The housing slump and rising costs continue to plague carpet manufacturers such as Dixie Group which on Tuesday reported an almost 9 percent drop in sales for the second quarter over a year ago.

However, Dixie’s earnings topped analysts’ estimates and its stock price climbed sharply.

“Because of continuing economic uncertainty, the outlook for the industry and our business remains difficult to predict,” said Dan Frierson, Dixie Group chairman and chief executive.

He said that depressed housing sales and tight credit conditions are expected to continue to affect demand for residential carpet products throughout the remainder of the year.

“Although we believe our commercial product sales will grow this year, we expect their rate of growth to slow by yearend,” said the chief of the Chattanooga-based company.

Dixie Group posted second-quarter sales of about $77.2 million, down 8.6 percent from $84.4 million for the second quarter 2007.

Income from continuing operations was $1.3 million or 10 cents per diluted share for the second quarter 2008 compared to $2.6 million or 19 cents per diluted share for the same time in 2007.

The 10 cents a share earnings still topped analysts’ earnings projections of 7 cents a share.

The Dixie Group’s stock closed Tuesday at $5.90 a share, up $1.15 or 24.3 percent from Monday’s close.

Kemp Harr, publisher of Floor Focus magazine, said Dixie Group, the fifth-largest carpet manufacturer in the United States, remains healthy despite the soft market. He said Dixie beat industry numbers released by the Carpet and Rug Institute.

“Like all the carpet companies, Dixie continues to struggle in this environment,” he said.

Mr. Frierson said Dixie Group’s 8.2 percent drop in residential carpet sales was better than the industry average, which plunged 13.5 percent.

However, commercial carpet sales fell 4.7 percent — below the industry average which grew 1.3 percent.

“Our commercial sales underperformed the industry for the first time in many quarters,” Mr. Frierson said. “This was largely attributed to large sales to one customer in the year ago quarter.”

Mr. Harr said that if single customer sales were not included in Dixie’s comparison, the quarter that ended July 28 would show 2 percent growth from the second quarter last year.

Gary Harmon, vice president and chief financial officer, said the company implemented cost-cutting measures and cut its work force by about 9 percent. The company also increased prices in February, June and July to account for rising raw materials and energy costs.

Mr. Frierson predicted the market should turn upward soon.

“Everybody we are talking to thinks we are bouncing along the bottom, and it will eventually get better,” he said.