Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1] Group 1 - The investment strategy is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1]

Core Insights - Hooker Furniture Corporation (NASDAQ: HOFT) reported Q2 FY26 results with revenue of $82.1 million, operating income of ($4.4) million, and adjusted EPS of ($0.31), falling short of consensus estimates [1] - Revenue declined 13.6% year-over-year, primarily due to a 44.5% decline at HMI driven by weak demand, tariff-related buying hesitancy, and a major customer bankruptcy [1] - Despite the sales decline, consolidated gross margin remained stable at 20.5%, supported by cost savings and improved labor efficiency [1] Financial Performance - HOFT's revenue of $82.1 million was below the expected $93.7 million and consensus of $91.2 million [1] - Operating income was reported at ($4.4) million, compared to estimates of ($0.8) million and ($1.5) million [1] - Adjusted EPS of ($0.31) was worse than the expected ($0.08) and consensus of ($0.16) [1] Sales and Market Dynamics - HMI experienced a significant 44.5% year-over-year decline in sales, indicating weak demand and external pressures [1] - In contrast, Hooker Branded net sales grew by 1.3% year-over-year, while Domestic Upholstery sales remained flat, showing resilience in legacy brands [1] Cost Management and Profitability - The company achieved $3.7 million in expense savings in the first half of FY26, moving towards an annualized savings goal of $25 million by FY27 [8] - Management is focused on navigating macroeconomic challenges, including housing market weakness and high mortgage rates, while aiming to return to profitability [1] Debt and Liquidity - HOFT repaid $16.5 million of debt year-to-date and reduced inventory to $58.5 million, enhancing liquidity during the transition to a new warehouse in Vietnam [8]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | August 3, 2025 | February 2, 2025 | Change | |:---|:---|:---|:---| | Total Assets | $278,043 | $313,942 | $(35,899) | | Total Liabilities | $84,923 | $109,559 | $(24,636) | | Total Shareholders' Equity | $193,120 | $204,383 | $(11,263) | [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | Change | |:---|:---|:---|:---|:---|:---|:---| | Net Sales | $82,149 | $95,081 | $(12,932) | $167,465 | $188,652 | $(21,187) | | Gross Profit | $16,837 | $20,922 | $(4,085) | $35,838 | $40,294 | $(4,456) | | Operating (Loss) / Income | $(4,401) | $(3,149) | $(1,252) | $(7,965) | $(8,169) | $204 | | Net (Loss) / Income | $(3,277) | $(1,951) | $(1,326) | $(6,329) | $(6,042) | $(287) | | Basic EPS | $(0.31) | $(0.19) | $(0.12) | $(0.60) | $(0.57) | $(0.03) | | Diluted EPS | $(0.31) | $(0.19) | $(0.12) | $(0.60) | $(0.57) | $(0.03) | [Condensed Consolidated Statements of Comprehensive (Loss) / Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20%2F%20Income) Condensed Consolidated Statements of Comprehensive (Loss) / Income (in thousands) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | Actuarial adjustments (net of tax) | $(34) | $(45) | $(68) | $(90) | | Total comprehensive (loss) / income | $(3,311) | $(1,996) | $(6,397) | $(6,132) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | Change | |:---|:---|:---|:---| | Net cash provided by operating activities | $18,107 | $5,314 | $12,793 | | Net cash used in investing activities | $(2,021) | $(808) | $(1,213) | | Net cash used in financing activities | $(21,560) | $(5,615) | $(15,945) | | Net decrease in cash and cash equivalents | $(5,474) | $(1,109) | $(4,365) | | Cash and cash equivalents - end of quarter | $821 | $42,050 | $(41,229) | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balance at Feb 2, 2025 | Net loss (26 weeks) | Cash dividends paid | Restricted stock compensation (net) | Balance at Aug 3, 2025 | |:---|:---|:---|:---|:---|:---| | Common Stock Amount | $50,474 | - | - | $356 | $50,619 | | Retained Earnings | $153,336 | $(6,329) | $(5,011) | - | $141,996 | | Accumulated Other Comprehensive Income | $573 | $(68) | - | - | $505 | | Total Shareholders' Equity | $204,383 | $(6,329) | $(5,011) | $356 | $193,120 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The financial statements are prepared in accordance with SEC rules and GAAP, with management's opinion that all necessary adjustments for fair statement are included[21](index=21&type=chunk) - Operating results for interim periods may not be indicative of full fiscal year results[21](index=21&type=chunk) - The company is evaluating the impact of new FASB ASUs 2023-09 (Income Taxes) and 2024-03 (Disaggregation of income statement expenses), effective for fiscal 2026 and 2028, respectively[23](index=23&type=chunk)[24](index=24&type=chunk) [1. Preparation of Interim Financial Statements](index=9&type=section&id=1.%20Preparation%20of%20Interim%20Financial%20Statements) [2. Recently Adopted Accounting Policies](index=9&type=section&id=2.%20Recently%20Adopted%20Accounting%20Policies) [3. Accounts Receivable](index=10&type=section&id=3.%20Accounts%20Receivable) Accounts Receivable (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Gross accounts receivable | $47,132 | $64,344 | | Customer allowances | $(1,084) | $(1,019) | | Allowance for doubtful accounts | $(4,732) | $(5,127) | | Trade accounts receivable | $41,316 | $58,198 | [4. Inventories](index=10&type=section&id=4.