Hooker Furniture(US:HOFT)2025-06-13 19:02Order Backlog and Sales Performance - As of May 4, 2025, the consolidated order backlog decreased by 2.7% from February 2, 2025, and by 40.3% from the same period last year, totaling $51.203 million[79]. - The Home Meridian segment's backlog fell significantly due to reduced demand and the loss of orders from a major customer that filed for bankruptcy in 2024[79]. - The consolidated order backlog for the Hooker Branded segment was $13.479 million, showing a slight increase from $13.109 million in the previous quarter but a decrease from $17.129 million year-over-year[79]. - The Domestic Upholstery segment's backlog increased to $19.401 million from $18.123 million in the previous quarter, indicating positive momentum[79]. - The Home Meridian segment's backlog was $18.069 million, down from $21.002 million in the previous quarter and significantly lower than $49.396 million year-over-year[79]. - Consolidated net sales for the first quarter were $85.3 million, a decrease of $8.3 million, or 8.8%, compared to the same period last year[83]. - Home Meridian accounted for over 90% of the sales decrease, with a net sales drop of $7.6 million, or 28.8%[94]. - Domestic Upholstery segment's net sales decreased by $1.1 million, or 3.7%, primarily due to decreased sales of indoor residential home furnishings[94]. Economic and Market Conditions - Existing home sales have remained around 75% of pre-pandemic levels for the past three years, indicating sluggishness in the housing market despite job growth[80]. - The average 30-year fixed mortgage rate in 2025 has been approximately 6.8%, a significant increase from the pandemic-era lows of about 3%[81]. - The University of Michigan's Consumer Sentiment Index dropped to 52.2 in May 2025, reflecting a nearly 30% decline since January 2025, indicating deteriorating consumer confidence[82]. - Macroeconomic factors, including high mortgage rates and low consumer confidence, are dampening demand in the home furnishings industry[80]. Financial Performance and Cost Management - Gross margin increased by 180 bps, driven by higher margins at Home Meridian and Domestic Upholstery, despite a decrease in net sales[84]. - Consolidated operating loss reduced by $1.6 million, or 31%, to $3.6 million, reflecting cost reduction initiatives[84]. - The company expects to achieve approximately $25 million in annualized savings by fiscal year 2027 through multi-phased cost reduction initiatives[85]. - Selling and administrative expenses decreased by $1.8 million in the first quarter, driven by cost reduction measures across all segments[96]. - The company anticipates net savings of over $14 million annually from fiscal 2027 as a result of ongoing cost reduction efforts[88]. - The company reported an operating loss of $3.6 million for the first quarter of fiscal 2026, an improvement of $1.6 million compared to the prior year[100]. - Consolidated net loss for the first quarter of fiscal 2026 was $3.1 million, a 25.4% improvement from a net loss of $4.1 million in the first quarter of fiscal 2025[102]. - Cash provided by operating activities increased to $14.7 million in the first quarter of fiscal 2026, up from $1.5 million in the prior year, driven by improved collections and inventory optimization[107]. Capital Expenditures and Investments - The company plans to spend approximately $2 to $3 million in capital expenditures over the remainder of fiscal 2026 to enhance operating systems and facilities[125]. - The ERP system upgrade is ongoing, with implementation completed in some divisions, although the project has been paused in the Home Meridian segment due to cost reduction initiatives[126]. Market Initiatives and Growth Strategies - The new Margaritaville licensing program and the Collected Living whole-home merchandising approach were highlighted as key initiatives for market expansion[105]. - A redesigned corporate website is set to launch in October, aimed at enhancing digital customer experience and supporting omni-channel growth[106]. - The company is experiencing modest improvement in furniture retail sales, with April sales up 5.6% year-over-year, although existing home sales remain subdued[103]. Risk Factors - The company faces risks related to tariff-related buying hesitancy among customers, particularly in value-focused segments[79]. - The company is exposed to market risk from changes in the cost of raw materials, particularly wood, fabric, and foam products, which could increase due to rising home construction activity[131]. - The company negotiates firm pricing in U.S. Dollars for imported products, primarily from suppliers in Vietnam and China, but remains exposed to foreign currency exchange rate fluctuations[132]. - A relative decline in the value of the U.S. Dollar could increase the price paid for imported products beyond negotiated periods, potentially impacting sales volume or profit margins[133]. Debt and Financial Obligations - The company had $22.6 million in outstanding loans and $6.7 million in letters of credit as of May 4, 2025, with $40.7 million of availability based on the current borrowing base[124]. - As of May 4, 2025, the company had $22.6 million in principal amount of outstanding loans, with a potential annual increase in interest expenses of approximately $226,000 for a 1% increase in the SOFR rate[130]. Dividends - The board of directors declared a quarterly cash dividend of $0.23 per share, payable on June 30, 2025, to shareholders of record at June 16, 2025[127].