Hooker Q1 Earnings Almost Double

June 4, 2012  by in UnCategorized   

By Home Furnishings Business in Financial Reports on June 5, 2012 Hooker Furniture (NASDAQ: HOFT) almost doubled first-quarter 2013 net income despite lower sales.

Hooker, Martinsville, Va., reported sales of $51.7 million, 11.4 percent below first-quarter 2012; and net income of $1 million for the period ended April 29, compared with net income of 523,000 for the same period last year.

The higher net income was the result of decreased discounting, lower selling and administrative costs and a $760,000 bottom-line improvement in upholstery segment results.

The sales decrease was driven by out-of-stock positions on some key products, decreased discounting and, to a lesser extent and consistent with the company's fiscal 2012 fourth quarter, delayed shipments due to vendor shifts from China to other countries. Lower sales volume was partially offset by increased average selling prices for both segments, due primarily to lower discounting.

"This quarter's sales results are disappointing because stock-outs on key items and groups offset the progress we have made in so many other facets of our business," said Paul B. Toms Jr., chairman and chief executive officer. "We're extremely pleased to have recorded a small operating profit in the upholstery segment this quarter. In addition, we have successfully worked through the heavy product discounting that impacted the first three quarters of last year, and ocean freight rates have stabilized at more favorable levels. The freshening of our product line has been rewarded with strong retailer acceptance of recent product introductions."

In addition to reaping the benefits of more efficient domestic production at the Bradington-Young upholstery division, improvements in upholstery results have also been accomplished by "purging the business of non-value added costs," said Michael Delgatti, president of Hooker Upholstery. "The introduction of creative and innovative programs and products at higher gross margins and our sales growth at Seven Seas Seating and Sam Moore have also been factors."

Sam Moore Furniture, the company's custom fabric upholstery line, grew sales approximately 9 percent this quarter compared to the same period a year ago, marking the fifth consecutive quarter of year-over-year sales increases.

"We believe these improvements in upholstery profitability are sustainable and that our out-of-stock challenges in imported leather and case goods are manageable," Toms said. "We have already addressed these issues by strengthening our team in Asia, which we expect will result in improved vendor performance and alignment and improved quality and delivery times. We expect our best-selling and new product inventory availability to improve by the middle of the second quarter, which will position us to regain the momentum we've lost."

Looking ahead, Toms said Hooker hopes to build upon a very strong April High Point Furniture Market.

"The spring furniture market was very strong for Hooker," Toms said. "Our attendance was up about 20 percent compared to a year ago, and there was a lot of excitement surrounding our new showroom. We had great reaction to many of our introductions, especially our Rhapsody case goods and upholstery collection and our new Sam Moore fabric sofa program. However, retailers reported a marked slowing of business in March and April, which was reflected in weaker incoming orders during our first quarter. In the second quarter, we'll still be working through the temporary impact of not being able to convert our backlog into shipments, although we expect to begin shipping key collections in June. As the usually slower summer selling season progresses, we expect our in-stock position will improve steadily. It will take a little longer to regain the floor space we've lost, but we are positioning ourselves to recapture it and fully expect to in time. We don't expect a significant improvement in demand until fall, but are gratified by encouraging developments in the economy such as improvements in the housing market, stable employment and the adjustment of consumers to a 'new normal.' We expect the consumer will continue to regain confidence to spend on larger ticket, deferrable purchases but also believe the recovery will be slow and choppy."