%20Inventories) Inventories (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Finished furniture | $70,745 | $82,635 | | Furniture in process | $1,588 | $1,524 | | Materials and supplies | $11,574 | $11,229 | | Inventories at FIFO | $83,907 | $95,388 | | Reduction to LIFO basis | $(25,375) | $(24,633) | | Inventories | $58,532 | $70,755 | [5. Property, Plant and Equipment](index=10&type=section&id=5.%20Property,%20Plant%20and%20Equipment) Property, Plant and Equipment, Net (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Total depreciable property, net | $23,857 | $25,163 | | Land | $1,077 | $1,077 | | Construction-in-progress | $3,288 | $1,955 | | Property, plant and equipment, net | $28,222 | $28,195 | [6. Cloud Computing Hosting Arrangement](index=10&type=section&id=6.%20Cloud%20Computing%20Hosting%20Arrangement) - The company capitalized **$287,000** in implementation costs and interest for ERP and supply chain planning software in Q2 FY26, down from **$1.2 million** in Q2 FY25[31](index=31&type=chunk) - Amortization expense for these costs was **$368,000** in Q2 FY26, up from **$292,000** in Q2 FY25[31](index=31&type=chunk) Capitalized Implementation Costs (in thousands) | Metric | August 3, 2025 (Gross carrying amount) | August 3, 2025 (Accumulated amortization) | February 2, 2025 (Gross carrying amount) | February 2, 2025 (Accumulated amortization) | |:---|:---|:---|:---|:---| | Implementation Costs | $17,210 | $(2,287) | $16,782 | $(1,561) | | Interest Expenses | $720 | $(36) | $596 | $(27) | [7. Fair Value Measurements](index=11&type=section&id=7.%20Fair%20Value%20Measurements) - Company-owned life insurance is measured at fair value on a recurring basis using **Level 2 inputs**, with changes reflected in income each reporting period[33](index=33&type=chunk) Assets Measured at Fair Value (in thousands) | Description | Fair value at August 3, 2025 (Level 2) | Fair value at February 2, 2025 (Level 2) | |:---|:---|:---| | Company-owned life insurance | $30,157 | $29,238 | [8. Intangible Assets](index=12&type=section&id=8.%20Intangible%20Assets) - Amortization expenses for intangible assets with definite lives were **$872,000** in Q2 FY26 and **$1.8 million** for H1 FY26, with an expected **$1.7 million** for the remainder of fiscal 2026[37](index=37&type=chunk) Intangible Assets (in thousands) | Metric | August 3, 2025 (Gross carrying amount) | August 3, 2025 (Accumulated Amortization) | February 2, 2025 (Gross carrying amount) | February 2, 2025 (Accumulated Amortization) | |:---|:---|:---|:---|:---| | Goodwill | $15,036 | - | $15,036 | - | | Trademarks and Trade names (indefinite) | $5,180 | - | $5,180 | - | | Customer Relationships | $38,001 | $(24,029) | $38,001 | $(22,349) | | Trademarks and Trade names (definite) | $2,334 | $(1,164) | $2,334 | $(1,062) | | Intangible assets, net | $45,515 | $(25,193) | $45,515 | $(23,411) | [9. Leases](index=12&type=section&id=9.%20Leases) - The company entered an agreement to terminate the Georgia warehouse lease by October 31, 2025, expected to reduce right-of-use assets by **$10.1 million**, lease liabilities by **$10.7 million**, and lease payments by **$13.4 million**[40](index=40&type=chunk) Lease Costs (in thousands) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Total operating lease cost | $2,639 | $2,699 | $5,318 | $5,447 | | Operating cash outflows | $2,601 | $2,554 | $5,213 | $5,163 | Operating Leases Right-of-Use Assets and Liabilities (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Total operating leases right-of-use assets | $41,797 | $45,575 | | Total operating lease liabilities | $44,901 | $48,575 | [10. Long-Term Debt](index=13&type=section&id=10.%20Long-Term%20Debt) - The company entered an Amended and Restated Loan Agreement on December 5, 2024, providing a revolving credit facility of up to **$70 million**, with an option to increase by **$30 million**[41](index=41&type=chunk)[42](index=42&type=chunk) - The facility is secured by a first priority security interest in substantially all of the Borrowers' assets, excluding real estate[47](index=47&type=chunk) - As of August 3, 2025, outstanding loans were **$5.6 million**, letters of credit were **$6.7 million**, and availability was **$57.7 million**[51](index=51&type=chunk) [11. Earnings Per Share](index=15&type=section&id=11.%20Earnings%20Per%20Share) - Due to net losses, approximately **106,000 shares** (Q2 FY26) and **115,000 shares** (H1 FY26) were excluded from diluted EPS calculation as they would have been antidilutive[56](index=56&type=chunk) Earnings Per Share Calculation (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | (Loss) / Earnings available for common shareholders | $(3,306) | $(1,992) | $(6,391) | $(6,124) | | Weighted average shares outstanding (Basic & Diluted) | 10,612 | 10,521 | 10,587 | 10,509 | | Basic (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | | Diluted (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | [12. Income Taxes](index=17&type=section&id=12.%20Income%20Taxes) - The differences in effective tax rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal 2026 under the annualization method[57](index=57&type=chunk) Income Tax (Benefit) / Expense and Effective Tax Rate | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Income tax (benefit) / expense (in thousands) | $(1,203) | $85 | $(1,967) | $(731) | | Effective tax rate | 26.9% | -4.5% | 23.7% | 10.8% | [13. Segment Information](index=17&type=section&id=13.