Hooker Furniture Achieves Double-Digit Sales, Income Gains in Second Quarter
Hooker Furniture Corporation reported consolidated net sales of $162.5 million for its fiscal 2022 second quarter ended August 1, 2021, a $32.0 million, or 25%, increase compared to the prior year period.
Net income for the second quarter was $7.5 million, or $0.62 per diluted share, a 29% increase from a year ago.
Consolidated operating income for the fiscal 2022 second quarter was $9.7 million versus $7.5 million in the prior year period, and operating margin improved moderately despite higher freight and raw material costs and ongoing shortages of ocean vessel and trucking capacity.
“For the second consecutive quarter, Hooker Furnishings achieved double-digit sales and profitability increases, with all three of our reportable segments posting year-over-year sales gains of more than 20%,” said Jeremy Hoff, chief executive officer and director of Hooker Furnishings. “While we expected sizable improvements compared to the early months of the pandemic a year ago, we continue to surpass our goal to return to our pre-pandemic growth track. Consolidated sales were up over $10 million compared to the second quarter of fiscal 2020, and profits were up about 79% compared to the same quarter.”
In addition, “Consumer and retail demand remain historically strong, with consolidated backlogs nearly double and incoming orders up 27% over last year for the six-month period,” Hoff added.
“While industry-wide demand continues to be high, we’re facing significant headwinds on the supply side that will impact us in the short term,” said Hoff. “The surge of the Delta variant of COVID-19 has caused factories in our source countries of Vietnam and Malaysia to close, with reopening prospects currently uncertain. In addition, global logistics challenges with higher freight and transit costs and lower transportation capacity, along with raw materials inflation and some labor shortages, remain ongoing.”
“We believe we are utilizing all available levers to help mitigate these headwinds, and we remain optimistic about our long-term position as we work our way through these transitory disruptions,” Hoff said.
For the fiscal 2022 first half, consolidated net sales were $325.4 million, an increase of $90.2 million or 38%, and net income was $16.9 million, or $1.40 per diluted share, compared to a net loss of $29.0 million or ($2.46) per diluted share, all compared to the prior year first half. The loss a year ago in the first half was due to non-cash impairment charges related to a write-down of goodwill and tradenames in the Home Meridian segment and goodwill in the Shenandoah division prompted by the impact of the COVID-19 downturn.
Segment Reporting: Hooker Branded
“The Hooker Branded Segment again had an exceptionally strong quarter, exceeding management’s expectations in sales, profitability, product flow and efficiency,” Hoff said. Net sales increased by $11.1 million or 29%, versus the prior year period. Incoming orders increased by 38%, and the backlog tripled as compared to the prior-year second quarter.
Operating income for the fiscal 2022 second quarter was $8.9 million, or 17.9% of net sales, compared to $6.1 million or 15.7% of net sales in the prior-year second quarter.
“We attribute our strong sales and profitability performance in the Hooker Branded Segment to industry-wide demand and the dramatic improvements and expansions of our product lines,” said Hoff, adding that the recent June High Point International Market was “the biggest in written orders since April 2016. The Commerce & Market collection, with pricing, scale and styling targeting Millennials, was one of our largest accent furniture launches in our company’s history. In addition, our strategy to rationalize our stocking inventory to focus on top sellers is helping us maximize shipping and production capacity, product flow and cash utilization,” Hoff said.
Segment Reporting: Home Meridian
HMI’s second quarter sales were $87 million, up approximately 23% over the prior year. Revenues were boosted by continued strong retail demand versus weak shipments during the second quarter last year due to Covid-19-related disruptions. “Year to date, we have seen a strong sales rebound with our traditional furniture channel retail base, as those customers pick up share lost to emerging channels during the opening months of the pandemic shutdowns last year. These emerging channel declines are the result of exceptionally strong demand in the prior year period,” he said.
“Lower allowances, reduced fixed and other operating expenses were all favorable, but not enough to mitigate the impact of all-time record freight costs,” Hoff said. The Home Meridian segment finished the quarter at essentially breakeven due to all the factors discussed above.
Incoming orders increased by about 4% as compared to the fiscal 2022 first quarter but decreased by 35% compared to the prior year second quarter when business rebounded dramatically after the height of the initial Covid crisis. Backlog at the end of the quarter was 62% higher than the prior year’s second quarter.
Segment Reporting: Domestic Upholstery
The Domestic Upholstery Segment net sales increased by $5.0 million or 28.7% in the fiscal 2022 second quarter compared to the prior year quarter due to significant sales increases at Bradington-Young and Shenandoah and to a lesser extent at Sam Moore.
Operating income for the fiscal 2022 second quarter was $457,000 or 2.0% of net sales compared to a small operating loss in the prior-year second quarter.
