Hooker Furniture Reports Robust Income Gains on Higher Sales in Third Quarter

Furniture World News Desk on 12/14/2014

Hooker Furniture  reported net sales of $63.2 million and net income of $3.2 million, or $0.30 per share, for its fiscal 2015 third quarter ended November 2, 2014.

Net income increased 51.4%, or $1.1 million, and earnings per share increased 50% on a $4.0 million or 6.8% consolidated net sales increase, compared to the same period last year.

For the fiscal 2015 first nine months, net sales increased 5.1%, or $8.7 million, to $179.4 million. Net income increased nearly 40% or $2.3 million, to $8.3 million, or $0.77 per share compared to $0.55 per share in the prior-year period.

"It's very encouraging to enter the historically strong fourth quarter with this kind of top and bottom-line momentum," said Paul B. Toms Jr., chairman and chief executive officer. "Our overall performance for the first nine months is one of best in memory, and net sales were the highest in six years. It is especially gratifying to see casegoods leading the way in sales growth while continuing to improve operating profitability."

Consolidated operating profitability increased in the quarter and year to date periods by 54.7% and 38.9% respectively, driven primarily by the casegoods segment in each period.

In the fiscal 2015 quarter and year-to-date periods, net sales increases were driven by higher average selling prices, while consolidated unit volume was essentially flat for the third quarter and decreased slightly for the year-to-date period. "The growth we are seeing in casegoods is having a positive impact on consolidated results," added Toms. "A number of factors are contributing to sales momentum in casegoods, including the strength of our product line, the shipment of several top-selling April market introductions during the quarter, a good inventory position on best sellers, some national digital advertising campaigns during the year and overall improvement in the casegoods market as housing activity increases."

"An uptick in incoming orders that began in August continued throughout the third quarter resulting in a nearly 8% increase," Toms said.

Gross profit increased in the quarter and nine-month periods, both as a percentage of net sales and in absolute terms, due to net sales increases in all segments, lower casegoods segment discounting and, for the quarter, lower upholstery segment cost of goods sold as a percentage of net sales due to higher net sales, improved material utilization and lower overhead costs.

Selling and administrative expenses were essentially flat as a percentage of net sales, but increased in absolute terms for the quarter and year-to-date periods. A variety of factors contributed to the higher expenses, including higher selling expenses due to increased net sales.

The Company's "all other" operating segment, which includes Hooker's new business ventures, H Contract and Homeware, contributed net sales of $1.6 million in the fiscal 2015 third quarter and $3.7 million for the year-to-date period. Operating losses for these ventures totaled $209,000 and $885,000 for the fiscal 2015 third quarter and year-to-date period, respectively. "H Contract is operationally profitable and 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

"We feel good about the composition of our inventories with a strong mix of best sellers, which has allowed us to drive sales gains. Overall, we have been more disciplined and collaborative in our inventory management process, which has put us in a better service position with less obsolescence."

The Company generated approximately $16 million in operating cash flow during the first nine-months of fiscal 2015 and cash and cash equivalents stood at $33.3 million at November 2, 2014, up $9.4 million from February 2, 2014.

The Company had no long-term debt at November 2, 2014 and had $13.1 million available on its $15.0 million revolving credit facility, net of $1.9 million reserved for standby letters of credit.

Business Outlook

"Based on the sales order momentum of last quarter and so far in the fiscal 2015 fourth quarter, we have an optimistic outlook for the remainder of the year," said Toms. "This November, which was the first month of our Fiscal 2015 fourth quarter, consolidated incoming orders were up about 10%.

"In the larger economic outlook, it's hard to find many negatives, as housing steadily improves, consumer confidence is up and the stock market is at an all-time high. Therefore, we expect and are planning for stronger business in the near term," Toms said.

About Hooker: 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 websites at hookerfurniture.com, bradington-young.com, sammoore.com, homeware.com, and hcontractfurniture.com.