MARTINSVILLE, VA Dec. 6, 2011 -- Hooker Furniture (Nasdaq:HOFT) today reported net sales of $54.2 million and net income of $2.3 million, or $0.21 per share, for its fiscal 2012 third quarter which began on August 1, 2011 and ended October 30, 2011.
Compared to the same period a year ago, fiscal 2012 third quarter:
net income increased by $1.1 million,
earnings per share increased from $0.11 per share to $0.21 per share, and
operating profitability increased by two hundred basis points to $2.7 million, or 5% of net sales, (compared to operating income of $1.7 million or 3% of net sales in the third quarter a year ago).
Compared to last year, fiscal 2012 third quarter net sales decreased $1.6 million, or 2.8%, to $54.2 million from $55.7 million in the corresponding fiscal 2011 third quarter. The sales dip was driven by softened consumer demand, lower unit volume and higher product discounting, partially offset by higher average selling prices due to the mix of products shipped.
For the first nine months of the 2012 fiscal year, which began on January 31, 2011, net sales increased $7.7 million, or 4.8%, to $168.1 million compared to $160.5 million for the same period a year ago. The Company reported higher net income for the fiscal 2012 first nine months of $4.4 million, or $0.41 per share, compared with net income of $3.4 million, or $0.32 per share, in the fiscal 2011 nine-month period.
"While we're disappointed we weren't able to post positive year-over-year sales growth for the quarter, we're pleased to have nearly doubled quarterly net income from a year ago and to have achieved the best overall profitability performance in the last seven quarters, despite the slight sales dip," said Paul B. Toms Jr., chairman and chief executive officer.
Gross profit increased $462,000 to $12.7 million, or 23.5% of net sales, in the fiscal 2012 third quarter, compared to $12.3 million, or 22.0% of net sales in the same period a year ago. Gross margin for the wood furniture division increased to 28.2% of net sales from 25.9% in last year's third quarter, primarily due to lower freight costs for imported furniture, partially offset by increased discounting due to a continued effort to reduce overstocked inventory. Gross margins for upholstered furniture were essentially flat at approximately 14.5% in both the 2012 and 2011 fiscal third quarters, primarily due to cost reduction efforts and higher average fabric upholstery selling prices implemented over the past twelve months, offset by increased raw material costs, the effect of reduced volume on overhead absorption and a casualty loss expense of $181,000 ($113,000, or $0.01 per share, after tax) related to a sprinkler malfunction at one of our warehouses during the third quarter.
"Hooker Furniture is a more efficient organization today than in the past several years, which contributed to our improved profit margins," said Toms. "We've done a good job of bringing down selling and administration expenses and other costs we can control."
Selling and administrative expenses decreased both as a percentage of sales and in absolute terms compared to both fiscal 2011 periods. For the fiscal year 2012 third quarter, selling and administrative expenses were 18.5% of net sales, or $10.0 million, as compared to 19.0% of net sales, or $10.6 million, for the same period a year ago. The decrease in spending was primarily due to:
decreased salaries and other employee-related costs, due to realignments in our officer group;
lower advertising supplies and sample expenses due to cost cutting measures;
lower contributions expense, due to decreased donations of second-quality inventory;
lower bad debts expense, due to adjustments in our accounts receivable reserves to reflect favorable collection trends; and
lower depreciation and amortization expense, primarily due to decreased information systems spending on our legacy systems in anticipation of our current Enterprise Resource Planning (ERP) project.
These decreases in selling and administrative expenses were partially offset by higher sales commissions, higher ERP-related expenses and by a $233,000 ($145,000, or $0.01 per share, after tax) charge to write down leasehold improvements related to relocating and consolidating our showroom space at our High Point, NC showroom.
