Hooker Furniture(HOFT) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net sales from continuing operations for Q3 2026 were $70.7 million, a decrease of $11.9 million or 14.4% compared to the prior year period [2] - Gross profit decreased by $2.4 million, but gross margin improved to 25.6%, up from 24.8% last year [3] - Operating loss from continuing operations totaled $16.3 million, and net loss from continuing operations was $12.5 million or $1.18 per diluted share [5] - Year-to-date consolidated net sales from continuing operations were $211.1 million, down $22 million or 9.4% compared to the prior year [6] Business Line Data and Key Metrics Changes - Domestic upholstery sales increased by 3% in Q3, while Hooker branded sales rose by 1.1% [3][6] - Hooker Branded net sales increased by 1.1% in both Q3 and the nine-month period, driven by higher average selling prices despite lower unit volume [15] - Domestic upholstery gross profit increased by $261,000 in Q3, with gross margin remaining consistent year over year [16] Market Data and Key Metrics Changes - The hospitality business experienced a decline in sales due to the timing of shipments, with several large projects shipping in the previous year's third quarter [3] - Discontinued operations for Pulaski Furniture and Samuel Lawrence Furniture saw combined net sales decline by $11.3 million in Q3 and $22.5 million year-to-date [8] Company Strategy and Development Direction - The company is focusing on exiting low-margin, tariff-sensitive categories and directing efforts towards stronger brands [9] - A new Margaritaville license collection is expected to drive significant organic growth, with initial purchase commitments exceeding historical levels [10] - The company aims to transition from a cost reduction strategy to an organic growth story, emphasizing core expertise in better-to-best home furnishings [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic pressures, including elevated housing prices and inflation, but expressed cautious optimism about improving profitability [22] - The company believes it is better positioned to improve profitability even in a prolonged downturn due to a more efficient cost structure and sharper portfolio focus [22] Other Important Information - The company recorded $22.1 million in non-cash impairment charges, which do not affect liquidity or ongoing operations [4] - Cash and cash equivalents stood at $1.4 million, with $63.8 million in available borrowing capacity at quarter end [18] - A new share repurchase program was authorized, allowing for the repurchase of up to $5 million of outstanding common shares [19] Q&A Session Summary Question: Impact of shipment timing in hospitality division - Management noted that the hospitality brand had significant contributions from large hotel projects last year, which did not repeat this quarter [24] Question: Sustaining sales gains in core business - Management expressed confidence in sustaining sales gains due to product momentum and significant product introductions [25][26] Question: Retail partners' feedback on Black Friday sales - Management reported relative positivity from retail partners regarding sales during peak retail times, but emphasized the need for more consistent demand [27][28] Question: Revenue impact from discontinued operations - Management indicated that discontinued operations had a significant drag on operating income, with further details expected in upcoming filings [29] Question: Long-term operating margins outlook - Management affirmed that it is reasonable to expect a return to historical operating margins when market conditions improve [30][31] Question: Future showroom operations - Management confirmed the exit from the Atlanta showroom and indicated a small presence in Las Vegas will be maintained [37][38] Question: Margaritaville margin profile - Management suggested that the margin profile for Margaritaville could be estimated based on historical Hooker Branded margins [41] Question: Future cost-cutting measures - Management highlighted that additional savings would be identified as they finalize their cost structure and divestiture of brands [42][43] Question: Signs of demand recovery - Management noted cautious optimism from partners but did not identify specific green shoots indicating demand recovery [45][46]