Hooker Furnishings Corporation (HOFT) Q4 2025 Earnings Conference Call April 17, 2025 09:00 AM ET Company Participants Operator - Conference Call ModeratorJeremy Hoff - Chief Executive OfficerEarl Armstrong - Senior Vice President & Chief Financial OfficerUnknown Speaker - Unidentified/Unassigned Conference Call Participants Dave Storms - Analyst, StonegateAnthony Lebedinsky - Analyst, Sudodi & Co Operator Good day and welcome to the Hooker Furnishings Corporation fourth quarter 2025 earnings webcast call. ...

Financial Data and Key Metrics Changes - Consolidated net sales for Q4 2025 increased by $7.7 million, approximately 8% gain over the previous year's Q4, driven by an additional week in the current period [5] - For fiscal 2025, consolidated net sales were $397.5 million, a decrease of $35.8 million or 0.3% compared to the previous fiscal year [7] - Consolidated operating loss was $18.1 million for the year, primarily due to lower sales volumes and $10.8 million in charges [8] Business Line Data and Key Metrics Changes - Hooker branded sales increased by 2% and Home Meridian sales increased by 13% based on average net sales per shipping day [6] - Hooker branded Q4 net sales rose by $3.8 million or 10% from the prior quarter, driven by a 14% increase in unit volume [17] - Home Meridian Q4 net sales increased by $6.3 million or 0.7% year over year, driven by strong hospitality sales [19] - Domestic upholstery Q4 net sales decreased by $2 million or about 7% year over year due to soft demand [20] Market Data and Key Metrics Changes - All three reportable segments experienced sales decreases driven by weak demand and a depressed housing market [8] - Year-end backlog fell 22%, driven mostly by a significantly improved in-stock position [18] - Cash and cash equivalents stood at $6.3 million, a decrease of $36.9 million from the previous year-end [22] Company Strategy and Development Direction - The company is focused on gaining market share and creating a pathway for profitability despite the ongoing furniture retail downturn [12] - Cost reduction initiatives are being accelerated, including the planned exit of the Savannah warehouse, expected to save $4 to $5.7 million annually beginning in fiscal 2027 [15][10] - The company is also opening a new leased facility in Vietnam to improve product flow and support margin expansion [15] Management's Comments on Operating Environment and Future Outlook - Management noted significant macroeconomic headwinds, including the weakest housing market in 50 years and lower consumer confidence [14] - Despite challenges, the company believes it is positioned to continue gaining market share through merchandising efforts and speed to market initiatives [28] - Management is evaluating strategies to mitigate the current economic environment, including potential additional tariffs [26] Other Important Information - The company expects to record net charges of between $3 million to $4 million in fiscal 2026 related to the Savannah warehouse exit [10] - The completion of cost reduction plans is expected by the second half of fiscal 2026, with total savings projected between $18 and $20 million [11] Q&A Session Summary Question: Insights on Hooker Branded's sales improvements - Management noted that the October market had a significant positive impact, particularly on Hooker case goods, with two new collections performing well [32] Question: Opportunities in domestic upholstery due to tariffs - Management sees a tremendous opportunity in domestic upholstery and has capacity to grow in this area [35] Question: Future gross margins for Home Meridian - Management indicated that there is a strong focus on growing Pulaski and Samuel Lawrence furniture, which is contributing to margin expansion [39] Question: Backlog comparison to pre-pandemic levels - Management did not provide specific figures but emphasized a focus on the right products and avoiding low-margin items [40] Question: Strategic inventory build and nimbleness - Management had already strategically increased inventory, which positioned the company well for current market conditions [46] Question: Market share growth sustainability - Management believes they can improve market share growth beyond the current 3 to 15 basis points pace [49]

分组1 - Hooker Furniture reported quarterly earnings of $0.01 per share, missing the Zacks Consensus Estimate of $0.16 per share, representing an earnings surprise of -93.75% [1] - The company posted revenues of $104.46 million for the quarter ended January 2025, surpassing the Zacks Consensus Estimate by 3.22%, compared to year-ago revenues of $96.78 million [2] - Hooker Furniture shares have lost about 46% since the beginning of the year, while the S&P 500 has declined by -10.3% [3] 分组2 - The current consensus EPS estimate for the coming quarter is $0.07 on $101.25 million in revenues, and for the current fiscal year, it is $1.20 on $438.35 million in revenues [7] - The Zacks Industry Rank indicates that the Furniture industry is currently in the bottom 5% of over 250 Zacks industries, which may negatively impact stock performance [8]

