Hooker Furniture(HOFT) - 2026 Q2 - Quarterly Results

Executive Summary & Key Performance Drivers The company is driving towards profitability through cost-reduction and growth initiatives, with key performance indicators showing progress in Q2 and 1H FY26 Executive Commentary CEO Jeremy Hoff outlines strategic steps to achieve profitability through cost reduction and growth, with Hooker Branded reaching breakeven and Domestic Upholstery significantly reducing losses - Company is taking decisive steps to return to profitability through cost-reduction and growth initiatives[2] - Hooker Branded achieved breakeven in Q2 FY26 despite weak demand and restructuring charges[3] - Domestic Upholstery reduced operating loss by nearly 70% in Q2 FY26, including restructuring costs[3] - HMI's fixed cost structure is expected to be aligned for a sustainable business by the end of Q3 FY26, with performance significantly enhanced by year-end[3] - New expense structure, reducing fixed costs by approximately 25%, is largely expected to be in place by the end of Q3 FY26[3][10] Key Performance Drivers: Q2 & 1H FY26 The company is executing a multi-phase cost reduction strategy targeting $25 million in annualized savings by FY27, with Q2 FY26 showing mixed results across segments and significant debt reduction - Multi-phase cost reduction strategy aims for approximately $25 million in annualized savings by fiscal year 2027[5] - Achieved $3.7 million in expense reductions in 1H FY26, despite $1.7 million in restructuring charges[5][6] Key Performance Metrics | Metric | Q2 FY26 | Change YoY | | :-------------------------- | :------ | :--------- | | Hooker Branded Sales | +$465K | +1.3% | | Hooker Branded Operating Results | Breakeven | vs. $329K loss PY | | Domestic Upholstery Operating Loss | Reduced by nearly $900K | | | Consolidated Net Sales | $82.1M | -13.6% | | Consolidated Operating Loss | $4.4M | vs. $3.1M PY | | Consolidated Net Loss | $3.3M | | | Debt Repayment YTD | $16.5M | | | Borrowing Capacity | $57.7M | | - HMI net sales down 44.5% YoY, driven by customer bankruptcy impact and tariff mitigation[6] - Q2 orders for Hooker Branded increased by 11%, and Domestic Upholstery by 2%, with backlog up 7% YoY[6] Cost Reduction and Operational Strategy The company is executing a multi-phase cost reduction plan targeting $25 million in annualized savings by FY27, while also pursuing strategic growth initiatives Multi-Phase Cost Reduction Plan Details The company is implementing a multi-phase cost reduction strategy to achieve approximately $25 million in annualized savings by fiscal year 2027, focusing on warehousing, distribution, and administrative expenses - Target of approximately $25 million in annualized savings by FY27, representing nearly 25% of fixed costs[5][8][10][11] - Savings breakdown includes $11 million in warehousing/distribution and $14 million in selling/administrative expenses[8] Cost Reduction Plan Summary | Fiscal Year | Initiative | Identified Reductions | Achieved Savings | Restructuring Charges | | :---------- | :-------------------------------- | :-------------------- | :--------------- | :-------------------- | | FY25 | Phase 1 | $10 million | $3 million | N/A | | FY26 | Phase 2 | $15 million | $3.7 million (1H) | $1.7 million (1H) | | FY27 | Annualized Target | N/A | $25 million | N/A | - Incurred $4.9 million in restructuring charges in FY25, including $3.6 million in severance[11] - Incurred $2.5 million in restructuring costs in 1H FY26, including $1.7 million in severance and warehouse consolidation, and $0.8 million from inventory liquidation at the Georgia warehouse[11] - Expecting approximately $2 million in additional charges in 2H FY26, primarily related to fixed asset write-offs and severance for the Savannah warehouse exit[11] - Savannah warehouse closure and lease termination effective October 31, 2025[11] - Vietnam warehouse opened in May 2025, reached two-thirds capacity, reducing direct container lead times from six months to four to six weeks[11][12] Phase 1: Initial Cost Reductions (Fiscal 2025) Phase 1 of the cost reduction plan identified $10 million in expense