Financial Data and Key Metrics Changes - 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 [3] - Operating loss was reduced by $1.6 million or 31% to $3.6 million, reflecting cost reduction initiatives [3] - Net loss was $3.1 million or $0.29 per diluted share, an improvement from the prior year's net loss of $4.1 million or $0.39 per diluted share [4] Business Line Data and Key Metrics Changes - Hooker Branded achieved breakeven for the quarter, with net sales increasing slightly due to higher unit volume [4] - Domestic Upholstery segment saw a net sales decrease of about $1 million or 3.7%, but gross profit increased by $575,000 due to reduced material and labor costs [20] - Home Meridian's net sales decreased by $7.6 million or about 29%, primarily due to a significant reduction in unit volume and loss of a major customer [19] Market Data and Key Metrics Changes - The overall decrease in consolidated sales was driven primarily by a double-digit sales decrease at HMI, which is positioned in the mid-price segment affected by import tariffs [4] - Existing home sales remain well below pre-pandemic levels, impacting furniture demand [10] - Furniture retail sales showed modest improvement, with April sales increasing 5.6% year over year [24] Company Strategy and Development Direction - The company is executing a phased cost reduction strategy aimed at achieving approximately $25 million in annualized savings by next fiscal year [12] - A new warehouse facility in Vietnam was opened to enhance supply chain efficiency and reduce lead times [5] - The company is focused on product innovation, cost optimization, and operational excellence to capitalize on emerging opportunities [25] Management Comments on Operating Environment and Future Outlook - The home furnishings industry is navigating a challenging environment due to persistent softness in the housing market and declining consumer sentiment [10] - Management believes they have successfully mitigated the impact of a 10% tariff through price increases and participation by source factories [11] - The company is optimistic about fiscal May orders, which were the highest since February [26] Other Important Information - Cash and cash equivalents stood at $18 million, an increase from year-end, primarily due to accounts receivable collections [21] - The company maintained financial flexibility with about $40 million in available borrowing capacity under its revolving credit facility [22] - The company announced a regular quarterly dividend, reflecting ongoing confidence in its outlook [22] Q&A Session Summary Question: Can you comment on the cadence of shipments from February through April? - Management noted that the cadence changed drastically due to tariffs, particularly affecting the HMI customer [30] Question: Can you quantify the impact of discounting on gross margins at Hooker Branded? - Management did not have specific quantification available [31] Question: What is driving the higher orders at the Hooker legacy brands in May? - The increase is attributed to a broadened merchandising strategy with Collected Living, which is starting to show positive effects [33] Question: Any comments on HMI's performance in May and early June? - There is still significant uncertainty due to tariffs, which is affecting performance [34] Question: How did Memorial Day sales go for retail partners? - Overall sentiment was relatively positive for most retailers during Memorial Day [36] Question: What is the cadence for cost savings initiatives for the rest of the year? - Management expects a positive impact from Phase one and anticipates significant savings from Phase two in Q4 [42] Question: What are the capital allocation priorities after dividends and debt? - Strengthening the balance sheet is the top priority, with dividends being a high priority as well [43] Question: Will the strong momentum from May carry over into the rest of the year? - Management believes the first half will be stronger than the second half, but is cautious about predicting sustained momentum [44]

Core Insights - Hooker Furnishings Corporation reported its fiscal 2026 first quarter results, highlighting stable legacy sales and ongoing cost-saving initiatives as key drivers for performance [1][2][3] Financial Performance - The company reported consolidated net sales of $85.3 million, a decrease of $8.3 million or 8.8% compared to the prior year [4] - Operating loss was reduced by $1.6 million, or 31%, to $3.6 million, attributed to cost-saving initiatives despite lower net sales [4] - Gross margin improved by 180 basis points, maintaining overall gross profit levels despite lower net sales [4] - The net loss for the quarter was $3.1 million, or ($0.29) per diluted share, an improvement from a $4.1 million loss, or ($0.39) per diluted share in the prior year [4][33] Cost Reduction Initiatives - The company is executing a multi-phase cost reduction strategy aimed at achieving approximately $25 million in annualized savings by fiscal year 2027 [6][8] - Initial cost reductions have already resulted in $2.2 million in savings, with expectations of $14 million in cost savings net of offsets and special charges for fiscal 2026 [5][8] - The strategic shift to a new warehouse in Vietnam is expected to enhance supply chain efficiency and reduce lead times from about 6 months to 4–6 weeks [11][12] Segment Performance - Hooker Branded segment net sales increased slightly by 0.8%, while Domestic Upholstery segment saw a decrease of 3.7% [4][12] - Home Meridian segment net sales decreased by $7.6 million, or 28.8%, primarily due to the loss of a major customer and reduced sales from import tariff-related hesitancy [19] - Despite sales decreases, Domestic Upholstery significantly narrowed operating losses by 55% [19] Market Conditions - The home furnishings industry is facing challenges due to persistent softness in the housing market, higher mortgage rates, and declining consumer sentiment [3][21] - Existing home sales remain well below pre-pandemic levels, impacting furniture demand [3][21] - Consumer confidence has dropped to near historic lows, leading many households to pull back on discretionary spending [3][21] Strategic Outlook - The company is focused on product innovation, cost optimization, and operational excellence to navigate ongoing economic challenges [22] - Key initiatives include the launch of the Margaritaville licensing program and the Collected Living merchandising approach, which received positive feedback at the April High Point Market [23][24] - The company anticipates that improvements in macroeconomic conditions will enhance its position for growth and shareholder value [5][22]