Backlogs at all three divisions were at historical highs, and incoming orders increased by 73% as compared to the prior year second quarter. “Profitability for the quarter was negatively impacted in May due to ongoing foam shortages which improved in June and July. A three-week production month in July also had an impact. There’s a lot of optimism in the Domestic Upholstery segment for the second half of the year,” said Hoff. “In addition to strong demand, we have seen stabilization of some raw materials issues such as foam allocation shortages. Our management focus is on servicing backlog with quality product and speed of delivery improvement which should drive increased profitability.”
Segment Reporting: All Other
All Other’s net sales decreased by $307,000 or 10% in the fiscal 2022 second quarter as compared to the prior year period due to an 11.3% sales decrease at H Contract. Operating income for the fiscal 2022 second quarter was $232,000 or 8.5% of net sales, compared to $350,000 or 11.5% of net sales in the prior year period.
As the retirement living market begins to slowly recover, H Contract incoming orders were up 6.4% over the prior-year second quarter, and backlog was 49% higher than the prior-year quarter end.
Cash, Debt and Inventory
Cash and cash equivalents stood at $37.4 million at fiscal 2022 second quarter-end, a decrease of $28.4 million compared to the balance at fiscal 2021 year-end due primarily to a $33.4 million increase in inventory as we continue to build inventories to meet increased customer demand and prepare for the holiday selling season.
Accounts receivable balances increased by $15 million as the result of increased net sales. We used existing cash on hand to pay $4.3 million in cash dividends to our shareholders and $3.5 million of capital expenditures to enhance our business systems and facilities.
Outlook
“In the current environment, supply chain and logistics continue to be our biggest challenges,” Hoff said. “The recent temporary Covid-related factory shutdowns in Vietnam and Malaysia in particular will have negative ripple effects throughout the global supply chain for some time.”
“Our Hooker Branded and Domestic Upholstery segments, where we have better ability to keep more product flowing and to ship from our significant US and Asia warehousing capacity is less challenged than Home Meridian, since Home Meridian ships primarily to larger customers via container and is more quickly impacted by factory shutdowns. Consequently, we expect our second-half net sales and income to be adversely affected by these challenges, particularly in our Home Meridian segment.”
“Our strong balance sheet and variable cost business model give us confidence that we can weather the current industry-wide challenges and should allow us to take advantage of the healthy consumer demand environment and long-term positive economic indicators and demographic trends for home-related industries,” Hoff concluded.
Dividends
On September 2, 2021, the Company’s board of directors declared a quarterly cash dividend of $0.18 per share, payable on September 30, 2021, to shareholders of record at September 16, 2021.
For the full second quarter results, click here.
About Hooker Furniture
Hooker Furniture Corporation, in its 98th year of business, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture and fabric-upholstered furniture for the residential, hospitality and contract markets. The Company also domestically manufactures premium residential custom leather and custom fabric-upholstered furniture. It is ranked among the nation’s largest publicly traded furniture sources, based on 2020 shipments to U.S. retailers, according to a 2021 survey by a leading trade publication. Major casegoods product categories include home entertainment, home office, accent, dining, and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand. Hooker’s residential upholstered seating product lines include Bradington-Young, a specialist in upscale motion and stationary leather furniture, Sam Moore Furniture, a specialist in upscale occasional chairs, settees, sofas and sectional seating with an emphasis on cover-to-frame customization, Hooker Upholstery, imported upholstered furniture targeted at the upper-medium price-range and Shenandoah Furniture, an upscale upholstered furniture company specializing in private label sectionals, modulars, sofas, chairs, ottomans, benches, beds and dining chairs in the upper-medium price points for lifestyle specialty retailers. The H Contract product line supplies upholstered seating and casegoods to upscale senior living facilities. The Home Meridian division addresses more moderate price points and channels of distribution not currently served by other Hooker Furniture divisions or brands. Home Meridian’s brands include Accentrics Home, home furnishings centered around an eclectic mix of unique pieces and materials that offer a fresh take on home fashion, Pulaski Furniture, casegoods covering the complete design spectrum in a wide range of bedroom, dining room, accent and display cabinets at medium price points, Samuel Lawrence Furniture, value-conscious offerings in bedroom, dining room, home office and youth furnishings, Prime Resources, value-conscious imported leather upholstered furniture, Samuel Lawrence Hospitality, a designer and supplier of hotel furnishings, and HMidea, 2019 start-up that provides better-quality, ready-to-assemble furniture to mass marketers and e-commerce customers and includes our Clubs channel. Hooker Furniture Corporation’s corporate offices and upholstery manufacturing facilities are located in Virginia and North Carolina, with showrooms in High Point, N.C. and Ho Chi Minh City, Vietnam. The company operates distribution centers in North Carolina, Virginia, Georgia, California and Vietnam. Please visit our websites hookerfurniture.com, bradington-young.com, sammoore.com, hcontractfurniture.com, homemeridian.com, pulaskifurniture.com, accentricshome.com and slh-co.com.
Contact:
Paul A. Huckfeldt – Senior Vice President & Chief Financial Officer – (276) 666-3949
Source: Hooker Furniture Corporation