%20Segment%20Information) - The company's segments are Hooker Branded, Home Meridian, Domestic Upholstery, and All Other, with H Contract sales now included in Hooker Branded and Domestic Upholstery[62](index=62&type=chunk) Segment Net Sales (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $36,250 | $35,785 | 1.3% | $73,359 | $72,593 | 1.1% | | Home Meridian | $16,932 | $30,516 | -44.5% | $35,742 | $56,940 | -37.2% | | Domestic Upholstery | $28,677 | $28,556 | 0.4% | $57,590 | $58,583 | -1.7% | | All Other | $290 | $224 | 29.5% | $774 | $536 | 44.4% | | **Consolidated** | **$82,149** | **$95,081** | **-13.6%** | **$167,465** | **$188,652** | **-11.2%** | Segment Operating (Loss) / Income (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $10 | $(329) | 103.0% | $37 | $(150) | 124.7% | | Home Meridian | $(3,916) | $(896) | -337.1% | $(6,754) | $(4,169) | -62.0% | | Domestic Upholstery | $(408) | $(1,285) | 68.2% | $(1,004) | $(2,593) | 61.3% | | All Other | $(87) | $(639) | 86.4% | $(244) | $(1,257) | 80.6% | | **Consolidated** | **$(4,401)** | **$(3,149)** | **-39.8%** | **$(7,965)** | **$(8,169)** | **2.5%** | [14. Subsequent Events](index=19&type=section&id=14.%20Subsequent%20Events) - On September 9, 2025, the board of directors declared a quarterly cash dividend of **$0.23 per share**, payable on September 30, 2025[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial performance, condition, liquidity, and future outlook for the period [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially, including adverse political acts, general economic conditions, asset impairment, and industry cyclicality[70](index=70&type=chunk) - Key risks include challenges in international markets, macroeconomic uncertainties affecting consumer spending, and risks associated with cost reduction plans and the Home Meridian segment restructuring[70](index=70&type=chunk) - Other risks involve reliance on offshore sourcing, supply chain disruptions, information system security breaches, and the terms of the Amended and Restated Loan Agreement[71](index=71&type=chunk) [Quarterly Reporting](index=23&type=section&id=Quarterly%20Reporting) - This report covers the unaudited condensed consolidated financial statements for the 2026 fiscal year's thirteen-week and twenty-six-week periods ending August 3, 2025, compared to the corresponding periods in fiscal 2025[76](index=76&type=chunk) [Overview](index=23&type=section&id=Overview) - Hooker Furnishings Corporation is a designer, marketer, and importer of casegoods, leather, fabric-upholstered furniture, lighting, accessories, and home décor for residential, hospitality, and contract markets, also manufacturing premium domestic custom furniture[80](index=80&type=chunk)[81](index=81&type=chunk) [Orders and Backlog](index=25&type=section&id=Orders%20and%20Backlog) - Consolidated order backlog decreased by **2.8%** from fiscal year-end, driven by Home Meridian's decline due to macroeconomic pressures, tariff-related buying hesitancy, and a major customer's bankruptcy[84](index=84&type=chunk) - Domestic Upholstery backlog rose nearly **7%** compared to both year-end and prior-year quarter-end, while Hooker Branded's backlog increased nearly **20%** from year-end, supported by a **10.6%** rise in incoming orders[85](index=85&type=chunk) Order Backlog (in thousands) | Reporting Segment | August 3, 2025 | February 2, 2025 | July 28, 2024 | |:---|:---|:---|:---| | Hooker Branded | $15,701 | $13,109 | $15,895 | | Home Meridian | $16,138 | $21,002 | $43,918 | | Domestic Upholstery | $19,313 | $18,123 | $18,066 | | All Other | $- | $402 | $- | | **Consolidated** | **$51,152** | **$52,636** | **$77,879** | [Executive Summary](index=26&type=section&id=Executive%20Summary) - The home furnishings industry faced challenges in Q2 FY26 due to low existing home sales, elevated mortgage rates, and persistent inflation, leading to reduced consumer demand[86](index=86&type=chunk) - Home Meridian's net sales declined by **44.5%** in Q2 FY26, and gross margin decreased by **1,330 bps**, primarily due to macroeconomic pressures, tariff-related buying hesitancy, and the loss of a major customer[87](index=87&type=chunk) - Hooker Branded and Domestic Upholstery segments showed modest net sales recovery in Q2 FY26, though sales volumes remain historically low due to housing market weakness[88](index=88&type=chunk) - The company recorded a consolidated net loss of **$3.3 million** (or **$0.31 per diluted share**) for Q2 FY26, compared to a **$2.0 million** net loss (or **$0.19 per diluted share**) in the prior-year quarter[88](index=88&type=chunk) [Multi-Phased Cost Reduction Initiatives](index=26&type=section&id=Multi-Phased%20Cost%20Reduction%20Initiatives) - The company aims for approximately **$25 million** in annualized cost savings by fiscal year 2027 through a multi-phase cost reduction strategy[89](index=89&type=chunk) - In H1 FY26, **$3.7 million** in savings were achieved, despite **$1.7 million** in restructuring charges[89](index=89&type=chunk) - Phase 2 actions include closing the Savannah warehouse by October 31, 2025, and operating a new Vietnam warehouse, which has reduced direct container lead times from six months to four to six weeks[94](index=94&type=chunk) - Total fixed costs are expected to reduce by approximately **$25 million** (nearly **25%**), with **$11 million** from warehousing/distribution and **$14 million** from S&A expenses[92](index=92&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Consolidated Performance Metrics (% of Net