Financial Performance - Net sales for Q4 fiscal 2025 were $104.5 million, an increase of 8% compared to $96.8 million in the prior year quarter[5]. - Consolidated net loss for Q4 was $2.3 million, or ($0.22) per diluted share, compared to net income of $593,000, or $0.06 per diluted share in the prior year[5]. - For the full year fiscal 2025, consolidated net sales were $397.5 million, reflecting a decrease of $35.8 million, or 8.3%, compared to the previous fiscal year[5]. - Hooker Branded Q4 net sales rose $3.8 million, or 10.0%, driven by a 14% increase in unit volume, while fiscal 2025 net sales decreased $10.1 million, or 6.5%[7]. - Home Meridian Q4 net sales increased $6.3 million, or 21.7%, year-over-year, with gross margin reaching 22.9%, the highest since 2016[8]. - Domestic Upholstery Q4 net sales decreased $2.0 million, or 7.0%, year-over-year, with fiscal 2025 net sales down $12.6 million, or 9.9%[9]. - Total net sales for the 53 weeks ended February 2, 2025, were $397.465 million, a decrease from $433.226 million in the prior year, representing a decline of approximately 8.2%[30]. - The Hooker Branded segment generated net sales of $146.470 million for the 53 weeks ended February 2, 2025, down from $156.590 million in the prior year, a decrease of approximately 6.8%[30]. Cost Management and Savings - The company expects fiscal 2026 cost savings of at least $0.8 to $1.0 million from the Savannah warehouse exit, with annualized savings of $4.0 to $5.7 million beginning in fiscal 2027[4]. - Total annualized cost savings from the Savannah exit and additional measures are expected to be between $18 million to $20 million, fully realized in fiscal 2027[9]. Cash Flow and Assets - Cash and cash equivalents stood at $6.3 million, a decrease of $36.9 million from the previous year-end, largely due to increased accounts receivable and planned inventory increases[11]. - Total assets decreased to $313.94 million as of February 2, 2025, down from $343.59 million as of January 28, 2024[24]. - Current liabilities decreased to $39.97 million as of February 2, 2025, compared to $41.41 million as of January 28, 2024[24]. - Cash used in operating activities was $23.016 million for the year, compared to cash provided by operating activities of $55.471 million in the previous year[27]. - Financing activities resulted in a net cash outflow of $11.149 million, compared to an outflow of $22.756 million in the previous year[28]. - The company paid cash dividends of $9.854 million during the year, slightly up from $9.682 million in the previous year[28]. Profitability and Loss - The company reported a net loss of $12.507 million for the 53 weeks ended February 2, 2025, compared to a net income of $9.865 million for the previous year[27]. - The gross profit margin for the consolidated segment was 22.3% for the 53 weeks ended February 2, 2025, down from 25.1% in the previous year[30]. - The company reported a net loss of $2.33 million for the 14 weeks ended February 2, 2025, compared to a net income of $0.59 million for the same period last year[20]. - Basic and diluted loss per share for the 14 weeks ended February 2, 2025, was $0.22, compared to earnings per share of $0.06 for the same period last year[20]. - The company incurred a depreciation and amortization expense of $9.229 million for the 53 weeks ended February 2, 2025, compared to $8.956 million in the prior year[27]. Market Conditions and Risks - The company is focused on gaining market share and maximizing revenues through merchandising efforts and speed-to-market initiatives despite economic uncertainties[13]. - The company is facing risks related to macroeconomic uncertainties, including inflation and high interest rates, which could impact sales and operating costs[18]. - The restructuring of the Home Meridian segment is ongoing, with the goal of returning to consistent profitability[18]. - The company is planning to shift inventories to a new warehouse facility in Vietnam, which poses execution and working capital risks[18]. Inventory and Backlog - The order backlog as of February 2, 2025, was $52.636 million, a decrease from $71.824 million a year earlier, indicating a decline of approximately 26.7%[33]. - The company reported a significant increase in inventory valuation expense to $622 thousand for the 53 weeks ended February 2, 2025, compared to $1.829 million in the previous year[27].

