MARTINSVILLE, Va. — Hooker Furnishings Corporation, a leader in the design, production, and marketing of home furnishings for 100 years, reported that its fiscal 2025 third quarter operating results were down for the quarter for the period beginning July 29 and ending October 27, 2024.

Fiscal overview
Hooker, which is an FDMC 300 listed company of top North American wood products companies, said that its third-quarter results 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 reinforces 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 months 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.

“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.”

Segment Reporting: Hooker Branded
The Hooker Branded segment net sales decreased by $4.2 million, or 10.7%, in the third quarter of fiscal 2025 versus the prior year period due primarily to lower average selling prices. While the gross revenue in this segment decreased by 6.7% compared to the previous year’s third quarter, discounts increased by 390 bps, primarily due to higher discounting on excess inventories to re-balance inventory mix and levels. Unit volume decreased by a modest 2.1% compared to the prior year’s third quarter but exceeded the first and second quarters of this fiscal year.

For the quarter, the segment reported an operating loss of $1.7 million, on historically low third quarter net sales. The result included approximately $1.0 million in severance charges related to the company’s previously announced cost reduction plan.

Incoming orders decreased by 13.3% year-over-year. The quarter-end order backlog was 30% lower than at the end of the prior year’s third quarter but remained 18% higher than pre-pandemic levels at the end of the fiscal 2020 third quarter.

For the nine-month period, net sales decreased by $13.9 million, or 11.7%, also due to 5.9% lower average selling prices resulting from the price reductions implemented in the previous year in response to reduced ocean freight costs. Unit volume was essentially flat, decreasing by about 1% compared to the prior year nine-month period.

Segment Reporting: Home Meridian (HMI)
The Home Meridian segment’s net sales decreased by $5.1 million, or 11.8%, in the third quarter of fiscal 2025 versus the prior year period due to reduced unit volume. Over 40% of the sales decrease was attributable to the loss of a major customer following its bankruptcy. Sales through major furniture chains and independent furniture stores decreased, though these decreases were partially offset by an 8% increase in sales within the hospitality business, marking two consecutive quarters of higher revenues. Incoming orders increased by 8.1% compared to the previous year’s third quarter, while decreasing modestly by 2.9% for the nine-month period, despite the absence of orders from the discontinued ACH product line and the loss of the same customer. The quarter-end backlog was 32.2% higher than the prior year’s third quarter end.

“Our strategic focus to support sustained profitability through restructuring Home Meridian’s business is yielding meaningful results, including significantly reduced allowances, improved product margins, and lower fixed costs across nearly all areas of this segment. We are encouraged that Home Meridian achieved a gross margin of 20.5% in the fiscal 2025 third quarter despite decreased net sales, its highest level since the acquisition in 2016.”

For the quarter, the segment reported an operating loss of $3.7 million, driven by a total of $4.6 million in charges, including the $2.4 million in bad debt charges due to the previously mentioned customer bankruptcy, $2.0 million in non-cash intangible asset impairment charges, and $233,000 in severance charges related to the company’s previously announced cost reduction plan.

For the nine-month period, net sales decreased by $19 million, or 16.6%, largely due to the absence of $11 million in ACH liquidation sales, which accounted for approximately 60% of the sales decrease and 75% of the unit volume decrease. Sales decreased in nearly all channels during the period, except for hospitality business, which experienced a 23% increase.

Segment Reporting: Domestic Upholstery
Domestic Upholstery segment net sales decreased by $3.2 million, or 9.9%, compared to the prior year third quarter, due to decreased sales at Shenandoah, Bradington-Young and HF Custom, attributed to persistent low demand. This decrease was partially offset by a 9.1% increase in sales at Sunset West, which has delivered year-over-year quarterly sales growth for three consecutive quarters this fiscal year. Gross profit decreased due to lower net sales, but the gross margin remained stable. For the quarter, the segment reported an operating loss of $281,000, a sequential improvement versus $1.3 million in operating losses recorded in each of the fiscal 2025 first and second quarters. The current quarter’s operating loss included approximately $560,000 in severance charges related to the company’s previously announced cost reduction plan.

Incoming orders decreased by 4.8% during the quarter, and the quarter-end backlog was 29.9% lower than at the end of the prior year’s third quarter. Excluding Sunset West, the order backlog remained consistent with pre-pandemic levels at the end of the fiscal 2020 third quarter.

For the nine-month period, net sales decreased by $10.6 million, or 10.8%, also due to decreased sales at Bradington-Young, Shenandoah, and HF Custom, partially offset by a 10.1% increase in Sunset West net sales.

Outlook
“Over the last few months, the key economic indicators that impact furniture sales have been trending positively,” said Hoff.

Interest rates, which drive home mortgage rates, were cut by the Federal Reserve in September and November.
Since summer, inflation has been cooling to levels closer to the Federal Reserve’s 2% target: at 2.9% in July, 2.5% in August, 2.4% in September and 2.6% in October.

In November, a leading real estate industry group stated its belief that the worst of the housing inventory shortage is ending and forecast an approximate 10% increase in home sales for 2025, with mortgage rates stabilizing around 6%.
Consumer sentiment rose in November to 71.8, its highest level since April, and the stock market continues near all-time highs.

“While the macro-economic outlook is improving, our team will continue to focus on the controllables and improvements already underway at Hooker Furnishings,” Hoff said. “Our balance sheet, financial condition and seasoned management team should well equip us to navigate any remaining challenges as we focus on maximizing efficiencies with the cost reductions while simultaneously investing in expansion strategies that will position us for revenue and profitability growth when demand fully returns,” he said.