Sales) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net sales | 100% | 100% | 100% | 100% | | Cost of sales | 79.5% | 78.0% | 78.6% | 78.6% | | Gross profit | 20.5% | 22.0% | 21.4% | 21.4% | | Selling and administrative expenses | 24.8% | 24.3% | 25.1% | 24.7% | | Operating (loss)/income | (5.4)% | (3.3)% | (4.8)% | (4.3)% | | Net (loss)/income | (4.0)% | (2.1)% | (3.8)% | (3.2)% | [Consolidated Net Sales](index=28&type=section&id=Consolidated%20Net%20Sales) - Consolidated net sales decreased by **$12.9 million (13.6%)** in Q2 FY26 and **$21.2 million (11.2%)** for H1 FY26, mainly due to Home Meridian's decline[98](index=98&type=chunk) - Home Meridian's net sales decreased by **44.5%** in Q2 FY26, with **40%** from hospitality timing, **35%** from macroeconomic pressures/tariffs, and **25%** from a major customer's bankruptcy[101](index=101&type=chunk) - Consolidated average selling price (ASP) increased due to a favorable product mix shift, as lower-priced Home Meridian unit volume declined by **37.7%** in Q2 and **36.7%** for H1[99](index=99&type=chunk) [Consolidated Gross Profit](index=29&type=section&id=Consolidated%20Gross%20Profit) - Consolidated gross profit decreased by **$4.1 million** in Q2 FY26, and gross margin declined by **150 bps**, mainly due to Home Meridian's lower profitability[102](index=102&type=chunk) - Home Meridian's gross profit decreased by **$4.9 million** in Q2 FY26, and gross margin decreased by **1,330 bps** due to reduced sales, unfavorable product mix, increased warehousing/distribution expenses, and inventory liquidation losses[104](index=104&type=chunk) - Domestic Upholstery's gross profit increased by **$659,000** in Q2 FY26, with gross margin rising by **220 bps**, driven by consistent material costs and reduced labor/indirect costs[104](index=104&type=chunk) [Consolidated Selling and Administrative Expenses](index=30&type=section&id=Consolidated%20Selling%20and%20Administrative%20Expenses) - Consolidated S&A expenses decreased by **$2.8 million** in Q2 FY26 and **$4.6 million** in H1 FY26, driven by cost-reduction and restructuring plans across all segments[103](index=103&type=chunk) - As a percentage of net sales, S&A expenses increased in both periods due to the overall decline in net sales[103](index=103&type=chunk) - Home Meridian's S&A expenses decreased by **$1.9 million** in Q2 and **$3.0 million** in H1, but as a percentage of net sales, they increased by **610 bps** and **500 bps**, respectively, due to under-absorption from lower sales volumes[109](index=109&type=chunk) [Intangible Asset Amortization](index=31&type=section&id=Intangible%20Asset%20Amortization) - Intangible asset amortization decreased for Q2 FY26 and H1 FY26 compared to prior-year periods due to the full amortization of the Sam Moore trade name[106](index=106&type=chunk) [Consolidated Operating (Loss) / Profit](index=31&type=section&id=Consolidated%20Operating%20(Loss)%20%2F%20Profit) - The Q2 FY26 operating loss of **$4.4 million** was higher than the prior year's **$3.1 million** loss, driven by **$2.0 million** in restructuring costs and Home Meridian's weakness[107](index=107&type=chunk) - Domestic Upholstery significantly reduced its operating loss by **$877,000 (68%)** in Q2 FY26 despite **$152,000** in restructuring costs[88](index=88&type=chunk) Operating (Loss) / Income (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $10 | $(329) | 103.0% | $37 | $(150) | 124.7% | | Home Meridian | $(3,916) | $(896) | -337.1% | $(6,754) | $(4,169) | -62.0% | | Domestic Upholstery | $(408) | $(1,285) | 68.2% | $(1,004) | $(2,593) | 61.3% | | All Other | $(87) | $(639) | 86.4% | $(244) | $(1,257) | 80.6% | | **Consolidated** | **$(4,401)** | **$(3,149)** | **-39.8%** | **$(7,965)** | **$(8,169)** | **2.5%** | [Consolidated Income Taxes](index=31&type=section&id=Consolidated%20Income%20Taxes) - The differences in effective tax rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal 2026 under the annualization method[110](index=110&type=chunk) Income Tax (Benefit) / Expense and Effective Tax Rate | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Income tax (benefit) / expense (in thousands) | $(1,203) | $85 | $(1,967) | $(731) | | Effective tax rate | 26.9% | -4.5% | 23.7% | 10.8% | [Consolidated Net (Loss) / Income](index=32&type=section&id=Consolidated%20Net%20(Loss)%20%2F%20Income) Net (Loss) / Income (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | Diluted (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | [Outlook](index=32&type=section&id=Outlook) - The company is focused on scaling its cost structure for profitability, preparing for the October debut of the Margaritaville collection, and pursuing growth in hospitality, contract, and outdoor channels, supported by the new Vietnam warehouse[114](index=114&type=chunk) - Home Meridian's fixed cost structure is expected to be aligned by the end of Q3 FY25, positioning it for significantly enhanced performance by the end of the current fiscal year, barring disruptive events[113](index=113&type=chunk) - Hooker Legacy orders showed encouraging momentum in July, with Hooker Branded orders up nearly **11%** and Domestic Upholstery up **1.6%** for the quarter, despite industry headwinds[112](index=112&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=33&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) - Operating cash flow increased significantly due to **$17.1 million** from trade receivable collections and **$12.2 