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]