reductions for fiscal 2025, achieving $3 million in savings through facility downsizing and workforce reductions - Identified $10 million in expense reductions in fiscal 2025, achieving $3 million in savings[5] - Reduced fixed costs by over $10 million through facility downsizing, workforce reductions, and other fixed cost reductions[11] - Incurred $4.9 million in restructuring charges in FY25, including $3.6 million in severance[11] Phase 2: Logistics & Operations Consolidation (Fiscal 2026) Phase 2 targets an additional $15 million in expense reductions for fiscal 2026, with $3.7 million achieved in 1H FY26, including the closure of the Savannah warehouse and opening of a Vietnam warehouse - Identified an additional $15 million in expense reductions for Fiscal 2026[5] - Achieved $3.7 million in expense reductions in the first half of fiscal 2026, despite $1.7 million in restructuring charges[5] - Savannah Warehouse: Entered into an agreement for full closure and lease termination effective October 31, 2025[11] - Vietnam Warehouse: Opened in May 2025, reached approximately two-thirds capacity, reducing direct container lead times from six months to four to six weeks[11] - Incurred $2.5 million in restructuring costs during 1H FY26, including $1.7 million in severance and warehouse consolidation costs and $0.8 million from inventory liquidation[11] Strategic Growth Initiatives The company is investing in strategic growth opportunities, including the Collected Living platform, leveraging the Vietnam warehouse, and launching the Margaritaville licensed collection - Strategic growth priorities include advancing Collected Living merchandising platform, leveraging Vietnam warehouse, and launching Margaritaville licensed collection[7][12] - Margaritaville launch is scheduled for the October High Point market, positioning the company for the second half of fiscal 2027[12] - Vietnam warehouse is already shortening container lead times and creating new mixability opportunities, reducing overall inventory requirements[12] Segment Performance Analysis This section analyzes the Q2 and 1H FY26 performance of Hooker Branded, Home Meridian, and Domestic Upholstery segments, highlighting sales, gross profit, and operating results Hooker Branded Segment The Hooker Branded segment achieved modest sales growth and breakeven operating results in Q2 and 1H FY26, with incoming orders and backlog showing positive trends Hooker Branded Segment Performance | Metric | Q2 FY26 | 1H FY26 | Change YoY (Q2) | Change YoY (1H) | | :-------------------- | :------ | :------ | :-------------- | :-------------- | | Net Sales | +$465K | +$766K | +1.3% | +1.1% | | Gross Profit | -$167K | -$560K | | | | Gross Margin | 29.1% | 29.5% | -80 bps | -100 bps | | Operating Results | Breakeven | Breakeven | vs. $329K loss PY | vs. $150K loss PY | | Restructuring Costs | $655K | $782K | | | | Incoming Orders (Q2) | +10.6% | | | | | Quarter-end Backlog | $15,701K | | Consistent YoY, +20% from FY-end | | Home Meridian (HMI) Segment The Home Meridian segment experienced significant sales decline and operating losses in Q2 and 1H FY26, primarily due to reduced hospitality business, macroeconomic pressures, and a major customer bankruptcy Home Meridian Segment Performance | Metric | Q2 FY26 | 1H FY26 | Change YoY (Q2) | Change YoY (1H) | | :-------------------- | :------ | :------ | :-------------- | :-------------- | | Net Sales | -$13.6M | -$21.2M | -44.5% | -37.2% | | Gross Profit | -$4.9M | -$5.6M | | | | Gross Margin | 6.2% | 10.6% | -1,330 bps | -590 bps | | Operating Loss | $3.9M | $6.8M | vs. $0.9M loss PY | vs. $4.2M loss PY | | Restructuring Costs | $1.2M | $1.4M | | | | Quarter-end Backlog | $16,138K | | Down from $43,918K PY | | - Sales decline driven by project-based hospitality (40%), traditional channels (35% due to macro/tariffs), and major customer bankruptcy (25%)[16] - Gross margin decline due to unfavorable customer/product mix, higher warehousing expenses, severance, and inventory liquidation[16] Domestic Upholstery Segment The Domestic Upholstery segment maintained flat net sales in Q2 FY26, significantly reducing operating