Hooker Furnishings Reports Results for Third Quarter 2024

December 5, 2024  by Karen Parrish in Business Strategy, Industry   

Fiscal 2025 Third Quarter Overview

• Results for the third quarter were driven by continued macro-economic and industry-wide headwinds which resulted in low demand and $7.5 million in charges ($4.4 million net of tax based on the effective tax rate in the third quarter), including restructuring costs related to the Company’s previously announced cost savings plan ($3.1 million of mostly severance), the bankruptcy of a significant customer ($2.4 million of bad debt expense) and non-cash trade-name impairment charges ($2.0 million related to Home Meridian (HMI) segment trade names.) These factors led to an operating loss of $7.3 million and a consolidated net loss of $4.1 million or ($0.39) per diluted share for the third quarter.

• Consolidated net sales were $104.4 million, a decrease of $12.5 million, or 10.7%, compared to the same quarter of the previous year, primarily due to ongoing macro-economic and related challenges in the home furnishings industry, loss of sales due to a customer bankruptcy and higher discounting to adjust inventory mix and levels.

• The Company is starting to see improved efficiencies from the cost reductions and expects to realize and exceed its goal of 10% or $10 million in annualized cost savings in fiscal 2026.

• The restructuring efforts at HMI in recent years are showing meaningful results and continued progress as HMI reinforce the Company’s belief that the segment is now on a sustainable path of profitability which will gain momentum as demand normalizes in the industry. In the third quarter, Home Meridian achieved a gross margin of 20.5%, its highest level since the business was acquired in 2016.

• For the nine-month period of fiscal 2025, consolidated net sales were $293.0 million, a decrease of $43.4 million or 12.9% compared to the same period of the previous year. This decrease was also due to persistent low demand affecting the home furnishings industry, and the absence of $11 million in liquidation sales from the unprofitable ACH product line which the Company exited last year. For the nine-month period, the Company reported a consolidated operating loss of $15.4 million and a net loss of $10.2 million, or ($0.97) per diluted share, attributed to lower overall sales, higher ocean freight costs at Hooker Branded, under-absorbed indirect costs at Domestic Upholstery, as well as the $7.5 million in charges mentioned earlier.

Management Commentary

“Despite the charges recorded in Q3 and the sustained macro-economic and furniture retail challenges, we’re encouraged by the sequential quarterly improvement in our core business profitability and by the progress of our cost reduction efforts, which will be more fully realized beginning in the 4th quarter,” said Jeremy Hoff, Chief Executive Officer at Hooker Furnishings. “This progress is a reflection of our team’s focus on managing our controllables and reducing non-strategic costs in a very challenging environment, while investing in impactful initiatives, including our recently announced global licensing agreement with Margaritaville, all of which we expect will benefit us when demand normalizes,” Hoff said.

“There are positive developments in the macro-economic environment, such as cooling inflation and recent interest rate cuts in September and November, which should begin to increase demand for furnishings as lower mortgage rates boost the housing market,” Hoff said.

“While early in our new merchandising strategy, our October High Point Market introductions were positively received with significant placements across the board at Hooker Legacy and HMI,” Hoff said. “In addition, we had the best retail placement market to date at outdoor furniture specialist Sunset West.”

“Early customer feedback of three major casegoods collections for Hooker Branded gave us the confidence to place initial cuttings early before these groups were officially introduced in October. As a result, the collections will ship this month with a second cutting in January, increasing our speed-to-market by six months,” Hoff said. “This puts us in a strong position for the coming fiscal year on our available product assortment.”

“In anticipation of increased demand and the typically strong fall selling season, Hooker Branded’s inventories increased nearly $11 million or 40% during the quarter compared to the previous quarter-end,” Hoff said. In addition, “We are aggressively producing our top collections to ensure we will be in stock during the first quarter of fiscal 2026,” Hoff said, adding that, “these inventories are high-quality assortments, centered on our best-selling and most-profitable SKUs.”