HOOKER FURNISHINGS Corp Q3 FY2025 earnings call

• Despite macroeconomic challenges and Q3 charges, there's sequential improvement in core business profitability and cost reduction efforts to be realized in Q4.
• Positive macro developments like cooling inflation and interest rate cuts expected to increase furniture demand.
• October High Point Market introductions were well-received, with strong placements at Sunset West.
• Hooker Branded built up inventory by $11 million to support new casegoods collections, aiming to accelerate speed to market.
• Announced global licensing agreement with Margaritaville to expand addressable market and growth opportunities.

Hooker Branded: Net sales decreased by $4 million or 10.7% in Q3, compared to prior year period. Nine-month net sales decreased by $14 million or 11.7%. Operating loss of $1.7 million in Q3, with approximately $1 million in severance charges. Inventories increased by $11 million or 40% compared to previous quarter end. Home Meridian: Net sales decreased by $5.1 million or 11.8% in Q3 due to reduced unit volume. Nine-month net sales decreased by $19 million or 16% largely due to absence of $11 million ACH liquidation sales. Operating loss of $3.7 million in Q3, driven by bad debt, impairment charges, and severance costs. Gross margin 20.5%, highest since 2016. Domestic Upholstery: Net sales decreased by $3.2 million or 10% in Q3. Nine-month net sales decreased by $10.6 million or 10.8%. Operating loss of $281,000 in Q3, an improvement from prior quarters, with approximately $560,000 in severance costs.

• Anticipates increased demand due to cooling inflation and recent interest rate cuts.
• Aggressively building inventory to support new major casegoods collections and best-selling SKUs for current and next fiscal year.
• Cost savings from restructuring efforts expected to be more fully realized starting in Q4.

• Ongoing low demand in the home furnishings industry.
• Bad debt expense of $2.4 million related to bankruptcy of a large customer.
• Noncash impairment charges of $2 million to certain trade names under Home Meridian.
• Potential US East Coast port strike in January 2025 could impact production and inventory ramp-up.

Q: Since the election, have you guys seen any notable changes in demand from your customers?

A: Yes, noticed a noticeable positive bump in order rates since the election.

Q: How impactful could the three new casegoods collections be for the fourth quarter?

A: Gives better shot at shipments at Hooker Branded, with first cutting in November and second in January, and benefits for next fiscal year.

Q: Do you think you can further improve gross margin at HMI?

A: A little bit, mainly due to getting out of unprofitable businesses like ACH.

Q: Describe current inventory position and quality?

A: Inventory position is the best in probably two years, with increase in good SKUs and cleaning up slow-moving stuff.

Q: Any more details on Margaritaville license?

A: Affects multiple divisions, opens doors in hospitality and contract divisions, with launch in October.

Q: Potential for continued discounting in holiday season?

A: Normal promotions, targeted in e-comm.

Q: Any other highly at-risk customers besides the big one?

A: No particularly significant change in pace of bankruptcies or distressed receivables besides the big customer.

Q: Logistics and next steps for Margaritaville license?

A: Pulling together elements from various divisions to put best foot forward on launch.

Q: Further severance costs in 4Q and spread of $10 million cost savings?

A: No significant additional restructuring costs expected, most savings in place for better part of the year, $10 million likely evenly spread.