Hooker Furnishings Corporation Q1 FY2026 earnings call

Cost Reduction Initiatives

• Hooker Furnishings is executing a multi-phase cost reduction strategy aiming for ~$25 million in annualized savings by next year. Phase one (began last year) included facility downsizing, workforce reduction, etc., achieving over $3M in fiscal 2025 and expecting over $10M annually. Phase two (logistics and operations consolidation) involves opening a Vietnam warehouse, expecting $25M net annualized savings by fiscal 2027.

Segment Performances

• Hooker Branded achieved breakeven; Domestic Upholstery and Home Meridian significantly reduced operating losses. Gross margins improved by 190 basis points.

Market Conditions

• Home furnishings industry faces challenges from housing market softness, higher mortgage rates, declining consumer sentiment, and tariff uncertainties. Mitigated 10% tariff with 5% price increase; waiting on Vietnam tariff decision in July.

Product Innovations

• Launched new case good collections in Collected Living format, Living Your Way modular upholstery program, Margaritaville licensing program, and redesigned corporate website.

Hooker Branded: Modest increase in sales due to higher unit volume, but tempered by lower average selling prices and discounts; achieved breakeven for the quarter. Domestic Upholstery: Net sales decreased by about $1 million or 3.7% primarily due to reduced demand for indoor residential home furnishings, but outdoor furnishings (Sunset West) saw a 12.7% sales increase. Gross profit increased by $575,000 with a 260 basis point increase in gross margin; operating loss reduced by 55%. Home Meridian: Net sales decreased by $7.6 million or 29% due to reduced unit volume and loss of a major customer; however, gross profit only decreased by $568,000 with a 200 basis point increase in gross margin; operating loss reduced by 17%. Consolidated net sales were $85.3 million, a decrease of $8.3 million or 8.8% from prior year. Operating loss reduced by $16 million or 31% to $3.6 million. Net loss was $3.1 million or $0.29 per diluted share, an improvement from prior year's net loss.

Forward-Looking Statements

• Fiscal May orders at Hooker Legacy were highest since February 2023, with Hooker branded up nearly 40% and domestic upholstery up 25% compared to prior year. Expect the second half of the year to be stronger than the first based on historical trends.

Risks

• Macro-economic headwinds including housing market softness, higher mortgage rates, declining consumer sentiment.
• Tariff uncertainties impacting consumer confidence and sales, especially for HMI in the mid-price segment.

Q: Looking back at the first quarter, can you comment on the cadence of shipments from February through April?

A: The cadence changed drastically due to tariffs, affecting HMI more than other segments.

Q: As far as gross margins, any way to quantify the impact of discounting at Hooker Branded?

A: No, not quantifiable at the moment.

Q: What's driving higher orders at Hooker legacy brands in May?

A: Broadened merchandising strategy with Collected Living.

Q: Update on HMI in May and early June?

A: Still uncertain due to tariffs with no clarity until July 9.

Q: Thoughts on Memorial Day performance?

A: Relatively positive for most retailers.

Q: Cadence of cost savings initiatives for rest of the year?

A: Phase one expected $2.5M less cost than last year, phase two impacts in Q2, Q3, Q4.

Q: Capital allocation priorities?

A: Strengthen balance sheet, dividends are high priority, no mention of share buybacks.

Q: Seasonality for the year?

A: Second half expected stronger based on historical trend.