Hooker Furniture(HOFT) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2021 were reported at $104.6 million, a decrease of 22.8% or $30.9 million compared to the previous year [10] - The company reported a preliminary net loss of $1.1 million, a decrease of $3.1 million from the $2 million net income in the prior year [10] - Preliminary loss per share was $0.09 compared to earnings per share of $0.17 in the prior year [11] - Consolidated gross profit decreased from $25.5 million to $18.7 million, representing a decline from 18.8% to 17.8% as a percentage of net sales [42] Business Line Data and Key Metrics Changes - In the Hooker Branded segment, net sales declined by $12.4 million or 31% [21] - The Domestic Upholstery segment saw a net sales decline of $8.5 million or 33.7% [21] - The Home Meridian segment reported sales of $57.7 million, down 14.7% from the prior year, but showed a preliminary operating loss improvement of 52% over the prior year [25] Market Data and Key Metrics Changes - Consolidated orders declined steeply by over 70% and 65% in March and April, respectively, but showed improvement in May with a decline of about 7% [14] - E-commerce sales accounted for 35% of total sales in the Home Meridian segment, significantly higher than typical levels [27] - The company noted that traditional furniture retailers were closed for two months, impacting sales, while other channels like e-commerce and clubs performed well [19] Company Strategy and Development Direction - The company is focusing on multiple distribution channels, which proved beneficial during the pandemic [19] - Plans to host Mega account retailers for private product presentations to mitigate the impact of canceled trade shows [34] - New product initiatives include a home office launch and a casual dining program, responding to market trends [71] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the recovery, noting that the worst of the retail slowdown may be behind them [38] - The company remains in a strong financial position, with a cash balance increase of $15 million since the fiscal year-end [46] - Management emphasized the importance of a strong balance sheet over income statements during challenging times [49] Other Important Information - The company declared a quarterly cash dividend of $0.16 per share, maintaining its history of consistent dividend payments [18] - Inventory levels decreased by approximately $19 million or 29% from the beginning of the fiscal year, indicating effective inventory management [32] - The company is monitoring capital expenditures closely, with a target of $3 million for the fiscal year [95] Q&A Session Summary Question: Sales channel mix and e-commerce performance - Management indicated that e-commerce sales for Hooker Legacy Brands were likely in the 15% to 20% range, lower than Home Meridian's 35% [54] Question: Cost control measures implemented - Cost control measures included salary reductions, layoffs, and significant cuts in spending, resulting in a $2 million reduction in fixed costs [58] Question: Exposure to China and tariffs - Approximately 12% of shipments came from China in Q1, with expectations of maintaining a similar percentage going forward [60] Question: Regional exposure and recovery - Management noted that the Northeast and upper Midwest may lag in recovery compared to the South and West [63] Question: Safety protocols and operational efficiency - The company is following CDC guidelines for safety, with no substantial additional costs expected from these measures [66] Question: New product categories in response to COVID-19 - The company is launching new home office products and expanding its product line in response to increased demand [71] Question: Customer outlook and changes in consumer behavior - Management expects sustained strength in e-commerce and noted that some traditional retailers have increased their online sales significantly [78] Question: Supply chain constraints - There are some lengthening lead times from suppliers, but the company remains a significant customer and expects to receive priority [81]