Core Insights - Hooker Furnishings Corporation reported a consolidated net loss of $2.3 million for the fourth quarter of fiscal 2025, compared to a net income of $593,000 in the prior year quarter, reflecting ongoing challenges in the home furnishings market [5][6][20] - For the full fiscal year 2025, the company experienced a consolidated net sales decrease of $397.5 million, down 8.3% from the previous year, driven by weak demand and macroeconomic uncertainties [5][6][20] - The company announced additional planned cost savings of $8 to $10 million, which, combined with previously announced savings, are expected to total between $18 million to $20 million once fully implemented by fiscal 2027 [5][6][20] Fiscal 2025 Fourth Quarter Results - Net sales for the fourth quarter were $104.5 million, an increase of 8% compared to $96.8 million in the prior year quarter, with the additional week contributing approximately $7.7 million [5][6] - Consolidated operating loss was $2.7 million, or (2.5%) of net sales, compared to operating income of $340,000, or 0.4% of net sales, in the prior year quarter [5][6] - Charges recorded in the fourth quarter totaled $3.1 million, including $1.3 million in inventory write-downs and $718,000 in bad debt expense due to a large customer bankruptcy [5][6] Fiscal 2025 Full-Year Results - Consolidated net sales for the full year were $397.5 million, reflecting a decrease of $35.8 million, or 8.3%, compared to the previous fiscal year [5][6] - Consolidated operating loss for the year was $18.1 million, or (4.6%) of net sales, compared to operating income of $12.4 million, or 2.9% of net sales, in the prior year [5][6] - Significant charges for the year totaled $10.8 million, including $4.9 million in restructuring costs and $3.1 million in bad debt expense [5][6] Segment Performance - Hooker Branded segment saw fourth quarter net sales rise by $3.8 million, or 10%, driven by a 14% increase in unit volume, although full-year sales decreased by 6.5% [7][8] - Home Meridian segment reported a fourth quarter net sales increase of $6.3 million, or 21.7%, with gross margin reaching 22.9%, the highest since 2016 [8] - Domestic Upholstery segment experienced a fourth quarter net sales decrease of $2.0 million, or 7%, with a full-year decrease of 9.9% [9] Cash, Debt, and Inventory - Cash and cash equivalents decreased to $6.3 million, down $36.9 million from the previous year-end, largely due to increased accounts receivable and planned inventory increases [11][12] - The company maintained financial flexibility with $41 million in available borrowing capacity under its new loan agreement as of the end of fiscal 2025 [11][12] - Inventory levels increased to support new product collections and mitigate supply disruptions [12] Management Commentary - The CEO highlighted that despite macroeconomic headwinds, the company gained market share in its Legacy divisions throughout fiscal 2025 [6] - The company is focused on cost reduction initiatives to improve operating income and cash flow, including the planned exit of the Savannah warehouse [6] - The management remains optimistic about future market share growth and revenue maximization through merchandising efforts and improved product availability [6]

Core Viewpoint - Hooker Furnishings Corporation has decided to exit its Savannah, Georgia distribution center and consolidate operations in existing facilities due to unsustainable business conditions caused by rising freight costs and a shift in competitive positioning for its Home Meridian segment's Accentrics Home brand [1][2]. Company Operations - The Savannah distribution facility commenced operations in October 2021 but faced challenges shortly after due to a significant increase in post-COVID container freight rates, which rose from approximately $4,000 to over $25,000 per container [2]. - The company liquidated inventory and closed the Accentrics Home brand in 2024 as part of a broader strategy to exit unprofitable businesses within the Home Meridian segment [2][3]. - Hooker Furnishings Corporation is a designer, marketer, and importer of various home furnishings, including casegoods, upholstered furniture, and outdoor furniture, serving residential, hospitality, and contract markets [4][5]. Financial Implications - The company anticipates recording net charges of between $1.6 million and $2.0 million in fiscal 2025 and between $3.0 million and $4.0 million in fiscal 2026 related to the Savannah exit [3]. - Preliminary estimates suggest potential savings of between $750,000 and $1.0 million in net operating expenses in fiscal 2026, with annualized savings expected to be between $4.0 million and $4.5 million starting in fiscal 2027 [3].

