Hooker Furnishings (NasdaqGS:HOFT) Q2 2026 Earnings Call September 11, 2025 09:00 AM ET Company ParticipantsEarl Armstrong - CFOJeremy Hoff - CEO & DirectorDave Storms - Director - Equity ResearchConference Call ParticipantsAnthony Lebiedzinski - Senior Equity Analyst - Specialty Retail/ConsumerOperatorGood day. Thank you for standing by. Welcome to the Hooker Furnishings Corporation's second quarter 2026 earnings webcast. At this time, all participants are on a listen-only mode. After the speaker's present ...

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 driven by declines at Home Meridian [4][5] - 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%, impacted by tariff-related buying hesitancy and the loss of a major customer due to bankruptcy, accounting for about 25% of the sales decline [3][16] - Domestic upholstery sales were flat in Q2, with a slight decline of 1.7% for the first six months, but operating losses were reduced by 68% 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, with July orders up 24% year-over-year [21] - The home furnishings industry continues to face challenges from low existing home sales, elevated mortgage rates, and persistent inflation, affecting consumer confidence and demand [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 remerchandising products and evaluating pricing on a SKU-level basis [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 current 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 $1.9 million in cash on hand, no outstanding amounts under its credit facility, and $67.9 million in available borrowing capacity [19] - The restructuring costs for the quarter totaled $2 million, with two-thirds attributed to cost of goods sold and one-third to 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 can the company get the Home Meridian segment back to profitability? - Management indicated that achieving a 25% reduction in overhead costs by the end of Q3 is crucial for short-term profitability [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 SG&A [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 [37][38] Question: What are the expectations regarding price increases? - Management clarified that they are evaluating pricing on a SKU-by-SKU basis and have a clear understanding of the 20% tariff impact [39][41] Question: Will the additional $2 million in charges coincide with the Savannah warehouse exit? - Management confirmed that the charges are primarily related to the closing of the Savannah warehouse [42]

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][5] - 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 in the same quarter last year [3][15] - Home Meridian net sales decreased by 44.5%, heavily impacted by tariff-related buying hesitancy and macroeconomic pressures [3][16] - Domestic upholstery segment's net sales were flat, with a slight decline of 1.7% for the first six months, but operating losses were reduced by 68% in Q2 [3][18] Market Data and Key Metrics Changes - The decline in Home Meridian was attributed to a loss of a major customer due to bankruptcy, accounting for about 25% of the sales decrease [4][16] - The hospitality business within Home Meridian saw a decline due to project timing, while traditional furniture channels faced macroeconomic pressures [3][16] 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][22] - The company is adapting to tariff impacts by evaluating pricing on a SKU-level basis and implementing mitigation strategies [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted that the home furnishings industry is facing challenges from low existing home sales, elevated mortgage rates, and persistent inflation [21] - There is optimism regarding the upcoming cost structure changes and the potential for growth when market demand returns [8][22] - The company is confident that its restructuring efforts will not hinder growth or customer service capabilities [10][22] Other Important Information - The company reported a significant improvement in operational results at Hooker branded and domestic upholstery, despite ongoing challenges [9] - Incoming orders for Hooker branded and domestic upholstery increased by nearly 11% and 1.6%, respectively, indicating some positive momentum [21] Q&A Session Summary Question: What is driving the increased orders at Hooker branded and domestic upholstery? - Management indicated subtle macro improvements at the retail level, with positive feedback from partners regarding Labor Day sales [27] Question: How do you plan to return the Home Meridian segment to profitability? - Management emphasized the importance of aligning cost savings with revenue growth, particularly focusing on customer relationships [29] Question: What is the breakdown of restructuring costs for the quarter? - Approximately two-thirds of the restructuring costs were in cost of goods sold, and one-third in selling and administrative expenses [31]