by HMI segment continued to drag down revenues and earnings, but company has a path forward to profitability with exit of Accentrics Home
MARTINSVILLE, Va. — Hooker Furnishings reported declines in sales for the fourth quarter and full fiscal year 2023 ended Jan. 29.
Net sales for the quarter totaled $131.3 million, down 2.6% from the $134.8 million reported in the same period last year. For the full year, sales totaled $583.1 million, down 1.8% from the $593.6 million reported the year prior.
The company said the full year decline was driven by a $62.6 million or 22.4% decrease in net sales in the Home Meridian segment and partially offset by a $49.9 million, or 46.7% increase in sales in domestic upholstery. This marked the second consecutive year of double-digit sales gains at the division, which includes Bradington-Young, HF Custom (Sam Moore) and Shenandoah. The company said that the addition of the Sunset West outdoor brand also contributed to annual sales growth in domestic upholstery.
Hooker Branded sales, the company reported, were flat compared to the record sales it achieved in FY 2022.
The company said it recorded a $24.4 million noncash charge during the year related to its exit of Accentrics Home, and also related to the write-down of ACH inventories and other excess inventories in Home Meridian. This was lower than an originally anticipated $34 million as sales of inventory so far have been discounted less than previously anticipated. Still, the charge, the company said, drove decreased consolidated gross profit and margin, although higher warehousing and distribution costs in the Hooker Branded segment and the lower overall sales volume also contributed to the decrease.
As a result, the company also reported a consolidated operating loss of $6 million compared to operating income of $14.8 million for the full fiscal year.
For the quarter, the company had a net loss of $17.9 million, or $1.60 per share compared to a loss of $3.9 million, or 33 cents per share in the same period last year. For the full year, the company reported a net loss of $4.3 million, or 37 cents per share, compared to net income of $11.7 million or 99 cents per share last fiscal year.
“During a year challenged by economic and global supply-chain headwinds, we’re pleased to have achieved double-digit sales gains in Domestic Upholstery for the second consecutive year, and to have a strong finish at Hooker Branded with a $6.5 million sales increase in the fourth quarter,” said Jeremy Hoff, chief executive officer and director of Hooker Furnishings. “Adding to the positive momentum, our contract and hospitality furnishings businesses, H Contract and SLH, continued to recover from the pandemic’s negative impact on these categories in the past two years. While painful in the short term, we made the decision to exit the unprofitable ACH business rather than dragging out corrective actions for years. It is an intentional effort to resolve this more quickly and get HMI on the path to profitability sooner.”
“As we reported last month, this action is part of our final phase of reorganization at HMI, and because of this, we’re confident we can turn HMI to profitability by the end of this year,” he added. “Also, as part of reorganizing the HMI segment, we are repositioning the Prime Resources International business unit as a direct container-only business model. Changing the PRI model minimizes both cash and inventory risk and eliminates unnecessary margin erosion from costs related to maintaining domestic inventory.”
Segment results were as follows:
+ Hooker Branded reported $49.9 million in sales during the quarter, compared to $43.4 million the same period last year, a 14.9% increase. For the full year, sales were $199.6 million, compared to $200.7 million last fiscal year. It reported operating income of $5.1 million during the fourth quarter, compared to $5.6 million the same period in 2022. For the full year, operating income was $20.5 million, compared to $30.7 million last year. The company said the segment experienced abnormally low inventory levels in the first quarter of FY 23 due to Covid-related temporary factory closures in Vietnam in late 2021. In the third quarter, it added, there was a temporary delay in shipments due to inventory mix issues. Those issues were later resolved as inventory rose by $35 million in the segment compared to the prior year end and more than doubled compared to fiscal 2020 and 2021 year ends, the company said.
+ Home Meridian reported $44.6 million in sales for the fourth quarter, down 26.7% compared to the $60.9 million reported the same period last year. For the full year, sales were $216.3 million, down 22.4% from the $278.9 million reported last fiscal year. It reported an operating loss of $29.9 million during the quarter compared to a loss of $12 million the same period last year. For the full year, it reported an operating loss of $37.2 million, compared to $21.3 million last year. The company said that the ACH segment contributed about 13% of HMI’s overall revenue but accounted for more than half of the operating loss in the segment, largely due to the write-down of its inventories. The company added that the unit’s business model required significant investment in inventory and high handling costs to meet quick shipping demands. In addition, the lower-priced and lower-margin inventories at ACH carried historically high freight costs from the prior year.
+ Domestic Upholstery reported $33.7 million in sales during the quarter, up 18.6% from the $28.4 million in sales the same period last year. For the full year, sales were $156.7 million, up 46.7% from the $106.8 million reported last year. Operating income for the quarter totaled $583,000, down from the $785,000 reported last year. For the full year, operating income totaled $8.8 million, compared to $4.7 million last year. The company added that gross margin was 20.8% compared to 19.5% in the prior year. Higher sales volume and operating near full capacity, it added, “significantly improved overhead absorption and direct labor efficiency; however, price inflation of raw materials and higher freight surcharges negatively impacted profitability.
Commenting on key initiatives moving forward, Hoff shared the following message as part of the earnings releases:
“Hooker Furnishings enters the year well positioned to navigate a new landscape that’s shifting from historically high demand to a reliance on market share gains,” Hoff said. “We have multiple initiatives underway to broaden our share of the total addressable market, brand positioning and visibility. At the spring High Point Market next week, we’ll debut our nearly 120,000-square-foot Hooker Legacy Showroom in a prime location at the center of the market and encompassing the entire third floor of the Showplace building. Featuring abundant natural lighting, high ceilings, a modern presentation and an outdoor patio, the showroom will help us attract new customers, become a more important brand offering to all sales segments, and accelerate our multiple strategic growth initiatives through this engaging shopping experience.”
