Hooker Furniture(US:HOFT)2023-06-08 16:02Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2024 were $121.8 million, a decrease of $25.5 million or 17% compared to the prior year [56] - Consolidated net income was $1.5 million or $0.13 per diluted share, down from $3.2 million or $0.26 per diluted share in the prior year [62] - Cash and cash equivalents increased to $31 million at the end of Q1 2024, up $12 million from the prior year [79] Business Line Data and Key Metrics Changes - In the Hooker Branded segment, net sales decreased slightly by 0.8% or $339,000 compared to the prior year [12] - Home Meridian segment saw a sales decrease of $20 million or 32% compared to the prior year, driven by lower sales from major furniture chains [68] - Domestic upholstery experienced a sales decline of $6 million or about 15%, marking the first quarterly sales decline in over two years [75] Market Data and Key Metrics Changes - Quarter-end backlog for Hooker Branded was lower than the prior year but remained 50% higher than pre-pandemic levels [73] - Incoming orders at HMI were lower than the prior year quarter due to the absence of orders from the Clubs channel [69] - The hospitality division's net sales more than doubled compared to the prior year, indicating a strong recovery in the hospitality industry [74] Company Strategy and Development Direction - The company is focusing on organic growth opportunities through expanded visibility, strategic product development, and operational improvements [19] - The transition to a new leaner business model at HMI is ongoing, with expectations of achieving profitability by the end of the fiscal year [66] - The launch of the new brand M and the rebranding of Sam Moore to HF Custom are part of the strategic initiatives to capture market share [11][15] Management's Comments on Operating Environment and Future Outlook - Management noted mixed retail conditions and economic uncertainties but observed positive trends in incoming orders for May and June [92] - The company expects some short-term volatility in sales and earnings at HMI but remains optimistic about achieving quarterly profitability by the end of fiscal 2024 [86] - Management emphasized the importance of aligning inventory levels with current demand and noted that inventory obsolescence has not been an issue [60] Other Important Information - The company generated $22 million in cash from operating activities during the quarter, which funded share repurchases and capital expenditures [80] - The liquidation of ACH inventories is about 80% complete, aiding in reducing the domestic warehousing footprint [63] - The company has an aggregate $27.2 million available under its existing revolver to fund working capital needs if necessary [83] Q&A Session Summary Question: Can you discuss the gross margin increase? - Management noted that the gross margin increased nearly three percentage points due to lower ocean freight costs and a return to more normalized discounting levels [27][33] Question: What is the status of the HMI warehousing footprint reduction? - Management stated they are 80% through the process and expect to reduce the footprint significantly by the end of the fiscal year [35] Question: How are incoming orders trending? - Management reported that order rates have improved across various brands, indicating a positive trend in demand [38][44] Question: What impact did the ERP rollout have on Sunset West? - Management confirmed that Sunset West faced disruptions during the ERP rollout, but these issues have largely been resolved [102] Question: What is the consolidated backlog number? - The consolidated backlog at the end of the quarter was $87 million [101]