HOOKER FURNISHINGS CORPORATION Fiscal 2024 Third Quarter overview:
- Consolidated net income for the quarter increased 45.4% to
$7 million or$0.65 per diluted share, compared to$4.8 million or$0.42 per diluted share a year ago. Consolidated operating income increased 36.6% compared to the prior year quarter. Operating income and margin were$8.8 million and 7.5% as compared to$6.4 million and 4.2% in the prior-year third quarter, due to improved profitability in the Hooker Branded and Home Meridian (HMI) segments. - Consolidated net sales for the fiscal 2024 third quarter decreased by
$34.7 million , or 22.9%, compared to a year ago, driven by continued soft demand for home furnishings, as well as the Company's exit from the Accentrics Home product line. Net sales declined in each of the three segments versus the prior year period. However, HMI segment’s sales increased compared to the first and second quarters of the current fiscal year, sparked by a large volume of shipments for new product placements. Hooker Branded sales also increased compared to the previous quarter in the current fiscal year. - The Company’s strategy to reposition the Home Meridian Segment from a volatile, high-risk model with unpredictable profitability to a lower risk, more sustainable revenue and profit model is beginning to yield tangible results. As the Company forecasted, the Home Meridian segment achieved a quarterly operating income for the first time since calendar year 2021. The segment contributed
$0.9 million to income in the current-year third quarter compared to a$3.2 million loss in the prior-year third quarter. - For the fiscal 2024 nine-month period, consolidated net sales decreased by
$115.4 million , or 25.5%, as compared to the same period last year. The nine-month results were driven by decreased net sales in all three segments, attributable to industry-wide soft demand, as well as the exit from the Accentrics Home product line which accounted for about$10 million of the decrease. Consolidated operating income and margin were$12 million , or 3.6%, as compared to$17.6 million and 3.9% in the prior-year nine-month period. Consolidated net income was$9.3 million or$0.85 per diluted share, as compared to$13.6 million or$1.14 per diluted share in the prior-year nine-month period.
Management Commentary
“Despite a challenging macroeconomic environment for the home furnishings industry, we’re proud of our team for persevering through some difficult decisions and short-term pain to create a more sustainable and profitable business model for Hooker Furnishings,” said
“While the housing market slowdown driven by high interest rates, and a shift in consumer discretionary spending away from home furnishings continue to challenge, we’re encouraged by positive indicators like the normalization of ocean freight rates, eased supply chain constraints, more stable raw material costs and increased labor availability.
“Demand is improving, with consolidated orders up
“The recent Fall High Point Market was positive by all measurables across the company,” Hoff added. “Increased visibility is one of our major strategic objectives. Adding two smaller showrooms in
“As reported previously, the collective impact of our new showrooms in
Segment Reporting: Hooker Branded
- Weak home furnishings demand drove a net sales decrease in the segment of
$17.5 million or about 31%. Also contributing to the net sales decrease in the segment were short-term delays related to the implementation of a new ERP overLabor Day weekend which had an impact of approximately$3 million , which would have positioned the business down 26% for the quarter. However, Hooker Branded reported a solid operating income of$7.3 million and an operating margin of 18.6%, an improvement compared to$5.9 million and 10.3% in the prior-year quarter. - For the fiscal 2024 nine-month period, net sales decreased by
$35.2 million , or 22.8%, also due to softer demand for home furnishings. - Gross profit and margin both increased in the fiscal 2024 third quarter despite the decline in net sales. This favorable outcome was attributed to significantly decreased product costs driven by lower ocean freight rates. In addition, warehousing costs decreased due to lower demurrage and drayage expenses, as well as lower labor and compensation expenses due to reduced shipping activities.
- The higher-than-average gross profit margin of 45.6% for the quarter was temporarily elevated due to timing issues with reduced freight and product costs. While price decreases and promotions were implemented in August, the majority of inventories sold in the quarter still carried price increases implemented in a prior year, resulting in the unusually high gross margin. We expect Hooker Branded margins to normalize to historical levels in the coming quarters.
- Incoming orders increased by 7% compared to the prior year’s third quarter and this year’s second quarter. Although quarter-end order backlog was lower than the prior-year quarter-end, it increased from this year’s second quarter-end and remained nearly 70% higher than pre-pandemic levels at the end of fiscal 2020 third quarter.
