Hooker Reports Higher 2nd Quarter Income

Furniture World News Desk on 9/16/2014

Hooker Furniture reported net sales of $54.9 million and net income of $2.3 million, or $0.21 per share, for its fiscal 2015 second quarter ended August 3, 2014.

Net income increased 34.6%, and earnings per share increased over 31%, compared to the comparable period a year ago on essentially flat sales. Sales decreased less than one percent, or by $415,000, compared to last year's second quarter. Net income increased by $584,000.

For the fiscal 2015 first half, net sales increased 4.2%, or $4.7 million, to $116 million. Net income increased 33.1%, or $1.3 million, to $5.1 million, or $0.47 per share compared to $0.35 per share in the prior-year period.

"Given the lackluster demand and sluggish retail conditions that characterized the summer months, we were pleased to deliver an approximate 35% net income increase on the strong performance of our casegoods unit, a nearly $200,000 operating profit turnaround for our H Contract unit and sequential improvements in Sam Moore profitability," said Paul B. Toms Jr., chairman and chief executive officer.

"Casegoods operating profitability increased by over 46% year-over-year for both the quarter and first half, and upholstery reported improved results compared to the previous three quarters, primarily due to Sam Moore achieving operating income in its domestic manufacturing operations for the most recent quarter," Toms said. Sam Moore's improvements came on the strength of a low double-digit sales increase, better capacity utilization, greater labor efficiency and lower medical costs.

In the second quarter, net sales were flat, primarily due to decreased unit volume in both segments, partially offset by higher average selling prices in upholstery. For the first half, sales increases were driven by higher average selling prices in the upholstery segment in the fiscal 2015 second quarter, along with increased unit volume in casegoods in the fiscal 2015 first quarter.

While demand remained subdued through the just-completed quarter, Toms noted that an uptick in incoming orders began in early August and has continued through the first month of the current fiscal third quarter. "On a consolidated basis, we saw over a 5% year-over-year improvement in incoming orders during the first month of the fiscal 2015 third quarter, with casegoods orders driving the increase," he said.

Despite sluggish summer business that followed a solid 10% sales gain in casegoods revenues during Hooker's fiscal 2015 first quarter, the Company remains bullish that a recovery in the casegoods industry is underway. "While upholstery sales have grown faster than casegoods sales over the last few years, we're still seeing indications of a recovery in casegoods sales and improved retailer ability to sell large-ticket bedroom, dining and home office furniture," Toms said.

Gross profit increased in the quarter, both as a percentage of net sales and in absolute terms, due to lower product discounting and lower cost of goods sold as a percentage of sales due to changes in product mix in the casegoods segment and improved gross profit at Sam Moore, due to increased net sales. These improvements were partially offset by decreased upholstery segment gross profit, due primarily to lower sales of imported upholstery and higher returns and allowances. For the fiscal 2015 first-half, gross profit also increased, primarily due to higher sales volumes in both operating segments, lower cost of goods sold as a percentage of net sales and decreased discounting in the casegoods segment, which was partially offset by higher returns and allowances.

Selling and administrative expenses decreased, as a percentage of net sales and in absolute terms, for the quarter due to a variety of factors, including lower selling expenses due to lower sales, partially offset by higher operating costs for the Company's new business ventures. For the fiscal 2015 first-half, selling and administrative expenses increased in absolute terms, primarily due to increased upholstery segment costs, but decreased as a percentage of net sales, primarily due to increased net sales.

Hooker's new business ventures, H Contract and Homeware, contributed net sales of $1.1 million in the fiscal 2015 second quarter and $2.1 million for the year-to-date period. Operating losses for these ventures totaled $320,000 and $677,000 for the fiscal 2015 second quarter and year-to-date period, respectively. "H Contract is operationally profitable and is gaining momentum, with both sales and incoming orders increasing," Toms said. "We're still investing significant amounts in building brand awareness and website traffic for Homeware, and have not yet reached break-even in that operation."

Cash, Inventory and Debt

"Our inventories are properly sized with a good composition of best sellers, positioning us well for the historically strong fall selling season," Toms said.

The Company generated approximately $18 million in operating cash flow during its fiscal 2015 first half and cash and cash equivalents stood at $36.9 million at August 3, 2014, up $13.1 million from February 2, 2014.

The Company had no long-term debt at August 3, 2014 and had $13.3 million available on its $15.0 million revolving credit facility, net of $1.7 million reserved for standby letters of credit.

Business Outlook

"Based on the increases in incoming orders we're seeing, both sequentially and year-over-year, we are encouraged about the prospects for fall business," Toms said. "In addition, we have already started shipping containers of some of our best-selling April introductions to our largest customers, and we believe these shipments will only gain momentum as we deliver these new products to the balance of our customer base. Economically, the fundamentals are in place for an improved housing market, and consumer confidence continues to strengthen. We're in a good service position in all divisions with adequate inventory on most of our best sellers," Toms concluded.

About Hooker Furniture: Ranked among the nation's top 10 largest publicly traded furniture sources based on 2013 shipments to U.S. retailers, Hooker Furniture Corporation is a residential wood, metal and upholstered furniture resource in its 90th year of business. Major casegoods product categories include home entertainment, home office, accent, dining, and bedroom furniture primarily 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 fabric upholstery with an emphasis on cover-to-frame customization; and Hooker Upholstery, which focuses on imported leather upholstered furniture targeted at the upper-medium price-range. The Homeware product line offers direct-to-consumer, customer-assembled, modular upholstered and casegoods products designed for younger and more mobile furniture customers. The H Contract product line supplies upholstered seating and casegoods to upscale senior living facilities. Visit hookerfurniture.com, bradington-young.com, sammoore.com, homeware.com, and hcontractfurniture.com.