Company Overview - Hooker Furnishings (NASDAQ: HOFT) has a business model heavily reliant on imports from Asia, particularly China, which raises concerns regarding its cost structure and exposure to geopolitical risks [2]. Investment Insights - The Value Lab, an investment group, focuses on long-only value ideas and aims to identify mispriced international equities, targeting a portfolio yield of approximately 4% [2]. - The Valkyrie Trading Society consists of analysts who share high conviction investment ideas that are expected to generate non-correlated and outsized returns in the current economic environment [5]. Services Offered - The Value Lab provides members with a portfolio that includes real-time updates, 24/7 chat support, regular global market news reports, feedback on stock ideas, monthly new trades, quarterly earnings write-ups, and daily macroeconomic opinions [3].

Financial Performance - Consolidated net sales for the third quarter were $104.4 million, a decrease of $12.5 million, or 10.7%, compared to the same quarter of the previous year[113]. - For the nine-month period of fiscal 2025, consolidated net sales were $293.0 million, a decrease of $43.4 million or 12.9% compared to the same period of the previous year[114]. - The company reported a consolidated operating loss of $7.3 million and a net loss of $4.1 million, or ($0.39) per diluted share[113]. - The consolidated operating loss for the nine-month period was $15.4 million, with a net loss of $10.2 million, or ($0.97) per diluted share[114]. - Consolidated net loss for the third quarter was $4,131 million, a 158.7% decrease from a profit of $7,038 million in the same quarter last year[137]. Sales and Orders - The consolidated order backlog decreased by 5.3% compared to the end of the previous year's third quarter and 8.4% compared to the fiscal 2024 year-end[109]. - Hooker Branded incoming orders decreased by 13.3% year-over-year, with a quarter-end order backlog 30% lower than the prior year's third quarter[110]. - Home Meridian incoming orders increased by 8.1% compared to the previous year's third quarter, with a quarter-end backlog 32.2% higher than the prior year's third quarter[110]. - Domestic Upholstery incoming orders decreased by 4.8% during the quarter, with a quarter-end backlog 29.9% lower than the prior year's third quarter[111]. - The Home Meridian segment's net sales increased to $9,316 million, representing a 23.4% growth compared to $7,550 million in the prior year[128]. - Hooker Branded segment reported net sales of $12,098 million for the third quarter of fiscal 2025, a 14.8% increase from $10,535 million in the same period last year[128]. Cost and Expenses - The company incurred $3.1 million in costs related to its cost reduction plan during the third quarter[113]. - Consolidated selling and administrative (S&A) expenses rose by $4,400 million, or 18.3%, due to restructuring costs and bad debt expenses[128]. - The company incurred $3.1 million in restructuring costs and $2.4 million in bad debt during the third quarter, contributing to operating losses[135]. - The Domestic Upholstery segment's S&A expenses increased by $1.8 million, primarily due to bad debt expenses from a major customer's bankruptcy[130]. Profitability and Margins - Consolidated gross profit margin decreased to 23.0% in the third quarter, down from 28.9% in the prior year[122]. - The Home Meridian segment achieved a gross margin of 20.5%, its highest level since the acquisition in 2016[124]. - The Domestic Upholstery segment's gross margin decreased by 300 bps in the nine-month period of fiscal 2025[125]. Economic Conditions - The company is experiencing macro-economic headwinds and challenging conditions impacting the home furnishings industry[113]. - Positive economic indicators suggest a potential 10% increase in home sales for 2025, which may benefit the company's sales outlook[138]. Other Notable Events - The company recorded $2.4 million in bad debt expense due to a large customer's bankruptcy, triggering a tradename impairment of $2.0 million[113]. - Approximately 40% of the Home Meridian segment's sales decrease was due to the loss of a significant customer following its bankruptcy[120]. - All Other recorded approximately $470,000 in restructuring costs due to inventory write-downs and warehouse closure expenses[126]. - The effective tax rate for the third quarter of fiscal 2025 was 40.7%, significantly higher than 22.4% in the prior year, due to the annualization method[136]. - Cash used in operating activities for the nine-month period was $12,334 million, compared to $48,770 million in the previous year[140]. - The backlog for the Home Meridian segment was primarily driven by increased orders from the hospitality business[110].