Segment Reporting: Home Meridian (HMI)
- Home Meridian’s segment net sales decreased by
$6.9 million , or 13.6%, compared to the prior-year third quarter, but increased compared to the first and second quarters of the current fiscal year. Sales decreases in the e-commerce channel previously served by ACH accounted for over 40% of the overall decrease in the segment, due to our exit from the ACH line. The remaining decreases in the segment were driven by sales decreases at SLF, PRI and PFC, the divisions that serve independent furniture stores and major furniture chains. These decreases were partially offset by strong sales at Samuel Lawrence Hospitality (SLH), which reported sales increases of 152% and 46% for the third quarter and nine-month periods, respectfully. - Despite the net sales decrease, HMI gross profit and margin increased by
$3.4 million or 940 bps, in the fiscal 2024 third quarter. This increase was attributed to improved margin as we exited from the unprofitable sales channels and product lines, decreased product costs, and increased profitability at SLH. Furthermore, decreased costs in theGeorgia warehouse, and decreased wage expenses due to organizational and personnel changes, all contributed to the increase of gross profit and margin. For the fiscal 2024 nine-month period, gross profit slightly decreased driven by sales decreases, while gross margin increased by 530 bps due to the previously mentioned factors, as well as the absence of warehouse transition and start-up costs incurred in the prior year first quarter. - Home Meridian recorded a quarterly operating income of
$0.9 million compared to a$3.2 million operating loss in the prior-year third quarter. - Liquidations of inventories that were written down in the prior-year fourth quarter were essentially completed during the quarter and had immaterial impact on gross profit. Inventory levels decreased by
$15 million as compared to the year-end and$46 million compared to the prior-year third quarter. In addition, we have realigned our inventory mix to reflect our current business plan and reduced our footprint in theGeorgia warehouse by 200,000 square feet in the second quarter. We also entered into an agreement in the third quarter to reduce another 200,000 square feet by early next fiscal year. - Incoming orders were 19% higher than the prior-year third quarter, but lower than the current year first and second quarters’ orders as our retail customers are matching inventories to current soft demand for home furnishings. Quarter-end backlog was lower than the same period last year and the first and second quarters of fiscal 2024.
Segment Reporting:
- After two years of sales growth,
Domestic Upholstery net sales decreased by$10.9 million , or 25%, in the fiscal 2024 third quarter due to lower demand. All four divisions reported sales decreases for both the quarter and the nine-month period. - Gross profit and margin both decreased in the fiscal 2024 third quarter and nine-month period driven by net sales decreases. Direct material costs were 220 bps and 310 bps below prior year periods due to more stable raw material costs. However, these decreases were more than offset by under-absorbed indirect costs, which were 440 bps and 370 bps higher as compared to the prior-year third quarter and nine-month period, respectively, and consisted primarily of indirect labor costs.
- Incoming orders increased by 39% in comparison to the third quarter of the previous year, as
Bradington Young , HF Custom andShenandoah all recorded increased orders. Sunset West orders remained unchanged as compared to the prior-year third quarter. Quarter-end backlog for the segment slightly decreased from the second quarter end.Bradington-Young backlog was 2.5 times that of the pre-pandemic levels at fiscal 2020 third quarter end, while the backlogs for HF Custom andShenandoah decreased to levels comparable to fiscal 2020.
Cash, Debt, and Inventory
- Cash and cash equivalents stood at
$40 million at fiscal 2024 third quarter-end, an increase of$21 million from the prior year-end. Inventory levels decreased by$32 million from year-end and$69 million from this time a year ago. During the nine-month period,$48.8 million of cash generated from operating activities funded$11.7 million in share repurchases,$7.2 million in cash dividends to shareholders,$5.7 million in capital expenditures including investments in the new showrooms,$3.8 million for development of our cloud-based ERP system, and$2.4 million for the BOBO acquisition. - Since the share repurchase program began in the second quarter of last year, a total of
$25 million has been spent to purchase and retire 1.4 million shares of common stock. The share repurchase program was completed during the fiscal 2024 third quarter. - In addition to the cash balance, an aggregate of
$27.2 million was available under our existing revolver at quarter-end.