losses and expanding gross margins, with incoming orders and backlog showing growth Domestic Upholstery Segment Performance | Metric | Q2 FY26 | 1H FY26 | Change YoY (Q2) | Change YoY (1H) | | :-------------------- | :------ | :------ | :-------------- | :-------------- | | Net Sales | Flat | -$1.0M | | -1.7% | | Gross Profit | +$659K | +$1.2M | | | | Gross Margin | 18.5% | 18.4% | +220 bps | +240 bps | | Operating Loss | -$408K | -$1,004K | Reduced by $877K (68%) | Reduced by $1.6M (61%) | | Restructuring Costs | $152K | $265K | | | | Incoming Orders (Q2) | +1.6% | | | | | Quarter-end Backlog | $19,313K | | +7% YoY | | - Indoor residential divisions posted sales increases, signaling early recovery[16] - Sunset West sales fell 9.7% due to supply chain disruptions, which stabilized post-quarter[16] Financial Position and Capital Management This section details the company's cash, debt, and inventory levels, along with its capital allocation strategies focused on debt reduction, liquidity, and shareholder returns Cash, Debt and Inventory Cash and cash equivalents decreased to $821,000 at quarter-end, primarily due to $16.5 million in debt repayment and dividends, while inventory levels decreased and borrowing capacity remained strong Cash, Debt and Inventory Levels | Metric | As of August 3, 2025 (Q2 FY26) | Change from Feb 2, 2025 (FY-end) | | :-------------------------- | :------------------------------ | :------------------------------ | | Cash and Cash Equivalents | $821,000 | -$5.5 million | | Inventory Levels | $58.5 million | -$12.3 million | | Debt Repaid YTD | $16.5 million | | | Available Borrowing Capacity | $57.7 million (Q2 end) | | | Available Borrowing Capacity (as of Sept 10, 2025) | $67.9 million | | Capital Allocation CFO Earl Armstrong highlights the company's focus on debt reduction, liquidity strengthening, and shareholder returns through dividends, supported by cost-saving measures and strategic growth priorities - Reduced debt, strengthened liquidity, and continued returning capital to shareholders through dividends over the past year[20] - Cost-saving measures are enhancing near-term liquidity and creating a foundation for strategic growth[20] - Focus remains on capital allocation strategies that drive long-term value creation, balancing cost initiatives with key growth priorities[20] Tariff Impacts and Mitigation Strategies The company is implementing various mitigation strategies across segments to address the new 20% US tariff on imports from Vietnam and assessing potential impacts of possible lumber tariffs - US Government announced a 20% tariff on imports from Vietnam, effective August 1, 2025[17] - Domestic Upholstery mitigates impact through new fabric sourcing for component parts[18] - Hooker Branded is remerchandising lines and evaluating pricing on a SKU-by-SKU basis to manage tariff impact[18] - HMI has implemented near-term mitigation efforts and is pursuing additional measures for existing collections[18] - Company is assessing potential impacts of possible lumber tariffs[18] Business Outlook Despite industry headwinds from low home sales and inflation, the company observes encouraging order momentum and focuses on scaling its cost structure, launching new collections, and pursuing growth in key channels - July orders for Hooker Branded and Domestic Upholstery were up 24% YoY[21] - Q2 orders for Hooker Branded were up nearly 11%, and Domestic Upholstery up 1.6%[21] - Industry headwinds include low existing home sales, elevated mortgage rates, and persistent inflation[21] - Company focus areas: scaling cost structure, Margaritaville collection debut, and growth in hospitality, contract, and outdoor channels, supported by Vietnam warehouse[21] Company Information & Disclosures This section provides an overview of Hooker Furnishings, its business, and important disclosures regarding investor communications and forward-looking statements About Hooker Furnishings Hooker Furnishings Corporation is a global designer, marketer, and importer of diverse furniture and home décor, also manufacturing premium custom furniture domestically across various brands - Hooker