dropped 38 percent after a second-quarter loss of $41 million was announced.

"...in order to address its liquidity challenges and improve business performance it is implementing strategic initiatives to achieve cost reductions, pursuing asset sales and working with its lenders to potentially modify its credit facilities," the company's second quarter earning announcement states.

In a research note Wednesday, Stifel analyst John Baugh wrote that some form of liquidation or a bankruptcy filing is indeed coming sooner rather than later.

• Net loss for the second quarter of 2013 was $40.8 million, or $5.15 per diluted share This compares to a net loss of $6.8 million, or $0.86 per diluted share, in the second quarter of 2012. 
• The Company ended the quarter with a cash balance of $8.8 million and a debt balance of $117.7 million.
• Net sales for the second quarter of 2013 were $255 million, a decline of 4 percent compared since the second quarter of 2012.
• Gross profit for the second quarter of 2013 was $46.6 million and gross margin was 18.3 percent, compared to $64 million in gross profit and 24.1 percent gross margin in the prior year period. 
• Selling, general and administrative expenses for the second quarter of 2013 totaled $63 million as compared to $69.4 million in the second quarter of 2012.
  
• Interest expense was $2.5 million as compared to $0.8 million in the prior year period. The increase in interest expense was primarily due to the increased interest rate on higher debt and amortization of debt issuance costs related to the previously announced debt refinancing in September 2012.