million** from inventory reductions, particularly in Hooker Branded and Home Meridian[118](index=118&type=chunk) - Financing activities used **$21.6 million**, primarily due to **$16.5 million** in repayments on the revolving credit facility[117](index=117&type=chunk) Cash Flow Summary (in thousands) | Metric | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---| | Net cash provided by operating activities | $18,107 | $5,314 | | Net cash used in investing activities | $(2,021) | $(808) | | Net cash used in financing activities | $(21,560) | $(5,615) | | Net decrease in cash and cash equivalents | $(5,474) | $(1,109) | [Cash Flows – Operating, Investing and Financing Activities](index=33&type=section&id=Cash%20Flows%20%E2%80%93%20Operating,%20Investing%20and%20Financing%20Activities) [Liquidity, Financial Resources and Capital Expenditures](index=33&type=section&id=Liquidity,%20Financial%20Resources%20and%20Capital%20Expenditures) - The company's financial resources include available cash and cash equivalents, expected cash flow from operations, available lines of credit, and cash surrender value of Company-owned life insurance[119](index=119&type=chunk) - Short-term cash requirements primarily fund operations, quarterly dividend payments, and capital expenditures for ERP, showroom renovations, and system upgrades[121](index=121&type=chunk) [Loan Agreements and Revolving Credit Facility](index=35&type=section&id=Loan%20Agreements%20and%20Revolving%20Credit%20Facility) - The company entered an Amended and Restated Loan Agreement on December 5, 2024, providing a revolving credit facility of up to **$70 million**, with an option to increase by **$30 million**[122](index=122&type=chunk)[123](index=123&type=chunk) - The facility is secured by a first priority security interest in substantially all of the Borrowers' assets, excluding real estate[127](index=127&type=chunk) - As of August 3, 2025, outstanding loans were **$5.6 million**, letters of credit were **$6.7 million**, and availability was **$57.7 million**[131](index=131&type=chunk) [Capital Expenditures](index=36&type=section&id=Capital%20Expenditures) - The company expects to spend approximately **$1 to $2 million** in capital expenditures for the remainder of fiscal 2026 to maintain and enhance operating systems and facilities[132](index=132&type=chunk) [Enterprise Resource Planning Project](index=36&type=section&id=Enterprise%20Resource%20Planning%20Project) - The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions in early September 2023[133](index=133&type=chunk) [Dividends](index=36&type=section&id=Dividends_FinancialCondition) - On September 9, 2025, the board of directors declared a quarterly cash dividend of **$0.23 per share**, payable on September 30, 2025[134](index=134&type=chunk) [Critical Accounting Policies](index=36&type=section&id=Critical%20Accounting%20Policies) - There have been no material changes to the company's critical accounting policies and estimates from those provided in the 2025 Annual Report[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Outlines the company's exposure to interest rate, raw material price, and foreign currency risks - The company is exposed to interest rate risk on its variable-rate debt, raw materials price risk (wood, fabric, foam), and foreign currency risk for imported products[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - A **1% increase** in the SOFR rate would result in an annual increase of approximately **$56,000** in interest expenses at current borrowing levels[137](index=137&type=chunk) - The company generally negotiates firm pricing in USD with foreign suppliers for at least one year and does not use derivative financial instruments to manage currency risk[139](index=139&type=chunk) [Interest Rate Risk](index=36&type=section&id=Interest%20Rate%20Risk) [Raw Materials Price Risk](index=37&type=section&id=Raw%20Materials%20Price%20Risk) [Currency Risk](index=37&type=section&id=Currency%20Risk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective and reported no material changes in internal control - Management concluded that disclosure controls and procedures were **effective** as of August 3, 2025[141](index=141&type=chunk) - **No material changes** in internal control over financial reporting occurred during the fiscal quarter ended August 3, 2025[142](index=142&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=37&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) PART II. OTHER INFORMATION [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) Confirms no director or officer trading arrangements were adopted, terminated, or modified during the quarter - No director or officer adopted, terminated, or modified a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended August 3, 2025[145](index=145&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including certifications and interactive data files - The exhibits include the company's Articles of Incorporation, Amended and Restated Bylaws, Rule 13a-14(a) and 13a-14(b) certifications, and Interactive Data Files (Inline XBRL)[145](index=145&type=chunk)