Furnishings is a global leader in home furnishings, designing, marketing, and importing various furniture types and home décor[1][24] - Company also domestically manufactures premium residential custom leather, fabric-upholstered, and outdoor furniture[24] - Operates multiple brands including Hooker Furniture, Bradington-Young, HF Custom, Hooker Upholstery, Shenandoah Furniture, H Contract, Home Meridian (Pulaski Furniture, Samuel Lawrence Furniture, Prime Resources International, Samuel Lawrence Hospitality), and Sunset West[24] Additional Information Hooker Furnishings uses its Investor Relations website as a primary channel for disclosing material information to investors, in compliance with Regulation FD - Investor Relations website is used for disclosing material information to investors and complying with Regulation FD[25] - Investors should monitor the IR website, press releases, SEC filings, conference calls, webcasts, and social media[25] Forward-Looking Statements This section highlights that forward-looking statements are subject to various risks and uncertainties, including tariffs, economic conditions, and operational challenges, with no obligation for updates - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially[26] - Key risks include tariffs (Vietnam, potential lumber), general economic conditions (housing, interest rates, inflation), cyclical nature of the furniture industry, and outcomes of cost reduction and HMI restructuring plans[28] - Other risks include Savannah warehouse exit, Vietnam warehouse operations, customer concentration, offshore sourcing reliance, IT security, and product defects[28] - The company undertakes no obligation to update forward-looking statements[29] Consolidated Financial Statements This section presents the company's consolidated statements of operations, comprehensive income, balance sheets, and cash flows for Q2 and 1H FY26, highlighting key financial changes Consolidated Statements of Operations For Q2 FY26, net sales decreased to $82.1 million, resulting in a net loss of $3.3 million, while 1H FY26 also saw reduced net sales and a net loss of $6.3 million Consolidated Statements of Operations | Metric | Q2 FY26 (13 Weeks, in thousands) | Q2 FY25 (13 Weeks, in thousands) | 1H FY26 (26 Weeks, in thousands) | 1H FY25 (26 Weeks, in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net Sales | $82,149 | $95,081 | $167,465 | $188,652 | | Gross Profit | $16,837 | $20,922 | $35,838 | $40,294 | | Operating (Loss) / Income | $(4,401) | $(3,149) | $(7,965) | $(8,169) | | Net (Loss) / Income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | Basic EPS (in dollars) | $(0.31) | $(0.19) | $(0.60) | $(0.57) | Consolidated Statements of Comprehensive (Loss) / Income The consolidated comprehensive loss for Q2 FY26 was $3.3 million and $6.4 million for 1H FY26, including actuarial adjustments and their tax effects Consolidated Statements of Comprehensive (Loss) / Income | Metric | Q2 FY26 (13 Weeks, in thousands) | Q2 FY25 (13 Weeks, in thousands) | 1H FY26 (26 Weeks, in thousands) | 1H FY25 (26 Weeks, in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net (Loss) / Income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | Total Comprehensive (Loss) / Income | $(3,311) | $(1,996) | $(6,397) | $(6,132) | Consolidated Balance Sheets As of August 3, 2025, total assets decreased to $278.0 million, driven by reductions in current assets, while total liabilities and shareholders' equity also declined Consolidated Balance Sheets | Metric | As of Aug 3, 2025 (in thousands) | As of Feb 2, 2025 (in thousands) | Change (in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | :-------------------- | | Total Assets | $278,043 | $313,942 | -$35,899 | | Cash and Cash Equivalents | $821 | $6,295 | -$5,474 | | Inventories | $58,532 | $70,755 | -$12,223 | | Total Current Assets | $108,142 | $141,124 | -$32,982 | | Long Term Debt | $5,225 | $21,717 | -$16,492 | | Total Liabilities | $84,923 | $109,559 | -$24,636 | | Total Shareholders' Equity | $193,120 | $204,383 | -$11,263 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $18.1 million in 1H FY26, while