Capital Allocation
“Going into the end of the year, our inventory levels are aligned with current demand and our S&OP process is working well,” said
Dividends
On
Outlook
“While economic indicators remain mixed and furniture industry retail traffic is down about 15% from January through
“As mentioned earlier, current retail conditions are soft, but consolidated orders are up
“As we look to the next quarter, we see flat sales for our higher-priced Hooker Legacy brands as compared to the prior year fourth quarter. We expect that the current downturn in the furniture retail business will temporarily suppress sales growth at HMI through the fourth quarter. However, significant new retail product placements achieved by HMI recently should begin to buoy sales by the first quarter of next fiscal year as the placements generate orders and backlogs.
We believe a lot of our growth initiatives will begin to gain traction in the first half of calendar 2024. We believe that our focus on reducing costs, keeping our balance sheet strong and judiciously deploying capital, along with our investments to promote higher visibility and future growth will continue to put us in the strongest possible position to leverage a return of furniture demand to more typical levels,” Hoff concluded.
Conference Call Details
Certain statements made in this release, other than those based on historical facts, may be forward-looking statements. Forward-looking statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as “believes,” “expects,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “would,” “could” or “anticipates,” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to: (1) general economic or business conditions, both domestically and internationally, including the current macro-economic uncertainties and challenges to the retail environment for home furnishings along with instability in the financial and credit markets, in part due to inflation and rising interest rates, including their potential impact on (i) our sales and operating costs and access to financing, (ii) customers, and (iii) suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses; (2) the direct and indirect costs and time spent by our associates associated with the implementation of our Enterprise Resource Planning system (“ERP”), including costs resulting from unanticipated disruptions to our business; (3) the cyclical nature of the furniture industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers’ income available for discretionary purchases, and the availability and terms of consumer credit; (4) difficulties in forecasting demand for our imported products and raw materials used in our domestic operations; (5) risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, customs issues, freight costs, including the price and availability of shipping containers, ocean vessels, ocean and domestic trucking, and warehousing costs and the risk that a disruption in our offshore suppliers or the transportation and handling industries, including labor stoppages, strikes, or slowdowns, could adversely affect our ability to timely fill customer orders; (6) risks associated with HMI segment restructuring and cost-savings efforts, including our ability to timely dispose of excess inventories, reduce expenses and return the segment to profitability; (7) the impairment of our long-lived assets, which can result in reduced earnings and net worth; (8) adverse political acts or developments in, or affecting, the international markets from which we import products, including duties or tariffs imposed on those products by foreign governments or the
| Table I | ||||||||||||||||
| HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| For the | ||||||||||||||||
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net sales | $ | 116,831 | $ | 151,580 | $ | 336,452 | $ | 451,803 | ||||||||
| Cost of sales | 83,121 | 119,572 | 251,495 | 359,281 | ||||||||||||
| Gross profit | 33,710 | 32,008 | 84,957 | 92,522 | ||||||||||||
