by Overall 22.9% drop in consolidated sales reflects continued soft demand for home furnishings
MARTINSVILLE, Va. — Hooker Furnishings reported a drop in sales for its fiscal 2024 third quarter, but an increase in net income during the same period.
The sales were impacted by what the company described as continued soft demand for home furnishings as well as the impact from its exit from its Accentrics Home division.
While net sales declined in each of its three segments, the company said that they increased in its Home Meridian division compared to the previous two quarters — signaling ongoing improvements in the division including operating income of $900,000 compared to a $3.2 million operating loss last year. Sales in the Hooker Branded segment also rose compared to the prior quarter.
Overall consolidated sales fell 22.9% during the quarter to $116.8 million, compared to $151.6 million in the same period last year. Meanwhile, net income rose 45.4% to $7 million, or 65 cents per share, compared to $4.8 million, or 42 cents per share, the same period last year.
For the first nine months of the fiscal year, its sales totaled $336.5 million, compared to $451.8 million last year, a 25.5% drop. Net income for the first nine months totaled $9.3 million, or 85 cents per share, compared to $13.6 million, or $1.14 per share, last year, a 31.6% decrease.
“Despite a challenging macroeconomic environment for the home furnishings industry, we’re proud of our team for persevering through some difficult decisions and short-term pain to create a more sustainable and profitable business model for Hooker Furnishings,” said Jeremy Hoff, chief executive officer. “After spending considerable time repositioning HMI to focus on its core products and businesses, it is encouraging to see HMI report a quarterly profit for the first time in two years and contribute to our overall profitability. Liquidating excess inventories, rightsizing our overhead and exiting unprofitable businesses have put us in a much stronger overall position. Ongoing execution of our strategic growth initiatives is our main focus.”
He added that an ongoing housing market driven by high interest rates and a shift in consumer discretionary spending away from home furnishings remain a challenge. “We’re encouraged by positive indicators like the normalization of ocean freight rates, eased supply chain constraints, more stable raw material costs and increased labor availability.”
He also noted that demand is improving with consolidated orders up 15.7% or $12.7 million compared to the prior-year quarter. For the first nine months, he noted, consolidated orders rose 33.5%, or $75.8 million, during the period. Most of this increase, he added, was driven by orders in the Home Meridian segment, which he described as “unusually low in both prior-year periods.”
Also during the quarter, operating income rose to $8.8 million, compared to $6.4 million in the same period last year, a 36.6% increase. For the first nine months, it was $12.1 million, compared to $17.6 million the same period last year, down 31.2%.
By segment, activity was as follows:
Hooker Branded sales totaled $39.1 million, compared to $56.6 million the same period last year, a 31% drop. For the first nine months, sales totaled $118.9 million, compared to $154.1 million the same period last year, a 22.8% drop. Operating income in the segment totaled $7.3 million, compared to $5.9 million the same period last year, up 19.6%. For the full nine months, operating income in the segment totaled $13.3 million, compared to $16.4 million last year.
The company said that weak demand drove the net sales decrease as did short-term delays related to the implementation of a new ERP system over Labor Day weekend, which had an estimated $3 million impact. It noted that incoming orders also rose 7% during the quarter compared to last year’s third quarter and this year’s second quarter.
“Although quarter-end order backlog was lower than the prior-year quarter end, it increased from this year’s second-quarter end and remained nearly 70% higher than pre-pandemic levels at the end of the fiscal 2020 third quarter,” the company said.
The Home Meridian segment reported a 13.6% decline in net sales, which totaled $43.7 million, compared to $50.6 million in the same period last year. For the full nine months, the segment reported $114.5 million in sales, compared to $171.7 million the same period last year, a 33.3% decline.
The company said that the quarterly sales decreases in the e-commerce channel previously served by Accentrics Home accounted for more than 40% of the decreases in the segment. The remaining sales decreases were driven by sales decreases in SLF, PRI and PFC, which serve independent furniture stores and large furniture chains.
Operating income totaled $923,000 compared to a loss of $3.2 million the same period last year. For the full nine months, the segment had an operating loss of $4.5 million compared to an operating loss of $7.3 million the same period last year. The company noted that HMI’s gross profit and margin increased by $3.4 million or 940 bps during the quarter. It said this was driven by the segment’s exit from unprofitable sales channels and product lines, decreased product costs and increased profitability at Samuel Lawrence Hospitality. The gains also resulted from decreased costs in its Georgia warehouse and decreased wage expenses because of organizational and personnel changes.
Sales decreases drove a slight decrease in gross profit during the quarter, although its gross margin increased by 530 bps because of the previously mentioned factors and the absence of warehouse transition and start-up costs incurred during the prior year’s first quarter.
In the domestic upholstery segment, sales totaled $32.6 million, compared to $43.3 million the same period last year, a 24.7% decrease, while sales in the first nine months totaled $98.6 million, compared to $123 million the same period last year, a 19.8% drop.
The segment reported Q3 operating income of $688,000, compared to $3.8 million last year, and during the full nine months, reported $2.7 million in operating income, compared to $8.3 million the same period last year.
The company said that gross profit and margin in the segment both decreased during the quarter and nine-month period, driven by sales decreases. Direct material costs, the company said, were 220 bps and 310 bps below prior-year periods as a result of more stable raw materials costs. However, they were more than offset by under-absorbed direct costs, which the company said were 440 bps and 370 bps higher compared to the prior-year quarter and nine-month periods.
Inventories also decreased by $15 million compared to the year end and $46 million compared to the prior-year quarter. Incoming orders also were 19% higher than the prior-year third quarter, but lower than the current year first and second quarters, “as retailers are matching inventories to current soft demand for home furnishings. Quarter-end backlog was lower than the same period last year and the first and second quarters of fiscal 2024.”