net cash used in financing activities rose substantially due to debt repayments Consolidated Statements of Cash Flows | Metric | Aug 3, 2025 (in thousands) | July 28, 2024 (in thousands) | | :------------------------------------ | :------------------------- | :------------------------- | | 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) | | Payments for Long-Term Loans | $(48,955) | $(700) | | Proceeds from Revolving Credit Facility | $32,440 | $0 | Segment Financial Performance This section provides a detailed financial breakdown of net sales, gross profit, and operating results by segment, along with order backlog data for Q2 and 1H FY26 Net Sales, Gross Profit / (Loss), and Operating (Loss) / Income by Segment This section details net sales, gross profit, and operating results for Hooker Branded, Home Meridian, Domestic Upholstery, and All Other segments for Q2 and 1H FY26, highlighting varied performance Net Sales by Segment | Segment | Q2 FY26 (in thousands) | % Net Sales (Q2 FY26) | Q2 FY25 (in thousands) | % Net Sales (Q2 FY25) | 1H FY26 (in thousands) | % Net Sales (1H FY26) | 1H FY25 (in thousands) | % Net Sales (1H FY25) | | :------------------ | :--------------------- | :-------------------- | :--------------------- | :-------------------- | :--------------------- | :-------------------- | :--------------------- | :-------------------- | | Hooker Branded | $36,250 | 44.1% | $35,785 | 37.6% | $73,359 | 43.8% | $72,593 | 38.5% | | Home Meridian | $16,932 | 20.6% | $30,516 | 32.1% | $35,742 | 21.3% | $56,940 | 30.2% | | Domestic Upholstery | $28,677 | 34.9% | $28,556 | 30.0% | $57,590 | 34.4% | $58,583 | 31.1% | | All Other | $290 | 0.4% | $224 | 0.2% | $774 | 0.5% | $536 | 0.3% | | Consolidated | $82,149 | 100% | $95,081 | 100% | $167,465 | 100% | $188,652 | 100% | Gross Profit / (Loss) by Segment | Segment | Q2 FY26 (in thousands) | % Net Sales (Q2 FY26) | Q2 FY25 (in thousands) | % Net Sales (Q2 FY25) | 1H FY26 (in thousands) | % Net Sales (1H FY26) | 1H FY25 (in thousands) | % Net Sales (1H FY25) | | :------------------ | :--------------------- | :-------------------- | :--------------------- | :-------------------- | :--------------------- | :-------------------- | :--------------------- | :-------------------- | | Hooker Branded | $10,541 | 29.1% | $10,708 | 29.9% | $21,605 | 29.5% | $22,165 | 30.5% | | Home Meridian | $1,054 | 6.2% | $5,946 | 19.5% | $3,787 | 10.6% | $9,397 | 16.5% | | Domestic Upholstery | $5,305 | 18.5% | $4,646 | 16.3% | $10,585 | 18.4% | $9,351 | 16.0% | | All Other | $(63) | -21.7% | $(378) | -168.8% | $(139) | -18.0% | $(619) | -115.5% | | Consolidated | $16,837 | 20.5% | $20,922 | 22.0% | $35,838 | 21.4% | $40,294 | 21.4% | Operating (Loss) / Income by Segment | Segment | Q2 FY26 (in thousands) | % Net Sales (Q2 FY26) | Q2 FY25 (in thousands) | % Net Sales (Q2 FY25) | 1H FY26 (in thousands) | % Net Sales (1H FY26) | 1H FY25 (in thousands) | % Net Sales (1H FY25) | | :------------------ | :--------------------- | :-------------------- | :--------------------- | :-------------------- | :--------------------- | :-------------------- | :--------------------- | :-------------------- | | Hooker Branded | $10 | 0.0% | $(329) | -0.9% | $37 | 0.1% | $(150) | -0.2% | | Home Meridian | $(3,916) | -23.1% | $(896) | -2.9% | $(6,754) | -18.9% | $(4,169) | -7.3% | | Domestic Upholstery | $(408) | -1.4% | $(1,285) | -4.5% | $(1,004) | -1.7% | $(2,593) | -4.4% | | All Other | $(87) | -30.0% | $(639) | -285.3% | $(244) | -31.5% | $(1,257) | -234.5% | | Consolidated | $(4,401) | -5.4% | $(3,149) | -3.3% | $(7,965) | -4.8% | $(8,169) | -4.3% | Order Backlog The consolidated order backlog was $51.2 million as of August 3, 2025, with varied trends across segments, including a significant decrease for Home Meridian and growth for Domestic Upholstery Order Backlog by Segment | Reporting Segment | August 3, 2025 (in thousands) | February 2, 2025 (in thousands) | July 28, 2024 (in thousands) | | :------------------ | :---------------------------- | :------------------------------ | :--------------------------- | | 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 |