| Selling and administrative expenses | 24,016 | 24,712 | 70,207 | 72,255 | ||||||||||||
| Intangible asset amortization | 924 | 878 | 2,732 | 2,634 | ||||||||||||
| Operating income | 8,770 | 6,418 | 12,018 | 17,633 | ||||||||||||
| Other income, net | 659 | 191 | 1,071 | 425 | ||||||||||||
| Interest expense, net | 364 | 434 | 1,197 | 546 | ||||||||||||
| Income before income taxes | 9,065 | 6,175 | 11,892 | 17,512 | ||||||||||||
| Income tax expense | 2,027 | 1,334 | 2,620 | 3,946 | ||||||||||||
| Net income | $ | 7,038 | $ | 4,841 | $ | 9,272 | $ | 13,566 | ||||||||
| Earnings per share | ||||||||||||||||
| Basic | $ | 0.66 | $ | 0.42 | $ | 0.85 | $ | 1.16 | ||||||||
| Diluted | $ | 0.65 | $ | 0.42 | $ | 0.85 | $ | 1.14 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 10,536 | 11,465 | 10,748 | 11,736 | ||||||||||||
| Diluted | 10,676 | 11,525 | 10,878 | 11,838 | ||||||||||||
| Cash dividends declared per share | $ | 0.22 | $ | 0.20 | $ | 0.66 | $ | 0.60 | ||||||||
| Table II | ||||||||||||||||
| HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| For the | ||||||||||||||||
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income | $ | 7,038 | $ | 4,841 | $ | 9,272 | $ | 13,566 | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Amortization of actuarial (gain)/loss | (70 | ) | 21 | (209 | ) | 62 | ||||||||||
| Income tax effect on amortization | 17 | (5 | ) | 50 | (15 | ) | ||||||||||
| Adjustments to net periodic benefit cost | (53 | ) | 16 | (159 | ) | 47 | ||||||||||
| Total comprehensive income | $ | 6,985 | $ | 4,857 | $ | 9,113 | $ | 13,613 | ||||||||
| Table III | ||||||||
| HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands) | ||||||||
| As of | ||||||||
| 2023 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 39,795 | $ | 19,002 | ||||
| Trade accounts receivable, net | 59,065 | 62,129 | ||||||
| Inventories | 65,156 | 96,675 | ||||||
| Income tax recoverable | 3,073 | 3,079 | ||||||
| Prepaid expenses and other current assets | 5,934 | 6,418 | ||||||
| Total current assets | 173,023 | 187,303 | ||||||
| Property, plant and equipment, net | 29,079 | 27,010 | ||||||
| Cash surrender value of life insurance policies | 28,264 | 27,576 | ||||||
| Deferred taxes | 11,959 | 14,484 | ||||||
| Operating leases right-of-use assets | 54,202 | 68,949 | ||||||
| Intangible assets, net | 29,547 | 31,779 | ||||||
| 15,036 | 14,952 | |||||||
| Other assets | 13,388 | 9,663 | ||||||
| Total non-current assets | 181,475 | 194,413 | ||||||
| Total assets | $ | 354,498 | $ | 381,716 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities | ||||||||
| Current portion of long-term debt | $ | 1,393 | $ | 1,393 | ||||
| Trade accounts payable | 23,294 | 16,090 | ||||||
| Accrued salaries, wages and benefits | 6,716 | 9,290 | ||||||
| Customer deposits | 5,033 | 8,511 | ||||||
| Current portion of lease liabilities | 7,045 | 7,316 | ||||||
| Other accrued expenses | 3,135 | 7,438 | ||||||
| Total current liabilities | 46,616 | 50,038 | ||||||
| Long term debt | 21,829 | 22,874 | ||||||
| Deferred compensation | 7,737 | 8,178 | ||||||
| Operating lease liabilities | 49,651 | 63,762 | ||||||
| Other long-term liabilities | 877 | 843 | ||||||
| Total long-term liabilities | 80,094 | 95,657 | ||||||
| Total liabilities | 126,710 | 145,695 | ||||||
| Shareholders' equity | ||||||||
| Common stock, no par value, 20,000 shares authorized, | ||||||||
| 10,672 and 11,197 shares issued and outstanding on each date | 49,503 | 50,770 | ||||||
| Retained earnings | 177,579 | 184,386 | ||||||
| Accumulated other comprehensive income | 706 | 865 | ||||||
| Total shareholders' equity | 227,788 | 236,021 | ||||||
| Total liabilities and shareholders' equity | $ | 354,498 | $ | 381,716 | ||||
| Table IV | ||||||||
| HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| For the | ||||||||
| Thirty-Nine Weeks Ended | ||||||||
| 2023 | 2022 | |||||||
| Operating Activities: | ||||||||
| Net income | $ | 9,272 | $ | 13,566 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by/(used in) operating activities: | ||||||||
