by Company execs reveal strategies to help boost sales, profitability of HMI segment
MARTINSVILLE, Va. – Hooker Furnishings’ latest conference call this week again highlights the challenges and opportunities the company – like many others in the industry – has experienced in recent months.
First the good news. The company ended its latest fiscal year strong with consolidated sales of $594 million, up about 10% from last year, which the company said was driven by increases of more than 20% in its Hooker branded and domestic upholstery businesses.
Meanwhile it reported net income of $11.7 million, compared to a net loss of $10 million last year.
The quarterly results, which is where Wall Street and investors place most of their attention, were less positive.
Its consolidated Q4 sales decreased 13.2%, to $134.8 million from $155.3 million for the year earlier period. It reported a loss of nearly $4 million, or 33 cents per diluted share compared to net income of $8.5 million, or 71 cents per diluted share for the same period a year earlier.
This decline reversed positive sales in the first half – including at Home Meridian International – whose residential furniture brands include Pulaski, Samuel Lawrence Furniture and Prime Resources International. This segment experienced an $18.9 million, or 23.7% decrease in revenues compared to a $5.8 million or 11.8% sales decline for the Hooker Branded segment.
Both declines were largely due to Covid-related shutdowns in Vietnam and Malaysia, two of the countries where the company sources case goods and upholstery. The good news, according to CEO Jeremy Hoff, is that factories have improved their capacity and flow of goods, which should help create a more consistent availability of product moving forward.
As it has been for some time, the Home Meridian segment proved to be one of the most challenging areas of the business. But here, too, there are bright spots that are in addition to the increases in capacity overseas.
During the call, Vice President, Finance and Chief Financial Officer Paul Huckfeldt noted that due to continued poor profitability and excess chargebacks of $2.9 million, HMI has decided to exit the Clubs channel of distribution. Doing so, he noted, has resulted in write-downs to dispose of obsolete and excess inventory.
In addition, the company is exiting HMI’s RTA business, which has been affected by high freight costs. While resulting in a one-time order cancellation costs of $2.6 million, the unpredictability of these freight costs moving forward makes the move to exit the business timely in that it could help return HMI to profitability.
Noting that these actions contributed to an operating loss during the quarter, Huckfeldt said, “We’re now freer to position our working capital and resources on the solid businesses like Pulaski, Samuel Lawrence, ACH (Accentrics Home) and PRI, with a goal to be in stock in our new 800,000-square-foot warehouse to service growing channels such as brick and mortar retailers, the interior design trade and e-commerce, while still growing our mega accounts as appropriate.”
Thus while e-commerce will remain part of its distribution, HMI also could likely see continued growth in these other all-too important channels.
Some challenges remain as the industry still enters still unclear territory regarding freight rates, which could continue to impact the cost of lower priced lines in particular including SLF and Pulaski.
But Hooker’s focused strategy including eliminating areas of weaknesses and going after areas of opportunity — while utilizing assets such as its expanded warehousing and distribution — could help return this area of the business to growth and profitability.
As plant capacity — and a more consistent flow of goods — from places like Vietnam and Malaysia continues to improve, the performance of HMI will be worth watching as will its impact on the overall Hooker Furnishings business.
“We continue to be encouraged by long-term trends such as demand for housing, the renewed and sustainable focus on home interiors and exteriors, and the prospect of the two largest demographic groups in history entering their prime earning and household formation years,” Hoff said at the end of the presentation. “While we have worked through a broad spectrum of challenges during the year, our team has continued to focus on multiple strategic growth initiatives, many of which will positively impact us in the next six to 12 months.”
