Hooker Furniture Corporation Reports Robust Profitability in Third Quarter

Furniture World News Desk on 12/11/2020

Hooker Furniture recently reported consolidated net sales of $149.7 million and net income of $10 million, or $0.84 per diluted share, for its fiscal 2021 third quarter ended November 1, 2020.

Consolidated net sales decreased by 5.4%, or $8.5 million, compared to the prior year period, while net income increased 157.5%, or $6.2 million. Earnings per diluted share for the quarter increased 154.5% from $0.33 a year ago.

“Our third quarter financial performance is encouraging on many fronts, as the business rebound that began in mid-May continues to gain momentum,” said Paul B. Toms Jr., chairman and chief executive officer. “Consolidated incoming orders were up 33.8% during the quarter, and our consolidated backlog is up 87.5%, both compared to a year ago. While we had a small consolidated sales dip driven by ongoing disruptions in the supply chain from the COVID-19 pandemic, two of our four segments achieved sales increases compared to the prior year. Sequentially, we grew weekly sales throughout the third quarter and reported a $19 million, or 15% consolidated revenue increase in the third quarter compared to the second quarter,” Toms said.

“Although we are still navigating what we believe will be short-term disruptions in the supply chain due to the COVID-19 pandemic, we believe furniture will be an advantaged sector of the economy, benefitting from a renewed consumer focus on the home, a strong housing market and less discretionary spending competition from travel, dining out and entertainment,” Toms said. “We are adding employees at most locations in order to service the robust demand for our products.”

“Supply chain bottlenecks in an environment of surging demand are the greatest business challenge,” Toms said. “Limitations on supply include scarcity of some raw materials and components, limited availability of shipping containers and ocean vessel space, production delays from some import suppliers and the process of getting our domestic upholstery production ramped back up after the factories were temporarily closed during the economic shutdown earlier this year. In addition, we’ve had to work around some COVID-related employee absences, all while keeping employee safety a top priority.”

Regarding the pandemic-related challenges, Toms said, “We are addressing and working through all the supply chain disruptions and making slow, but steady progress. Our overseas vendors are increasing capacity and production each month, and all three of our domestic upholstery divisions were operating at current full capacity at the end of the third quarter. We are in the process of expanding capacity with additional personnel hires.”

“We’re very encouraged by the current historic levels of orders and backlog; however, due to the current supply chain issues, orders are not converting to shipments as quickly as could be expected in the pre-Pandemic environment and we expect that to continue at least into the fiscal 2022 first quarter,” Toms continued. “In a normal environment, we’d expect backlog to be one helpful indicator of sales for the Hooker Branded and Domestic Upholstery segments and All Other for the upcoming 30-day period and for the upcoming 90-day period for Home Meridian. However, the current logistics challenges are slowing order fulfillment, particularly for Home Meridian whose average order sizes tend to be larger and more episodic versus orders for the traditional Hooker businesses, which tend to be smaller and more predictable. Additionally, Home Meridian orders are programmed out and scheduled for delivery to its larger accounts further into the future than usual, which is also contributing to the increased backlog. We expect these headwinds will continue to impact us and our sales in Q4, with steady improvements beginning in mid-February 2021 after the new year holidays in China and Vietnam,” he concluded.

Consolidated operating income increased by $8.0 million or 161.1% as compared to the prior year third quarter. The Hooker Branded segment reported $7.7 million operating income and maintained operating margin at a high level. The Home Meridian segment reported $2.5 million operating income compared to a $4 million operating loss in the prior year third quarter. The operating loss in the prior year period was due to excess chargebacks with one major customer, excess inventory and carrying costs due to customer returns and excess inventory, and inventory write-downs – all of which either did not reoccur or reoccurred at much lower or near normal levels. Additionally, tariff costs which adversely affected prior year results have been mostly mitigated in the current year through re-sourcing and selected re-pricing efforts. The Domestic Upholstery segment reported $2.4 million in operating income for the third quarter, representing solid improvements compared to operating losses in the first and second quarter of the current fiscal year at the height of the initial COVID-19 crisis.

For the fiscal 2021 first nine months, consolidated net sales were $384.8 million, a decrease of 13.7% or $61.1 million compared to last year, and net loss was $19 million, or -$1.61 per diluted share, compared to $0.85 earnings per diluted share in last year’s first nine months.

The driver for the net loss for the 2021 first nine months occurred in the first quarter at the depth of the COVID economic contraction. Due to the material impact of COVID-19 on the Company’s financial performance, market valuations and other factors in the 2021 first quarter, the Company determined that an intangibles asset valuation analysis was appropriate when reporting 2021 first quarter results. As a result, the first-nine months loss was driven by a $44 million ($33.7 million after tax), non-cash intangible asset impairment charge in Q1 to write down goodwill and certain tradenames in the HMI segment, and goodwill in the Shenandoah division of the Domestic Upholstery segment.

About Hooker Furniture: Founded by the Hooker family in 1924, Hooker Furniture Corp. is a designer, marketer, manufacturer and importer of case goods, 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 through its Bradington-Young, MARQ and Sam Moore Furniture brands. It is ranked among the nation's largest publicly traded furniture sources, based on 2016 shipments to U.S. retailers, according to a 2017 survey by a leading trade publication. Hooker Furniture’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 eight distribution centers in North Carolina, Virginia, California and Vietnam. For more information, visit hookerfurniture.com.