MARTINSVILLE, Va. -- Freight costs tripled, factories were shuttered by COVID, and component prices were inflated. Still, buoyed by sales from its branded and domestic upholstery segments, Hooker Furnishings Corp. reported net sales increases of 9.9%.

The company, which ranked 23 in the FDMC 300 2022 ranking, reported net sales of $593.6 million for its 2022 fiscal year ended January 30, 2022, a $53.5 million, increase compared to a year ago.

The revenue gain was driven by sales increases of over 20% in both the Hooker Branded and Domestic Upholstery segments compared to the prior year. These gains were partially offset by a 1.2% sales decrease in the Home Meridian segment.

Sales increased despite global logistic challenges and COVID-related closures at its Asian factories, said Jeremy Hoff, chief executive officer. He said that the company was impacted by soaring ocean freight costs and shipping bottlenecks throughout the year, material and component parts inflation, and staffing and foam shortages.

“We successfully mitigated a multitude of macroeconomic challenges for much of the year on the Hooker legacy side of the business and the first half at Home Meridian. We were able to grow sales, remain profitable and undertake transformative strategic initiatives for the long-term expansion of the business,” said Hoff. 

This was particularly true, he said, during the first half of the year when all segments achieved double-digit sales increases and the company was still able to “meet historical levels of demand with the right products and inventory readiness.”

“HMI was more quickly and severely impacted by rising freight costs, reduced vessel space, and the COVID-related factory shutdowns which began in August,” Hoff said.

“Over the course of the last 18 months, transportation costs have roughly tripled, substantially increasing our cost of imported goods sold,” Hoff said.

“We were able to mitigate many of these dynamics until late summer when the unexpected COVID-related shutdown of our Asian factories began and continued through most of the rest of the fiscal year,” Hoff said. “While incoming orders and backlogs remained historically high, this loss of production capacity substantially reduced our supply of imported products, which impacted Home Meridian immediately and even began to cause out of stock issues and low inventory receipts at Hooker Branded in the 4th quarter, despite that segment’s US warehousing model,” he said.

As a result, the Company reported a 13.2% consolidated sales decreased in the fourth quarter that began on November 1, 2021 and ended on January 30, 2022. Fourth-quarter consolidated sales were $134.8 million, with the decline driven by a 23.7%, or $18.9 million, revenue decrease at HMI and an 11.8%, or $5.8 million, sales decline at Hooker Branded. These lower sales were slightly offset by a $3.2 million or 13.5%, increase in Domestic Upholstery sales during the fourth quarter.

Over the last few months, our Asian suppliers have begun to ramp up production again and are “currently operating at around 85% to 90% capacity and improving weekly,” Hoff said, adding that “While we anticipate that production of imported goods will reach 100% capacity sometime during the first quarter of fiscal 2023, as we forecasted last quarter, we won’t feel the full impact of higher production until the second quarter.”

Also in the 2022 fourth quarter, the Company reported a consolidated operating loss of $5.3 million, compared to $10.5 million of operating income in the prior-year period. Net loss for the fourth quarter of fiscal 2022 was $4.0 million, as compared to a net income of $8.5 million, in the fourth quarter of fiscal 2021.

Future looks bright

“Incoming orders and backlogs continue to be strong in most divisions,” said Hoff. “We are concerned about ongoing global logistics constraints and economic headwinds affecting the consumer that could impact short-term demand, such as inflation, high gas prices, and the war in Ukraine.

Hoff expects the production capacity of its Asian suppliers to improve significantly, reaching 100% capacity at some point during the first quarter, although the full financial impact of this improvement in inventory readiness won’t be felt until the second quarter. 

“We remain optimistic that long-term trends will continue to benefit us, such as demand for housing, the renewed and sustainable focus on home interiors and exteriors, and the Millennial generation entering their prime earning and household formation years,” said Hoff. “We were also very encouraged by the recently concluded Spring High Point market. Attendance was up significantly compared to both the Fall 2021 and June 2021 markets, more in line with pre-pandemic levels. New products were very well received with major placements across all brands, including new placements of Home Meridian’s licensed products.”

While we have worked through a broad spectrum of challenges during the past year, our team has continued to focus on multiple strategic growth initiatives, many of which we expect will positively impact us in the next 6 to 12 months,” Hoff said. “One such initiative is the integration of Sunset West, a leading manufacturer of outdoor furniture, which we acquired on February 1st of this year.