Hooker 1Q Sales Rise 13.7%

June 6, 2011  by in UnCategorized   

By Home Furnishings Business in Financial Reports on June 7, 2011

Hooker Furniture (NASDAQ: HOFT) reported first-quarter 2012 sales of $58.4 million, an increase of 13.7 percent over the prior-year period.

Net income for the period, which ended May 1, fell 52.3 percent from first-quarter 2011 to $523,000.

According to a Hooker Furniture earnings announcement, this marks the fourth consecutive quarter of year-over-year sales increases as unit volume grew across all divisions. Casegoods unit volume led the way with a nearly 26 percent increase, while upholstered fabric and upholstered leather seating unit sales increased 7 percent and 4 percent, respectively.

The lower net income was the result of increased product discounting from a focused effort to reduce slow-moving, excess inventory. Other factors contributing to decreased profitability for the quarter included: higher freight costs on imported casegoods inventory that was shipped during the quarter compared to the prior-year quarter; continuing but smaller operating losses in domestically produced upholstery; higher returns and allowances expense; and elevated health care costs.

"We're pleased to report a healthy top line gain in casegoods for the quarter," said Paul B. Toms Jr., chairman, chief executive officer and president of Hooker, Martinsville, Va. "Although we've had positive sales comps during the previous three quarters, over the past six months we've started to see significant growth in casegoods. This kind of growth is vital for achieving the high profitability performance objectives we've set for ourselves."

Noting that the significance of the sales gains is tempered due to somewhat depressed sales during the prior year quarter because of production and shipping bottlenecks, Toms added that the demand environment is also strong.

"Consolidated orders are up almost 14 percent and backlogs are healthy, which bodes well for shipments through the second quarter," he said. "Given the sales growth we had this quarter, we're disappointed in our inability to generate higher profits. We've moved a lot of slow-selling, excess inventory but still have additional work to do and expect discounting to impact profitability over the next two quarters. It's difficult to say how much of a factor the discounting will be due to other unknown variables, such as retail demand and the amount of full-price furniture we're able to ship to offset the discounting of slower selling items."

Toms also commented on Hooker's business outlook.

"Since early April, business has slowed for most of our customers. Having said that, we've seen relatively strong orders because we are aligned with the healthiest retailers, enjoying retail success with product introductions over the past eighteen months and are gaining market share," he said. "While business isn't robust, we are holding our own and faring better than retail in general.

"We expect our margins to be impacted through the fiscal 2012 third quarter by additional discounting as we rationalize our product line and work to move excess inventory. Additionally, we expect inflation on imported goods from China over the remainder of the fiscal year, which will be mitigated with price increases to our customers. While consumer confidence continues to be stifled by declining home values, high unemployment, high consumer debt loads and rising inflation, we expect to grow through continued market share gains, even if the sales environment remains less than optimum."