Hooker Furnishings posts double-digit income gains in third quarter

The Charleston is a whole home collection from Hooker Furnishings that the company said embodies the area's classic traditional charm, coastal retreat, and refreshed English heritage.

Photo By Hooker Furnishings

MARTINSVILLE, Va. — Hooker Furnishings Corporation, a global leader in the design, production, and marketing of home furnishings for nearly a century, reported operating results that showed that while sales were down, net income was up by more than 45% for the third quarter ended October 29, 2023.

Hooker Furnishings is an FDMC 300 company, ranking #27 on the list. According to the recently released third quarter and nine month results, 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.
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Dspite 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 Jeremy Hoff, chief executive officer. “After spending considerable time repositioning HMI to focus on its core products and businesses, it is encouraging to see HMI report a quarterly profit for the first time in two years and contribute to our overall profitability. Liquidating excess inventories, rightsizing our overhead and exiting unprofitable businesses have put us in a much stronger overall position,” Hoff said. “Ongoing execution of our strategic growth initiatives is our main focus,’ he continued.

“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 $12.7 million, or 15.7%, for the third quarter versus the prior year period. For the first nine months, consolidated orders increased by $75.8 million or 33.5%,” he said. “Most of the consolidated increase is driven by Home Meridian segment orders which were unusually low in both prior year periods.”

Outlook

“While economic indicators remain mixed and furniture industry retail traffic is down about 15% from January through October 2023, we believe the long-term economic outlook has improved which bodes well for Hooker and the industry,” said Hoff. “Reduced housing activity and high mortgage interest rates are still challenging, but several positives have emerged since last quarter. Core inflation is at the lowest level since 2021, the US economy grew nearly 5% last quarter, unemployment remains at record lows and a recession appears less likely.

“As mentioned earlier, current retail conditions are soft, but consolidated orders are up $12.7 million, or 15.7% for the third quarter. For the first nine months, consolidated orders increased by $75.8 million or 33.5%,” Hoff said.

“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.

 

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Larry Adams | Editor

Larry Adams is a Chicago-based writer and editor who writes about how things get done. A former wire service and community newspaper reporter, Larry is an award-winning writer with more than three decades of experience. In addition to writing about woodworking, he has covered science, metrology, metalworking, industrial design, quality control, imaging, Swiss and micromanufacturing . He was previously a Tabbie Award winner for his coverage of nano-based coatings technology for the automotive industry. Larry volunteers for the historic preservation group, the Kalo Foundation/Ianelli Studios, and the science-based group, Chicago Council on Science and Technology (C2ST).