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Company Overview - Hooker Furniture Corporation (NASDAQ:HOFT) is a well-known furniture manufacturer and importer, offering a variety of home furnishings including case goods, leather furniture, and fabric-upholstered furniture. The company faces significant competition from other furniture brands such as La-Z-Boy and Ethan Allen [1] Financial Performance - On September 11, 2025, the company reported an earnings per share (EPS) of -$0.31, which was significantly below the estimated EPS of -$0.12, resulting in a negative surprise of 158.33% [2][6] - The company's revenue for the quarter was $82.15 million, missing the estimated revenue of $106.47 million by 9.89%, and representing a decline from $95.08 million reported in the same quarter the previous year [3][6] Financial Metrics - The company has a negative price-to-earnings (P/E) ratio of -8.49, indicating negative earnings, and a price-to-sales ratio of 0.25, meaning the stock is valued at 25 cents for every dollar of sales [4] - The enterprise value to sales ratio is 0.38, providing insight into the company's valuation relative to its revenue [4] - The enterprise value to operating cash flow ratio is -15.22, reflecting challenges in generating positive cash flow from operations. However, the company has a strong current ratio of 3.94, suggesting it can cover its short-term liabilities with its short-term assets [5][6] - The debt-to-equity ratio is 0.35, indicating a moderate level of debt relative to equity [5]

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2026 were $82.1 million, down $13 million, or 13.6% year-over-year, primarily due to declines at Home Meridian [4] - Consolidated operating loss was $4.4 million compared to $3.1 million in the prior year quarter, reflecting lower sales volume and unfavorable customer mix [4] - Consolidated net loss was $3.3 million, or $0.31 per share, with a six-month net loss of $6.3 million, or $0.60 per diluted share [4][5] Business Line Data and Key Metrics Changes - Hooker branded net sales increased by 1.3% year-over-year, reaching breakeven compared to a $329,000 loss last year, despite $655,000 in restructuring costs [3][15] - Home Meridian net sales decreased by 44.5%, significantly impacted by tariff-related buying hesitancy and the loss of a major customer due to bankruptcy [3][16] - Domestic upholstery segment's net sales were flat, with a slight decline of 1.7% for the first six months, but gross profit rose by $659,000 in Q2 [17][18] Market Data and Key Metrics Changes - Incoming orders for Hooker branded and domestic upholstery increased by nearly 11% and 1.6% respectively during the quarter, indicating some positive momentum [21] - The home furnishings industry continues to face challenges from low existing home sales, elevated mortgage rates, and persistent inflation, affecting consumer confidence [21] Company Strategy and Development Direction - The company is focused on cost reduction efforts, aiming to eliminate approximately $25 million, or 25% of fixed costs, with significant savings expected by the end of Q3 2026 [13][14] - A new Margaritaville license collection is set to launch in October, which is anticipated to enhance growth opportunities [10][21] - The company is adapting to tariff impacts by evaluating pricing on a SKU-level basis and implementing mitigation strategies across segments [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to profitability through cost structure scaling and strategic growth initiatives, despite ongoing macroeconomic challenges [7][9] - The company expects HMI's performance to improve significantly by the end of the fiscal year, barring additional tariffs or disruptive events [8][21] Other Important Information - The company reported approximately $1.9 million in cash on hand and no outstanding amounts under its credit facility, with $67.9 million in available borrowing capacity [19] - The restructuring costs for the quarter totaled $2 million, with about two-thirds in cost of goods sold and one-third in selling and administrative expenses [30] Q&A Session Summary Question: What is driving the increased orders at Hooker branded and domestic upholstery? - Management noted subtle macro improvements at the retail level, with positive feedback from partners regarding Labor Day sales [26][27] Question: How does the company plan to return HMI to profitability? - Management indicated that achieving a 25% reduction in overall spending by the end of Q3 is crucial for short-term profitability, with a focus on customer relationships [28][29] Question: What is the breakdown of restructuring impacts on costs? - Approximately two-thirds of the restructuring costs were in cost of goods sold, and one-third in selling and administrative expenses [30] Question: Can you provide updates on the Margaritaville launch logistics and interest? - Management described the launch as a significant opportunity, with positive early indicators from partners and a substantial number of SKUs planned [37][38] Question: What are the expectations for price increases and their timing? - Management clarified that they have a clear understanding of the pricing strategy and are evaluating it on a SKU-by-SKU basis [39][41] Question: Will the additional $2 million in charges coincide with the Savannah warehouse exit? - Management confirmed that the additional charges are primarily related to the closing of the Savannah warehouse [42]

