Hooker Furnishings Corporation Q4 FY2026 earnings call

• Fiscal 2026 was transformative with navigating significant tariffs, opening a fulfillment warehouse in Asia, exiting unprofitable divisions, reducing fixed costs by about $26.3 million. - Delivered slight market share growth, with key strength in key businesses offsetting softness and launched Margaritaville line. - Hooker branded segment had $1.9 million operating income for the year vs prior year operating loss. - Domestic upholstery segment improved in fourth quarter, reducing operating loss by over 50%. - Evaluating potential recovery of import tariff amounts, monitoring new tariff developments.

Hooker Branded: Net sales decreased 2.9% for fiscal 2026. Operating income was $1.9 million for the year. Fourth quarter net sales decreased 2.9% due to one fewer selling week, supplier delays, and weather-related shipping disruptions. Gross margin expanded by 200 basis points. Incoming orders were flat year over year, while backlog increased nearly 26%. Domestic Upholstery: Net sales decreased 2.7% for fiscal 2026. Despite a significant impairment charge in the third quarter, the segment showed improvements in the fourth quarter, reducing its operating loss by more than 50% compared to the prior year quarter. Gross margin improved by 230 basis points. Incoming orders decreased slightly by about 2%, while backlog increased about 8% year over year. Other: Consolidated net sales from continuing operations were $67 million, a decrease of 17.2 million or about 21% compared to the prior year period. Operating income was $629,000 for the quarter, with $1.2 million in Hooker branded, $617,000 in all other, and an operating loss of $1.2 million in domestic upholstery. For full fiscal year 2026, net sales from continuing ops were $278.1 million, a decrease of $39.2 million or 12.4% compared to the prior year.

• Expect significant improvement in earnings in fiscal 2027 bolstered by Margaritaville product line. - Incoming orders in Hooker-branded and domestic upholstery segments have increased year-over-year for three consecutive quarters (adjusted for extra week in prior year's fourth quarter). - Positioned to report improved results even if current market conditions persist with more efficient cost structure and streamlined portfolio.

• Severe winter weather in January reduced net sales for the quarter by $3 to $4 million. - Tariffs were a significant disruptor, with U.S. Supreme Court ruling on certain tariffs and potential new tariffs under different legal authority. - Macro pressures and tariff-related purchasing hesitancy among customers, particularly large furniture retailers affecting discontinued operations.

Q: Regarding Hooker branded segment's gross margin, was there anything unusual in the fourth quarter and sustainability?

A: No unusual factors in fourth quarter for gross margin, expect continued strong margins.

Q: For domestic upholstery segment, talk about gross margin impacts and foam costs.

A: Domestic upholstery is combining divisions for strategic initiative, efficiencies improved but need more revenue. Foam costs are increasing due to industry disruptions like fire at a Texas facility and Middle East war affecting raw materials.

Q: On Margaritaville, interest level from retailers and shipments?

A: Committed galleries have grown, more optimistic about its impact on growth, shipments expected in back half of fiscal 2027.

Q: Weather disruptions, recoverability and Q1 impact?

A: Backlog should be mostly caught up by end of Q1.

Q: Shipping second-order impacts and supply chain?

A: No significant second-order impacts.

Q: Tariffs, runway and industry reaction?

A: Industry is managing through tariff disruption, no one knows what new tariffs will be.

Q: Future divestitures, plant/warehouse closures?

A: No current plans for divestitures or closures.

Q: Tariff rebate amount?

A: Material but not disclosed.

Q: Backlog and total orders at end of year and vs prior year?

A: Order backlog at end of year was roughly $36 million, total orders in 2026 were $256 million vs prior year's $257 million