by Total revenues increased 13.6% from the same period last year, while domestic upholstery delivered its 7th consecutive double-digit gain
MARTINSVILLE, Va. — Hooker Furnishings reported increases in revenue and net income for the third quarter ended Oct. 30.
The company said that net sales were $151.6 million, up 13.6% compared to the $133.4 million reported the same period last year.
It had net income of $4.8 million, or 42 cents per share, compared to a loss of $1.2 million, or 10 cents per share last year.
Net sales increased in its Home Meridian segment and domestic upholstery segment, which reported its seventh consecutive quarter of double-digit sales growth.
Meanwhile, sales fell slightly in the Hooker Branded segment, which reported $54.7 million in sales, down 2.4% from the $56 million reported last year.
The company said that the lower sales were due to a temporary inventory mix issue that resulted from some vendor factory shipments received in its warehouse as incomplete collections missing some pieces. It noted that retailers delayed receipt of orders until the collections could ship complete.
The Hooker Branded segment, however, remained profitable, with operating income of $5.2 million, compared with $6.7 million reported last year.
The company said that incoming orders decreased compared to the prior-year quarter as the market is “gradually returning to more typical levels of demand.” While its end-of-quarter backlog was lower than the same period last year, it also was about three times higher than pre-pandemic levels in 2019.
The Home Meridian segment reported that net sales increased 9.4%, to $50.6 million, compared to $46.2 million the same period last year. It also narrowed its operating loss significantly, from $10.2 million last year to $3.2 million.
Sales increases to furniture chains, mass merchants and hospitality customers were offset by the absence of club channel sales the company exited last year. E-commerce sales also decreased because of a “normalization of post-Covid demand.” HMI shipments also were lower than anticipated because of customers with high inventories that had delayed shipments.
Incoming orders in the segment, along with backlogs, decreased compared to last year because of the absence of club channel orders and lower orders from mass merchant retailers that delayed shipments to rationalize inventories.
The domestic upholstery segment reported $43.4 million in sales, up 48.2% from the $29.3 million reported last year. It also reported an increase in operating income, to $3.8 million from $1.6 million last year.
The company said this was the seventh quarterly increase in double-digit sales growth for the segment, which was driven by the addition of the Sunset West outdoor division as well as organic sales growth at Bradington-Young, Sam Moore and Shenandoah. Each of these domestic upholstery producers also reported double-digit net sales gains for both the quarter and the nine-month periods.
The company added that incoming orders decreased compared to last year because of current demand, long lead times and high backlogs. However, year-to-date orders were about the same as calendar year 2019.
In addition, the segment lowered its backlog compared to the same period last year and fiscal 2022 year end, when demand was “exceptionally strong” amidst production capacity constraints. Compared to calendar year 2019, the company said, its quarter-end backlog was about three times higher than pre-pandemic levels.
Of the overall results, company Chief Executive Officer Jeremy Hoff said that steady fulfillment of backlogs, along with full production levels, healthier inventory levels and operational improvements contributed to the revenue gains during the quarter.
“We anticipate continued improvements throughout these key areas within our organization as we approach our fiscal year end,” he said. “However, economic indicators are mixed, and there are potential headwinds including rising interest rates, declining home sales and consumer confidence.”
He added that year-over-year quarterly profitability gains were driven by sales growth and “successful mitigation of supply-chain bottlenecks over the last two years.”
“Improving our operational costs and exiting unprofitable businesses at HMI is beginning to show up in our margins and will continue to improve profitability,” he said.
He also noted that the company had a successful October High Point Market.
“New program and product introductions at the well-attended Fall High Point Market created considerable momentum,” Hoff said, adding, “Our market launch of the in-stock Portfolio program at HMI was very well received. Portfolio’s launch was a successful first step in expanding and diversifying HMI’s customer base.”
In addition, he said, response was positive for Hooker Furniture’s 92-piece Charleston collection, one of the largest in company history.
“The updated traditional styling, clean finishes and accent color finishes were met with enthusiasm from retailers who believe there’s a void for classic designs in the marketplace, a furnishings style that’s sought after by a significant set of younger consumers in their prime furniture-buying years,” Hoff said, noting that the collection will be shipped before the next High Point Market in spring 2023, and before the grand opening of the company’s new High Point showroom in Showplace.
Other highlights from the report were as follows:
+ Cash and cash equivalents were $6.5 million at the end of the third quarter, down $62.9 million from the balance at the end of fiscal 2022. This was due largely to a $58.9 million increase in inventory.
+ During the nine-month period, the company also said it repurchased and retired 598,000 in shares for its common stock under the $20 million share repurchase authorization approved by its board of directors earlier this year.
“Even while spending $9.4 million on the share repurchase, we have been generating cash since last quarter,” said Chief Financial Officer Paul Huckfeldt. “With lead times reducing as much as they have, we are aiming to reduce inventories by $25 million by roughly this time next year, which will further improve our cash position. To support the inventory reduction effort and improve liquidity, we have also implemented targeted promotions on certain products.”
+ In addition, the company’s board declared a quarterly cash dividend of 22 cents per share, which will be paid on Dec. 30 to shareholders of record as of Dec. 16. The company said the 10% increase is the seventh consecutive year that it has increased its annual dividend.