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2026 were $82.1 million, down $13 million, or 13.6% year-over-year, primarily driven by declines at Home Meridian [4][5] - Consolidated operating loss was $4.4 million compared to $3.1 million in the prior year quarter, reflecting lower sales volume and unfavorable customer mix [4] - Consolidated net loss was $3.3 million, or $0.31 per share, with a six-month net loss of $6.3 million, or $0.60 per diluted share [4][5] Business Line Data and Key Metrics Changes - Hooker branded net sales increased by 1.3% year-over-year, reaching breakeven compared to a $329,000 loss last year, despite $655,000 in restructuring costs [3][15] - Home Meridian's net sales decreased by 44.5%, with a significant portion attributed to the loss of a major customer and macroeconomic pressures [4][16] - Domestic upholstery's net sales were flat, with a 1.7% decline over six months, but operating losses were reduced by 68% in Q2 [17][18] Market Data and Key Metrics Changes - The home furnishings industry is facing challenges from low existing home sales, elevated mortgage rates, and persistent inflation, impacting consumer confidence and demand [21] - Incoming orders for Hooker branded and domestic upholstery increased by 24% year-over-year in July, indicating some positive momentum [21] Company Strategy and Development Direction - The company is focused on cost reduction efforts, aiming to eliminate approximately $25 million, or 25% of fixed costs, with significant savings expected by the end of Q3 2026 [13][14] - A new Margaritaville product line is set to launch in October, which is anticipated to create growth opportunities [10][21] - The company is adapting to tariff impacts by evaluating pricing on a SKU-level basis and implementing mitigation strategies [11][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to profitability through cost structure scaling and strategic growth initiatives [7][21] - The company expects HMI's performance to improve significantly by the end of the fiscal year, barring additional tariffs or disruptive events [8][21] Other Important Information - The company reported $1.9 million in cash on hand and no outstanding amounts under its credit facility, with $67.9 million in available borrowing capacity [19] - Restructuring costs for the quarter totaled $2 million, with two-thirds attributed to cost of goods sold and one-third to selling and administrative expenses [30] Q&A Session Summary Question: What is driving the increased orders at Hooker branded and domestic upholstery? - Management noted subtle macro improvements at the retail level, with positive feedback from partners regarding Labor Day sales [26][27] Question: How does the company plan to return HMI to profitability? - Management indicated that achieving a 25% reduction in overhead costs by the end of Q3 is crucial for short-term profitability [28][29] Question: What is the breakdown of restructuring costs for the quarter? - Approximately two-thirds of the restructuring costs were in cost of goods sold, and one-third in selling and administrative expenses [30] Question: Can you provide updates on the Margaritaville launch? - The launch is seen as a significant opportunity, with positive early indicators from partners and a substantial number of SKUs planned [37][38] Question: What are the expectations for price increases? - Management is evaluating pricing on a SKU-by-SKU basis and believes they have a clear understanding of the impact of the 20% tariff [39][41] Question: Will the additional $2 million in charges coincide with the Savannah warehouse exit? - Yes, the additional charges are expected to be related to the closing of the Savannah warehouse [42]

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2026 were $82.1 million, down $13 million, or 13.6% year-over-year, primarily driven by declines at Home Meridian [4][5] - Consolidated operating loss was $4.4 million compared to $3.1 million in the prior year quarter, reflecting lower sales volume and unfavorable customer mix [4] - Consolidated net loss was $3.3 million, or $0.31 per share, with a six-month net loss of $6.3 million, or $0.60 per diluted share [4][5] Business Line Data and Key Metrics Changes - Hooker branded net sales increased by 1.3% year-over-year, reaching breakeven compared to a $329,000 loss last year, despite $655,000 in restructuring costs [3][15] - Home Meridian net sales decreased by 44.5%, impacted by tariff-related buying hesitancy and the loss of a major customer due to bankruptcy, accounting for about 25% of the sales decline [3][16] - Domestic upholstery sales were flat in Q2, with a slight decline of 1.7% for the first six months, but operating losses were reduced by 68% in Q2 [17][18] Market Data and Key Metrics Changes - Incoming orders for Hooker branded and domestic upholstery increased by nearly 11% and 1.6% respectively during the quarter, with July orders up 24% year-over-year [21] - The home furnishings industry continues to face challenges from low existing home sales, elevated mortgage rates, and persistent inflation, affecting consumer confidence and demand [21] Company Strategy and Development Direction - The company is focused on cost reduction efforts, aiming to eliminate approximately $25 million, or 25% of fixed costs, with significant savings expected by the end of Q3 2026 [13][14] - A new Margaritaville license collection is set to launch in October, which is anticipated to enhance growth opportunities [10][21] - The company is adapting to tariff impacts by remerchandising products and evaluating pricing on a SKU-level basis [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to profitability through cost structure scaling and strategic growth initiatives, despite current