Despite Quarterly Loss, Krause’s Sees Upturn

Krause’s Furniture Inc.’s first-quarter report Wednesday showed the company still wading in red ink. But sales hit record levels and both company executives and an analyst said they expect the nationwide maker and retailer of custom furnishings to finally break into the black by year-end.

Brea-based Krause’s, which has been working on a turnaround since 1996, posted a loss of $2.2 million, or 10 cents a share, for the quarter ended March 26. That compares to a loss of $1.9 million, or 9 cents a share, in the comparable period a year earlier.

The latest loss was in line with analysts’ forecasts and reflected costs for six new-store openings and development of the company’s electronic commerce plan, which could give Krause’s a lift in its climb toward profitability.

First-quarter sales hit a record $39 million, an 11.7% jump over $34.9 million a year earlier. The company said same-store sales, a key industry indicator, rose 5.8% in the quarter.

Krause’s stock closed unchanged Wednesday, at $2.38 in American Stock Exchange trading.

Krause’s plan is to open 20 new stores a year. In past years, the company’s has failed to meet its expansion targets.

Alex Woodward, an analyst with Black & Co., was cautiously optimistic about the company’s prospects, saying Krause’s appears poised to make a profit this year.

“There’s potential for them to really ramp the sales and actually make some money,” he said. “Right now it looks like fourth quarter is when they’ll actually have some earnings.”

The company’s e-commerce efforts would be an extra cushion.

Krause’s, which earlier this year received a $19-million capital infusion from investors largely for Internet business development, said Wednesday that company management was now reviewing its online strategy. But officials declined to comment further or say when its business-to-business e-commerce plan would commence.

Analysts say the Internet holds promise for the company because it already has the manufacturing and distribution system in place to quickly make and deliver custom furniture.

In addition, its Brea manufacturing plant is only being used at just over half its capacity, the company said, allowing plenty of room for growth. And because Krause’s owns all of its 96 stores nationwide, it would not be leaching business from franchisees, they say.

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Krause’s Results

Krause’s Furniture had a wider first quarter loss, but same store sales grew 5.8%.

Sales (in millions)

2000: $39

1999: $34.9

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Net income (in millions)

2000: -$2.2

1999: -$1.9

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Per share

2000: -.10

1999: -.09

Source: Krause’s Furniture Inc., Brea.