by Soft retail demand, exit of unprofitable HMI product lines impacts sales, but company also reports strong cash position, increased profitability due to reductions in inventory
MARTINSVILLE, Va. — Hooker Furnishings reported a 26.3% decline in quarterly sales and a 25.7% decline in sales for the full fiscal year ended Jan. 28.
Sales for the quarter totaled $96.8 million, down from $131.3 million for the same quarterly period the year prior. For the full year, sales totaled $433.2 million, compared to $583.1 million the year before.
The company said that the decline in consolidated net sales for the full year were driven by both industrywide weak demand and the exit of unprofitable product lines in its Home Meridian segment to the tune of a $21 million decline in revenues. The company also attributed the quarterly decline to soft demand for home furnishings.
Net income for the quarter totaled $593,000, or 6 cents per share, compared to a loss of $17.9 million, or $1.60 per share last year. For the full year, net income was $9.9 million, or 91 cents per share, compared to a loss of $4.3 million, or 37 cents per share the year prior.
The company also said that operating profitability increased by $18.4 million compared to an operating loss of $6 million last year and that its overall financial position and balance sheet were strengthened with a $24.2 million increase in cash to more than $43 million by year end. The company also said it achieved a 36% or $35 million reduction in inventories that aligned with demand, which included the liquidation of HMI’s obsolete product mix.
“We’re proud of our team’s accomplishments and discipline during a challenging year, as we successfully restructured our HMI business model, improved profitability and strengthened our balance sheet,” said Jeremy Hoff, chief executive officer. “At the same time, we reinforced belief in our strategic growth initiatives by continuing to make the necessary investments to fuel long-term growth and sustainability.”
“Fiscal 2024 marked the third full fiscal year since the initial Covid crisis and was a pivotal year for us,” Hoff added. “Since 2020, we have navigated through some of the most volatile macroeconomic conditions of our 100-year history: the severe initial downturn of the pandemic followed by a demand surge for home furnishings, supply chain disruptions, inventory unavailability, historically high ocean freight costs, significant inflation, higher interest rates, a sluggish housing market and a temporary shift in discretionary spending away from home furnishings. Against the backdrop of these disruptions and recent weak industrywide demand, we’ve strengthened our financial position, made strategic investments to expand our addressable market and continued our over 50-year history of dividend payments, including our eighth consecutive annual dividend increase.”
By segment, the company reported the following results:
The Hooker Branded segment saw net sales decrease 24% or $49.3 million, from $205.9 million to $156.6 million. The company said that this was largely because of decreased sales resulting from soft demand for home furnishings. It added that the drop was further amplified by strong sales in the prior year driven by a surge in demand following Covid and the fulfillment of historically higher order backlog carried over from FY 2022.
The company added that despite the sales decrease, its gross margins in the segment rose because of a mix of reduced ocean freight costs and the lingering impact of price increases implemented during the prior year. Its operating income for the year was $16.8 million, or 10.8% of sales, compared to $22 million, or 10.7% of sales the year prior.
For the quarter, the company said that net sales fell 27.3%, or by $14.1 million, to $37.7 million from $51.8 million. It noted while incoming orders were flat compared to the prior year’s fourth quarter, its backlog was 25% lower than the prior year end, but 40% higher than the fiscal 2020 year end.
Operating income in the segment was $3.6 million, or $9.4% of sales, compared to $5.6 million, or 10.8% of sales, the same period last year.
In its Home Meridian segment, net sales fell 33.7%, or by $72.8 million during the year, to $143.5 million from $216.3 million, again because of soft demand for home furnishings, which the company said resulted in reduced sales across all channels, including traditional brick-and-mortar stores, mass merchants and e-commerce.
The exit of unprofitable business, it said, represented about 26% of the sales decrease. However, its Samuel Lawrence division had a 38% increase in sales because of a strong rebound in the hospitality market.
The segment also experienced an operating loss of $5.5 million for the year, which was down significantly from the $37.2 million operating loss during the prior year.
However, its gross profit for the year was $24.4 million, compared to a loss of $2.6 million the prior year. The company said this was because of the absence of the $24.4 million write-down of excess inventories.
“We made significant progress in restructuring HMI to focus on its core businesses and product lines, allowing the segment to achieve profitability in the third quarter for the first time since calendar year 2021 and to improve fiscal year gross profit, setting it on what we believe is a path of sustained profitability,” Hoff said.
For the quarter, HMI had sales of $29 million, compared to $44.6 million the same period last year and an operating loss of $997,000, which was down significantly from the loss of $29.9 million the same period last year.
In the Domestic Upholstery segment, the company said that full-year net sales decreased 19.1%, or $29.9 million, to $126.8 million from $156.7 million. With all four divisions in the segment reporting sales decreases driven by reduced demand, the company said that the full-year results also compared to all-time record sales achieved in the segment the prior fiscal year because of the fulfillment of historically high order backlogs.
The segment reported $1.1 million in operating profit compared to $8.9 million the prior year.
For the quarter, the segment reported $28.3 million in sales, compared to $33.7 million in the same period a year earlier, a 16% decrease.
For the quarter, it also reported an operating loss of $1.6 million, compared to a gain of $583,000 in operating income the same period the year prior.
The company also noted that incoming orders increased across all four upholstery divisions in FY 2024 and that the year-end backlog was 36% lower than the prior year end. The upholstery backlog also was 7% higher than the fiscal 2020 year end, which excluded Sunset West, which the company acquired on the first day of its 2023 fiscal year, in calendar year 2022.
“As we celebrate our 100th year in business, the adaptability that’s been integral to our culture since 1924 continues to be vital to our success today and will drive us forward as we start our next century,” Hoff concluded. “As part of that adaptability, Hooker was pleased to welcome Caroline Hipple as chief creative officer last week. An industry veteran with more than 45 years of retail, sales, marketing and creative merchandising experience, Caroline joins the company most recently from Norwalk Furniture, where she served as president for eight years. Under her leadership, Norwalk experienced significant growth. She’ll lead Hooker’s existing team of very talented merchandisers and designers in repositioning our legacy brands, including newly acquired Sunset West and Bobo Intriguing Objects, to deliver a more integrated and aspirational presentation in their approach to the market. We believe this move will position Hooker as a whole-home, consumer-centric resource to its customers and ultimately drive increased sales and earnings when demand returns.”