macroeconomic challenges [7][9] - The company expects HMI's performance to improve significantly by the end of the fiscal year, barring additional tariffs or disruptive events [8][21] Other Important Information - The company reported $1.9 million in cash on hand, no outstanding amounts under its credit facility, and $67.9 million in available borrowing capacity [19] - The restructuring costs for the quarter totaled $2 million, with two-thirds attributed to cost of goods sold and one-third to selling and administrative expenses [30] Q&A Session Summary Question: What is driving the increased orders at Hooker branded and domestic upholstery? - Management noted subtle macro improvements at the retail level, with positive feedback from partners regarding Labor Day sales [26][27] Question: How can the company get the Home Meridian segment back to profitability? - Management indicated that achieving a 25% reduction in overhead costs by the end of Q3 is crucial for short-term profitability [28][29] Question: What is the breakdown of restructuring impacts on costs? - Approximately two-thirds of the restructuring costs were in cost of goods sold and one-third in SG&A [30] Question: Can you provide updates on the Margaritaville launch logistics and interest? - Management described the launch as a significant opportunity with positive early indicators from partners [37][38] Question: What are the expectations regarding price increases? - Management clarified that they are evaluating pricing on a SKU-by-SKU basis and have a clear understanding of the 20% tariff impact [39][41] Question: Will the additional $2 million in charges coincide with the Savannah warehouse exit? - Management confirmed that the charges are primarily related to the closing of the Savannah warehouse [42]

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2026 were $82.1 million, down $13 million, or 13.6% year-over-year, primarily due to declines at Home Meridian [4][5] - Consolidated operating loss was $4.4 million compared to $3.1 million in the prior year quarter, reflecting lower sales volume and unfavorable customer mix [4] - Consolidated net loss was $3.3 million, or $0.31 per share, with a six-month net loss of $6.3 million, or $0.60 per diluted share [4][5] Business Line Data and Key Metrics Changes - Hooker branded net sales increased by 1.3% year-over-year, reaching breakeven compared to a $329,000 loss in the same quarter last year [3][15] - Home Meridian net sales decreased by 44.5%, heavily impacted by tariff-related buying hesitancy and macroeconomic pressures [3][16] - Domestic upholstery segment's net sales were flat, with a slight decline of 1.7% for the first six months, but operating losses were reduced by 68% in Q2 [3][18] Market Data and Key Metrics Changes - The decline in Home Meridian was attributed to a loss of a major customer due to bankruptcy, accounting for about 25% of the sales decrease [4][16] - The hospitality business within Home Meridian saw a decline due to project timing, while traditional furniture channels faced macroeconomic pressures [3][16] Company Strategy and Development Direction - The company is focused on cost reduction efforts, aiming to eliminate approximately $25 million, or 25% of fixed costs, with significant savings expected by the end of Q3 2026 [13][14] - A new Margaritaville license collection is set to launch in October, which is anticipated to enhance growth opportunities [10][22] - The company is adapting to tariff impacts by evaluating pricing on a SKU-level basis and implementing mitigation strategies [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted that the home furnishings industry is facing challenges from low existing home sales, elevated mortgage rates, and persistent inflation [21] - There is optimism regarding the upcoming cost structure changes and the potential for growth when market demand returns [8][22] - The company is confident that its restructuring efforts will not hinder growth or customer service capabilities [10][22] Other Important Information - The company reported a significant improvement in operational results at Hooker branded and domestic upholstery, despite ongoing challenges [9] - Incoming orders for Hooker branded and domestic upholstery increased by nearly 11% and 1.6%, respectively, indicating some positive momentum [21] Q&A Session Summary Question: What is driving the increased orders at Hooker branded and domestic upholstery? - Management indicated subtle macro improvements at the retail level, with positive feedback from partners regarding Labor Day sales [27] Question: How do you plan to return the Home Meridian segment to profitability? - Management emphasized the importance of aligning cost savings with revenue growth, particularly focusing on customer relationships [29] Question: What is the breakdown of restructuring costs for the quarter? - Approximately two-thirds of the restructuring costs were in cost of goods sold, and one-third in selling and administrative expenses [31]

Hooker Furniture (HOFT) came out with a quarterly loss of $0.31 per share versus the Zacks Consensus Estimate of a loss of $0.12. This compares to a loss of $0.19 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -158.33%. A quarter ago, it was expected that this home furnishings company would post a loss of $0.16 per share when it actually produced a loss of $0.29, delivering a surprise of -81.25%.Over the last four quarters, t ...