AFMA revises sales projections.

Sales of residential furniture in 1998 have outpaced beginning-of-the-year projections, and shipments are now projected to top $23 billion for the first time ever, according to the latest forecast from the American Furniture Manufacturers Assn.

Shipments are now expected to reach $23.8 billion, a 9.3 percent increase over 1997 shipments of $21.26 billion (revised upward from $20.97 billion), according to AFMA's Quarterly Economic Forecast. Earlier this year, AFMA had predicted only 3.7 percent growth in 1998 to $21.7 billion.

Shipments of wood household furniture are expected to rise to $11.21 billion in 1998, a 9.4 percent increase over 1997 sales of $10.25 billion.

Yet in spite of these favorable revisions, global economic concerns brought a note a caution from some of the larger residential furniture manufacturers.

Ethan Allen Interiors, LADD and Stanley Furniture each posted positive financial quarterly data, yet each pointed to the global economy as a reason for caution.

"Although Ethan Allen has not seen any notable signs of a slow-down, with the recent news of global market events and concern about a slowing economy, we are adopting a careful yet proactive approach to manufacturing," said Ethan Allen CEO M. Farooq Kathwari in announcing record first quarter (FY 99) sales and earnings. "We are making provisions to further increase production while maintaining the flexibility to moderate our plans if needed."

Despite their concerns, each company assured stockholders that it was positioned for any downturn.

"While the recent turmoil in the global financial markets has created some uncertainty regarding future business conditions, our current order trends continue to be very positive," said Albert Prillaman, president and CEO of Stanley Furniture Co. Stanley Furniture reported record third quarter (FY 98) sales and earnings.

AFMA BULLISH ABOUT 1999

Residential Furniture Group Raises Growth Prediction

                    Prediction at           Revised
                    start of 1998          Prediction

1998 (proj.)           $21.75                $23.78
1999 (proj.)           $22.82                $24.28

Highlights from Recent Residential Furniture Quarterly Reports

* Ethan Allen Interiors Inc. reported record first quarter sales and earnings. Sales for the quarter ended Sept. 30, 1998, totaled $166.2 million or 9 percent greater than the corresponding quarter in 1997.

Net income for the quarter was $16.2 million, a 15 percent increase from third quarter of 1997.

* LADD Furniture Inc. reported that its fiscal 1998 third quarter net earnings jumped more than 90 percent from the year-earlier quarter, on a sales increase of 10 percent.

For the quarter, which ended Oct. 3, 1998, LADD earned $3.3 million versus $1.7 million in the comparable 1997 quarter. Third quarter net sales this year totaled $142.9 million, up from $129.9 million in the same period of 1997.

Third quarter sales of residential wood furniture increased 11 percent from a year earlier, while its residential upholstery sales rose 12 percent.

LADD's contract furniture volume growth slowed on a year-over-year comparative basis, with contract sales rising 4 percent in the third quarter. The company said production capacity constraints have forced them to be selective in taking orders.

* Stanley Furniture Co. reported record sales and earnings for the third quarter of 1998, marking the 13th consecutive quarter of record earnings. The board of directors also authorized the use of up to $10 million to repurchase the company's common stock.

Sales of $63.8 million for the third quarter of 1998 represent an increase of 18 percent over the previous year's quarter. Net income rose 26 percent to $3.7 million from $2.9 million in the prior year's quarter.

* O'Sullivan Industries Holdings reported that for the fiscal 1999 first quarter, ended Sept. 30, 1998, net sales were $87.7 million, up 13.7 percent from $77.1 million for the first quarter of fiscal 1998. Net income for the first quarter of this fiscal year was $3.7 million, up 3.1 percent from $3.6 million for the same quarter a year ago.

* Bassett Furniture reported lower sales and earnings which it attributed to prior year gains. Net sales for the quarter were $98.1 million, down 11 percent from the $110.2 million in the prior year. Net income for the third quarter, which ended August 1998, was $3.7 million versus $6.1 million in the prior year.