Financial Data and Key Metrics Changes - The company reported a consolidated net loss of $4.1 million or $0.39 per diluted share in Q3 2025, compared to a consolidated net sales of $104 million, a decrease of 10.7% year-over-year [6][7] - For the nine-month period, consolidated net sales were $293 million, a decrease of 12.9% compared to the same period last year [6] Business Line Data and Key Metrics Changes - **Hooker Branded Segment**: Net sales decreased by $4 million or 10.7% in Q3 2025, primarily due to lower average selling prices. The segment reported an operating loss of $1.7 million [14][15] - **Home Meridian Segment**: Net sales decreased by $5.1 million or 11.8% in Q3 2025, with over 40% of the sales decrease attributed to the loss of a major customer due to bankruptcy. The segment reported an operating loss of $3.7 million [17][20] - **Domestic Upholstery Segment**: Net sales decreased by $3.2 million or 10% in Q3 2025, with a slight improvement in operating loss to $281,000 compared to previous quarters [22][23] Market Data and Key Metrics Changes - Incoming orders for Hooker Branded decreased by 13% year-over-year, while the quarter-end backlog was 30% lower than the prior year's third quarter [16] - Home Meridian's incoming orders increased by 8% compared to the previous year's third quarter, with a quarter-end backlog 32% higher than the prior year [18][19] Company Strategy and Development Direction - The company is focusing on cost reduction efforts and managing controllables while investing in initiatives to expand its addressable market, including a global licensing agreement with Margaritaville [9][10] - The company anticipates increased demand and has built up Hooker Branded inventory by $11 million or 40% compared to the previous quarter end [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about macroeconomic improvements, such as cooling inflation and interest rate cuts, which are expected to increase demand for furnishings [10][29] - The management team is confident in the company's financial condition and plans to maximize efficiencies while investing in expansion strategies [30] Other Important Information - The company reported cash and cash equivalents of $20.4 million at the end of Q3 2025, a decrease of $22.7 million from the previous year-end [25] - The company plans to finalize the refinancing of its credit facility and pay off term debt shortly [26] Q&A Session Summary Question: Changes in demand since the election - Management noted a noticeable positive bump in order rates since the election [36] Question: Impact of new casegoods collections on Q4 - The new collections are expected to improve shipments and position the company for the next fiscal year [38] Question: Further improvement in gross margin at HMI - Management indicated there is potential for further improvement, primarily due to exiting low-margin businesses [40] Question: Current inventory position and quality - Management described the current inventory position as the best in two years, focusing on high-quality SKUs [43] Question: Impact of the Margaritaville licensing deal - The licensing deal is expected to be very impactful across multiple divisions, opening new opportunities [48] Question: Potential for continued discounting during the holiday season - Management does not anticipate more discounting than normal [60] Question: Bankruptcy concerns and customer risk - Management acknowledged the significant impact of a major customer's bankruptcy but did not see a notable increase in distressed receivables [63] Question: Logistics and next steps for the licensing deal - Management is focused on coordinating efforts across divisions to ensure a successful launch [66] Question: Expectations for severance costs in Q4 and next year - Management does not expect significant additional restructuring costs and anticipates most savings will be evenly spread throughout the next year [68]

Group 1: Earnings Performance - Hooker Furniture reported a quarterly loss of $0.20 per share, significantly worse than the Zacks Consensus Estimate of $0.02, marking an earnings surprise of -1,100% [1] - The company posted revenues of $104.35 million for the quarter ended October 2024, exceeding the Zacks Consensus Estimate by 4.46%, but down from $116.83 million a year ago [2] - Over the last four quarters, Hooker Furniture has not surpassed consensus EPS estimates, indicating ongoing challenges in meeting market expectations [2] Group 2: Stock Performance and Outlook - Hooker Furniture shares have declined approximately 31.3% since the beginning of the year, contrasting with the S&P 500's gain of 27.6% [3] - The current consensus EPS estimate for the upcoming quarter is $0.19 on revenues of $102.3 million, while for the current fiscal year, it is -$0.37 on revenues of $390.9 million [7] - The estimate revisions trend for Hooker Furniture is currently unfavorable, resulting in a Zacks Rank 5 (Strong Sell), suggesting expected underperformance in the near future [6] Group 3: Industry Context - The Furniture industry, to which Hooker Furniture belongs, is currently ranked in the bottom 30% of over 250 Zacks industries, which may negatively impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, highlighting the importance of monitoring these changes [5]