| Depreciation and amortization | 6,626 | 6,578 | ||||||
| Deferred income tax expense | 2,575 | 1,650 | ||||||
| Noncash restricted stock and performance awards | 1,685 | 1,323 | ||||||
| Provision for doubtful accounts and sales allowances | (270 | ) | (3,831 | ) | ||||
| Gain on life insurance policies | (784 | ) | (744 | ) | ||||
| Loss on sales of assets | 29 | - | ||||||
| Changes in assets and liabilities: | ||||||||
| Trade accounts receivable | 3,334 | 3,069 | ||||||
| Inventories | 33,264 | (56,343 | ) | |||||
| Income tax recoverable | 5 | 2,357 | ||||||
| Prepaid expenses and other assets | (3,400 | ) | (5,863 | ) | ||||
| Trade accounts payable | 7,169 | (1,522 | ) | |||||
| Accrued salaries, wages, and benefits | (2,574 | ) | 936 | |||||
| Customer deposits | (3,477 | ) | (1,277 | ) | ||||
| Operating lease assets and liabilities | 366 | (238 | ) | |||||
| Other accrued expenses | (4,400 | ) | (391 | ) | ||||
| Deferred compensation | (650 | ) | (419 | ) | ||||
| Net cash provided by/(used in) operating activities | $ | 48,770 | $ | (41,149 | ) | |||
| Investing Activities: | ||||||||
| Acquisitions | (2,373 | ) | (25,912 | ) | ||||
| Purchases of property and equipment | (5,718 | ) | (3,469 | ) | ||||
| Premiums paid on life insurance policies | (378 | ) | (464 | ) | ||||
| Proceeds of life insurance policies | 444 | - | ||||||
| Net cash used in investing activities | (8,025 | ) | (29,845 | ) | ||||
| Financing Activities: | ||||||||
| Purchase and retirement of common stock | (11,674 | ) | (9,359 | ) | ||||
| Cash dividends paid | (7,228 | ) | (7,117 | ) | ||||
| Payments for long-term loans | (1,050 | ) | (350 | ) | ||||
| Proceeds from long-term loans | - | 25,000 | ||||||
| Proceeds from revolving credit facility | - | 36,190 | ||||||
| Payments for revolving credit facility | - | (36,190 | ) | |||||
| Debt issuance cost | - | (38 | ) | |||||
| Net cash (used in)/provided by financing activities | (19,952 | ) | 8,136 | |||||
| Net increase/(decrease) in cash and cash equivalents | 20,793 | (62,858 | ) | |||||
| Cash and cash equivalents - beginning of year | 19,002 | 69,366 | ||||||
| Cash and cash equivalents - end of quarter | $ | 39,795 | $ | 6,508 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid/(refund) for income taxes | $ | 74 | $ | (1 | ) | |||
| Cash paid for interest, net | 1,375 | 293 | ||||||
| Non-cash transactions: | ||||||||
| (Decrease)/Increase in lease liabilities arising from changes in right-of-use assets | $ | (8,987 | ) | $ | 7,402 | |||
| Increase in property and equipment through accrued purchases | 35 | 112 | ||||||
| Table V | ||||||||||||||||||||
| HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
| NET SALES AND OPERATING INCOME/(LOSS) BY SEGMENT | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||
| % Net | % Net | % Net | % Net | |||||||||||||||||
| Net sales | Sales | Sales | Sales | Sales | ||||||||||||||||
| Hooker Branded | $ | 39,122 | 33.5% | $ | 56,632 | 37.4% | $ | 118,936 | 35.4% | $ | 154,133 | 34.1% | ||||||||
| Home Meridian | 43,692 | 37.4% | 50,588 | 33.4% | 114,524 | 34.0% | 171,721 | 38.0% | ||||||||||||
| 32,559 | 27.9% | 43,436 | 28.7% | 98,555 | 29.3% | 122,982 | 27.2% | |||||||||||||
| All Other | 1,458 | 1.2% | 924 | 0.5% | 4,437 | 1.3% | 2,967 | 0.7% | ||||||||||||
| Consolidated | $ | 116,831 | 100% | $ | 151,580 | 100% | $ | 336,452 | 100% | $ | 451,803 | 100% | ||||||||
| Operating income/(loss) | ||||||||||||||||||||
| Hooker Branded | $ | 7,287 | 18.6% | $ | 5,860 | 10.3% | $ | 13,298 | 11.2% | $ | 16,423 | 10.7% | ||||||||
| Home Meridian | 923 | 2.1% | (3,205 | ) | -6.3% | (4,532 | ) | -4.0% | (7,290 | ) | -4.2% | |||||||||
| 688 | 2.1% | 3,823 | 8.8% | 2,739 | 2.8% | 8,288 | 6.7% | |||||||||||||
| All Other | (128 | ) | -8.8% | (60 | ) | -6.5% | 513 | 11.6% | 212 | 7.1% | ||||||||||
| Consolidated | $ | 8,770 | 7.5% | $ | 6,418 | 4.2% | $ | 12,018 | 3.6% | $ | 17,633 | 3.9% | ||||||||
For more information, contact:
2023 GlobeNewswire, Inc., source
