by Hooker Furnishings division’s transition from the unprofitable club channel segment is starting to show results
MARTINSVILLE, Va. —As many in the industry know, the pandemic was particularly harsh for importers like Home Meridian International, part of the Hooker Furnishings group of companies.
Issues from Covid-related shutdowns at Asian factories, to high container costs and scarce container availability, affected both product flow and costs, which ultimately translates into sales and earnings.
But this past quarter the company once again is showing signs of strength and resilience. Based on Hooker’s Q3 results for the fiscal quarter ended Oct. 30, the HMI segment reported a 9.4% increase in net sales compared to the prior year third quarter when factory-related lockdowns in Vietnam and Malaysia impacted its container-direct business.
It experienced an operating loss of $3.2 million, but this was due primarily to deflated sales from delayed shipments and higher than expected “transition and labor costs” related to the company’s new Georgia distribution center. But this also was a $7 million improvement compared to its operating loss the same period last year.
HMI’s nine-month results — down 21% from $218 million last fiscal year to $171.7 million — also reflect the company’s exit last year from the club channel segment along with decreased e-commerce sales the company said was due to the normalization of post-Covid consumer demand.
But as the company has said previously, the goal for the segment isn’t necessarily to achieve the same level of sales in the future, but rather to achieve profitability. And so far, the company appears to be heading in the right direction, particularly in the dramatic narrowing of its Q3 loss.
“Year-over-year profitability gains for the quarter were driven by sales growth and successful mitigation of supply chain bottlenecks that have impacted us over the last two years,” said Jeremy Hoff, chief executive officer, in the company’s conference call with analysts. “Improving our operational costs and exiting unprofitable businesses at HMI are beginning to show up in our margins and will continue to help improve profitability.”
While he acknowledged that larger economic challenges remain, such as rising interest rates, declining home sales and faltering consumer confidence, he pointed to other positives such as its best-attended Market since the pandemic, which “gave us a real momentum boost” as it exceeded October 2019 attendance by 12%.
“We found retailers to be upbeat and receptive to new products they now can expect to receive within several months of order for the first time in a couple of years.”
He added that Home Meridian’s newly remodeled 100,000-square-foot showroom — which included 10,000 square feet devoted to its new Portfolio whole home program across the HMI brands that is stocked in its Savannah warehouse — also was a hit with dealers.
“Portfolio’s launch was a first successful step in expanding HMI’s customer base to include interior designers and a greater number of independent furniture retailers,” he said.
Note also that the company’s move to Showplace next spring is expected to generate interest and high attendance from the industry at large, including retailers and designers alike who are eager to see the presentation.
Time will tell how the strategy impacts the numbers, notably profitability in the segment. But the quarters ahead will be worth watching as the company has long-identified — and abandoned — certain areas of the business in pursuit of potentially more profitable channels of distribution.
Obviously, the company needs to help its increasingly diverse base of customers succeed and make money. But it also can’t do so at the expense of its own profitability and success. If that happens, no one really wins.
