by Company remains profitable in most segments, narrows operating loss in Home Meridian division
MARTINSVILLE, Va. — A slow retail environment combined with its recent exit from the Accentrics Home brand contributed to a drop in consolidated net sales and income during Hooker Furnishings’ first fiscal 2024 quarter ended April 30.
The company reported consolidated net sales of $121.8 million, a 17.3% decrease from the $147.3 million reported the same period last year.
Its consolidated net income totaled $1.5 million, or 13 cents per share, compared to $3.2 million, or 26 cents per share last year. Consolidated operating income was $2 million, compared to $3.9 million the same period last year.
Inventory levels also decreased by $23 million during the quarter, which the company said puts it on track to reduce inventories by $30 million before the end of its fiscal year.
“Considering the softer retail environment, economic uncertainties and our recent exit from the Accentrics Home line, we’re pleased to have exceeded internal and external expectations for sales and earnings this quarter,” said Jeremy Hoff, chief executive officer and director of Hooker Furnishings. “Our liquidation of ACH inventories and other obsolete inventories at HMI is about 80% complete as of May end, which is helping us reduce our domestic warehousing footprint and make progress towards getting profitability back on track at HMI. We generated $22.4 million in cash during the quarter, and we are continuing to build cash currently as we further reduce inventories. Recent cash levels have increased by about $15 million since the end of our first quarter.”
Net sales in the company’s Hooker Branded segment, which includes imported case goods and upholstery, fell .8% to $41.9 million, compared to $42.2 million last year. Net sales, it said, were impacted by higher discounting compared to abnormally lower levels of discounting in the prior-year period. It also noted that higher demurrage and drayage expenses that heavily impacted gross margin in prior quarters were still higher than last year’s first quarter, although they are trending down.
In this segment, the company said that inventory levels also fell by $14 million compared to the end of the 2023 fiscal year, and were “still elevated at quarter end and higher than pre-pandemic levels in calendar year 2019.”
Operating income in the segment was $2.3 million, compared to $4.1 million last year. Its margin was 5.5% compared to 9.8% last year.
Net sales in the Home Meridian segment, which includes Pulaski, Samuel Lawrence Furniture and Prime Resources International, fell by $20.2 million, to $41.9 million, compared to $62.1 million in the prior-year quarter, a 32.5% decrease. This was driven by sales decreases at major furniture chains and mass merchants in what the company described as a slower retail environment for home furnishings. It also experienced lower selling prices resulting from liquidation sales along with delayed orders from retailers that are continuing to reduce their own inventories.
The segment lowered its operating loss to $2.1 million, from $3.1 million the same period last year.
The company said that despite the drop in sales, Samuel Lawrence’s net sales more than doubled compared to the prior-year quarter, which the company said indicates a strong recovery in the hospitality industry after the pandemic. Freight costs also improved because of the stabilization of ocean freight rates.
Overall, the sales decrease at HMI was better than expectations, Hoff said, adding that while disappointing, the operating loss also was an improvement from last year.
“Our transition to a new business model at HMI will continue into this year as we move away from higher-risk businesses to focus on our core strengths and core businesses,” he said, alluding to the brands in the segment. “We believe we are on track to achieve profitability in this segment by the end of the fiscal year.”
Sales in the domestic upholstery segment fell 14.8% to $35.1 million, from $41.2 million, a 14.8% decrease. This was the segment’s first quarterly sales decline in two years, or 10 consecutive quarters, the company said.
Sales declines at HF Custom (formerly Sam Moore), Sunset West and Shenandoah were partially offset by increased net sales at Bradington-Young.
Meanwhile, the segment remained profitable with $1.3 million in operating profits compared to $2.7 million last year. Its margin was 3.8% compared to 6.7% last year.
“Much of the Domestic Upholstery sales dip was driven by the fact that we worked through our large backlogs in the divisions, and then experienced softer demand,” Hoff said, adding, “We do not think it is a long-term situation. The temporary slowdown at Sunset West occurred due to transitioning to a new ERP system and bi-coastal distribution. Now that this transition is largely complete, Sunset West is expanding to a nationally distributed brand, which we believe offers a double-digit organic growth opportunity over multiple years.”
The company added that quarter-end backlogs for Bradington-Young were more than three times higher than pre-pandemic levels at the end of the fiscal 2020 first-quarter end. Meanwhile, backlogs at HF Custom and Shenandoah fell to levels similar to fiscal 2020. Incoming orders at Bradington-Young and Shenandoah were at similar levels compared to fiscal 2020 and HF Custom had lower orders compared to this period.
Also the company’s cash and cash equivalents were $31 million at the end of the first fiscal quarter, up $12 million from the prior-year end. During the first quarter, the company said that it used a portion of the $22.4 million in cash generated from operating activities to fund $4.3 million in share repurchases, $3.2 million in capital expenditures, including investments in its new 120,000-square-foot showroom in Showplace which opened at the April High Point Market. In addition, there were $2.4 million in cash dividends to shareholders and $1.3 million invested in its new cloud-based ERP system.