"We continue to proactively invest in our business, with two of the most notable examples being our ongoing ERP project and our investment in a new consolidated and renovated showroom which will open at the April 2012 High Point Market," said Toms. "We are now about two years into the ERP project to integrate and improve our operating systems, and expect to go live in case goods early next year with upholstery coming on line soon after. We are excited about the new showroom, which will create an exceptional presentation environment for our brands."
Operating profitability for the fiscal 2012 third quarter increased two hundred basis points compared to the fiscal 2011 third quarter. This increase primarily reflects improved gross margins and lower selling and administrative expenses. As a result, the Company realized operating income for the fiscal year 2012 third quarter of $2.7 million, or 5% of net sales, compared to operating income of $1.7 million, or 3% of net sales, in the fiscal year 2011 third quarter.
For the first nine-months of fiscal 2012, the Company's operating income increased to $5.9 million, or 3.5% of net sales, compared to operating income of $4.9 million, or 3.1% of net sales, in the first nine months of fiscal 2011.
The Company reported net income for the 2012 first nine months of $4.4 million, or $0.41 per share, compared with net income of $3.4 million, or $0.32 per share, in the fiscal 2011 nine-month period. Fiscal year 2011 first nine-month's results included a $500,000 charge ($312,000, or $0.03 per share, after tax), representing the Company's insurance deductible for a fire at one of its distribution facilities during the fiscal 2011 first quarter.
Cash, Inventory and Debt
Cash and cash equivalents increased $16.1 million to $32.7 million as of October 30, 2011 from $16.6 million on January 30, 2011, due principally to decreased inventories and accounts receivable, partially offset by increases in prepaid expenses and decreased accounts payable.
"We've continued to reduce inventories and are now close to our target range," Toms said. "As we have streamlined inventories, we've been able to maintain service levels and are over 95% in-stock on the best-selling items that drive our business."
The Company had no long-term debt at October 31, 2011. At quarter-end, it had $13.2 million available on its revolving line of credit and $15.8 million available to borrow on the cash surrender value of company-owned life insurance policies.
"Although consumer demand softened noticeably beginning in April through late September, we've seen an improvement in incoming orders over the last 60 days," said Toms. "Some of our well-received products from the Spring 2011 High Point Market are now hitting retail floors and should favorably impact our sales during our fiscal fourth quarter and beyond. There are still a number of uncertainties in the economy that we believe are deflating consumer confidence such as lingering high unemployment, a volatile stock market, the depressed housing market and the government's inability to get the federal deficit under control. While we're not bullish about the overall economy in the near term, we are bullish about our opportunity to further improve profitability and our competitive position in the industry."
On August 22, 2011, the Company announced that the Board of Directors promoted Alan Cole to President of the Corporation and Michael Delgatti to President of Hooker Upholstery. "We're very pleased to have Alan's involvement in the casegoods business and believe his focus on sales and marketing will give us more synergy between all of our operating divisions," Toms said. "Michael's promotion will better leverage his talents and expose him to more responsibility."
At its December 6, 2011 meeting, The Company's board of directors declared a quarterly cash dividend of $0.10 per share, payable on February 24, 2012 to shareholders of record at February 10, 2012.
Ranked among the nation's top 10 largest publicly traded furniture sources based on 2010 shipments to U.S. retailers, Hooker Furniture Corporation is an 88-year old residential wood, metal and upholstered furniture resource. Major wood furniture product categories include home entertainment, home office, accent, dining, and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand, and sold at moderate price points under the Envision Lifestyle Collections by Hooker Furniture brand. Youth bedroom furniture is sold under the Opus Designs by Hooker Furniture brand. Hooker's residential upholstered seating companies include Hickory, N.C.-based Bradington-Young LLC, a specialist in upscale motion and stationary leather furniture, and Bedford, Va.-based Sam Moore Furniture LLC, a specialist in upscale fabric occasional chairs with an emphasis on cover-to-frame customization. Please visit our websites at www.hookerfurniture.com, www.envisionfurniture.com, www.bradington-young.com, www.sammoore.com and www.opusdesigns.com.
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