by Earnings call also offers insights into recent successes including performance at Sunset West, plus first quarterly increase in 2 years at Home Meridian division
MARTINSVILLE, Va. — Hooker Furnishings’ latest second-quarter earnings call with analysts offered further details of the steps the company is taking to achieve cost savings that aim to return it to profitability in the coming months heading into 2025.
In summary, the company experienced a 2.8% decrease in sales during the quarter — a significant improvement from the 23.2% reduction in sales during the first quarter — and a net loss of $2 million, or 19 cents per share, also down from the $4.9 million, or 39 cents per share, net loss during the first quarter.
For the full first half, it reported sales of $188.7 million, down 14.1% from $219.6 million the same period last year. Its net loss in the first half was just over $6 million, or 57 cents per share, compared to net income of $2.2 million, or 20 cents per share, the same period last year.
Thus, as anticipated, the company has initiated cost reductions to help return it to profitability moving forward. According to CEO Jeremy Hoff, the company has begun a cost savings plan that expects to reduce fixed costs by 10% or an annualized savings of $10 million, half of which will be realized in the third and fourth quarters.
Hoff also noted that the company expects to exceed that target, thanks in part to a reduction in staff to be achieved by layoffs and early retirements. Hoff noted during the call that this will achieve an annualized savings of nearly $6 million, although it also expects to record some $3 million in severance costs in its FY 2025 third quarter.
Despite this reduction, which includes the cutting of 20 positions and 24 early retirements in the U.S., plus an undisclosed amount of cutbacks overseas, the company has retained certain key personnel including Chief Creative Officer Caroline Hipple, who is leading a remerchandising of Hooker Legacy Brands, a move he said, “aims to position the company as a more integrated whole-home consumer-centric resource with an elevated aesthetic and presentation.”
Hoff also told Home News Now that in deciding which costs to cut, the company aimed to find anything non-personnel-related where it could save money. This included the consolidation of certain operations along with fixed cost reductions such as reducing the size of the company’s Savannah, Georgia, warehouse by half, restructuring the company’s Boho division into the Hooker Branded business and eliminating the division’s retail store and dedicated warehouse.
“And all those things cut down by what we would have had to do by at least half personnel-wise. … We minimized it as much as we could,” he said. “This is the most brutal thing I have been through in my career. We don’t take it lightly. You are affecting people’s lives and it’s tough.”
He added that in considering the staff reductions, the company also aimed to avoid any direct impact on the service it provides to its customers, but that also was as sensitive as possible to those impacted.
“Our whole mentality was how much can we find to save as many people as we can through this process,” he said, noting that is why the company decided to offer some early retirements where it could, while avoiding any direct impact on its ability to service customers. “We did a really hard thing but I believe we did it in a way that respected our people as much as possible through a tough process.”
He also said there are no plans to reduce headcount further at this point.
During the call with analysts, the company noted several other developments that can be seen as positives in an extremely challenging environment. For one, its sales decrease and net loss were lower than the first quarter.
Another unexpected bright spot were the results from the Home Meridian division. Chief Financial Officer Paul Huckfeldt noted that HMI, home to Pulaski, SLF and Prime Resources International, among others, saw its net sales rise by $1.6 million, or 5.6% in Q2, largely resulting from strong performance in its hospitality division.
“This marks the first year-over-year quarterly sales increase in two years for this segment,” Huckfeldt noted.
“Additionally, sales through major furniture chains and mass merchants increased during the quarter,” he added, noting that the gains were partially offset by decreases in sales to independent furniture stores and through the e-commerce channel.
He said that the division also reported “an increase in gross profit achieving a gross margin of 19.5%, one of the highest levels since the acquisition of that business in 2016.”
Meanwhile, HMI’s operating loss was $896,000 for the quarter, well below the $3.3 million the same period last year. HMI’s operating loss for the full first half also fell to $4.2 million, from nearly $5.5 million the same period last year.
“We believe that we’ve reached the point at HMI where we have a significant path to profitability that is sustainable for the foreseeable future once demand normalizes for the home furnishings industry,” Huckfeldt said, noting that much of the division’s $13.9 million sales decrease in the division during the first half was largely due to the absence of $11 million in liquidation sales for Accentrics Home, which the company exited last year.
Another bright spot for the business was the performance of its Sunset West outdoor division, which the company said had a single-digit increase in net sales following a 20% gain in the previous quarter. It also reported a 10.7% sales increase for the first half, compared to an overall 11.2% decline in the domestic upholstery segment during the same period resulting from sales decreases at Bradington-Young, HF Custom and Shenandoah.
“Now that we’ve repositioned Sunset West from a West Coast-centric distribution and supply chain to a bicoastal operation, the division is hitting its stride, and we believe it will be a key area for growth for our company,” Huckfeldt noted, adding that about half of demand is now coming from the East Coast, “a trend that we believe will continue to grow.”
In his concluding remarks during the conference call, Hoff noted that there are other bright spots in the broader economy that could help the industry moving forward, ranging from lower inflation to a surge in mortgage refinancing in August that could put more money in consumers’ pockets resulting from lower monthly payments on credit cards, homes and automobiles.
“Additionally, existing home sales grew in July, ending a four-month sales decline,” he added. “Our strong balance sheet, financial condition and seasoned management team will allow us to navigate the remaining downturn as we focus on maximizing efficiencies with the planned cost reductions. We’ll continue investing in expansion strategies that will position us for improved profitability and revenue growth when demand returns.”
