Hooker Furniture(HOFT) - 2025 Q4 - Annual Report

Customer Concentration - The company’s top five customers accounted for approximately 24% of consolidated sales in fiscal 2025, with no single customer exceeding 7%[27] - Less than 2% of the company’s sales in fiscal 2025 were to international customers, defined as sales outside of the United States and Canada[27] Supply Chain and Sourcing - The company’s five largest domestic upholstery suppliers accounted for 31% of raw materials purchases for domestic upholstered furniture manufacturing operations in fiscal 2025[26] - The company has observed price increases in imported raw materials, including fabrics, steel, and hides, following the implementation of initial reciprocal tariffs in April 2025[26] - The company’s reliance on offshore sourcing exposes it to risks related to fluctuations in the prices of purchased finished goods and customs issues[13] - Payment for imported products is generally due 10 to 14 days after quality audit inspections are complete[32] Inventory and Backlog - As of February 2, 2025, the consolidated order backlog was $71.824 million, a 27$15 million reduction in the Home Meridian backlog and a $3.4 million reduction in the Hooker Branded backlog[37] - The Home Meridian segment's backlog is considered a helpful indicator of sales for the upcoming 90-day period, while the Hooker Branded and Domestic Upholstery segments' backlogs are viewed as indicators for the upcoming 30-day period[35] - The Domestic Upholstery backlog did not include Sunset West, which was acquired at the beginning of fiscal 2023 and had approximately$1.6 million in backlog at fiscal 2020 year-end[38] - The company recorded a significant backlog increase during the COVID-19 crisis, reaching historical levels at the end of fiscal 2021 and 2022 due to supply chain challenges[36] Workforce and Employee Well-being - The company had 1,034 full-time employees as of February 2, 2025, with 895 located in the United States and 139 in Asia[42] - The company is committed to providing competitive compensation and comprehensive health benefits to ensure the well-being of its employees[45] Sustainability Initiatives - The company has implemented several sustainability initiatives, including purchasing renewable energy for multiple facilities and achieving 100% renewable energy operation for Sunset West and HF Custom[44] - The company has established partnerships with organizations like the Arbor Day Foundation and the Sustainable Furnishings Council to promote environmental responsibility and sustainability[44] Compliance and Ethics - The company maintains a Code of Business Conduct and Ethics, requiring all employees to comply with anti-corruption and anti-bribery training annually[46] - The company is subject to various federal, state, and local laws and regulations, but compliance has not materially affected its financial position in the past[48] Operational Changes - The company reduced the physical footprint of its Georgia warehouse by 400,000 square feet during fiscal 2024 and announced a planned exit from this warehouse in March 2025[29] - The company’s exit from the Accentrics Home business unit was driven by the need to reduce inventory for e-commerce shipping requirements[29] - The company does not use derivative financial instruments to manage exchange rate risks but may consider doing so in the future[25] - The company’s domestic upholstery segment products are made to order and carry significant amounts of raw materials for production[30]