MARTINSVILLE, Va. – Industry giant Hooker Furnishings reported a decline in sales for the second quarter late last week. Company executives explained the company’s performance in an earnings report followed by an earnings call.
Here are a few of the key takeaways:
Sales fell at a faster pace: Consolidated net sales for the fiscal 2024 second quarter were $97.8 million, a decrease of $55.1 million, or 36% compared with the prior year second quarter. Last quarter, sales had fallen 17.3%, or $55.1 million.
Each of the company’s three segments also saw greater dips than the previous quarter. In Hooker Branded, net sales decreased by $18.1 million, or 34.3% due to decreased shipments and unit volume. Last quarter, the segment saw sales decrease by 0.8%.
In Home Meridian, the company reported a loss of $3.3 million, with sales falling 51%. Last quarter, sales fell 32.5%, or just over $20 million. Finally, in Domestic Upholstery, sales fell 19.4% due to sales dips at Shenandoah and HF Custom, partially offset by an increase at Sunset West. Last quarter, the segment saw sales decline after 10 consecutive quarters of year-over-year growth, falling 14.8%.
Hooker attributed the decline primarily to industry-wide decreased demand for home furniture, as well as the planned exits of its unprofitable operations within Home Meridian.
Long-term is the name of the game: As the short-term remains choppy, the company continues to put its faith in longer-term strategies.
“In this environment, we’ve prioritized strengthening our financial position and strategically deploying capital and other resources, while investing in new showrooms and systems that position us to immediately leverage increasing demand when it occurs,” said Hoff. “For example, the collective impact of our new showrooms in High Point, Atlanta and Las Vegas have increased our customer contacts from about 3,000 to around 14,000 annually, more than quadrupling the number of existing and potential customers.
“While we expect the full benefit of this investment will have a mostly longer-term impact, we have already opened a thousand new accounts in the first half as visibility and engagement have increased,” Hoff added. “The transformation of the Home Meridian segment to a sustainably profitable business model is well underway. “Most of the excess inventories connected to the exit of ACH at the end of the last fiscal year have been sold, and the related cost reduction efforts are paying off. We recorded a small operating income in fiscal July in this segment and while we continue to expect some short-term volatility in sales and earnings, we expect HMI to achieve sustainable profitability in the second half of the fiscal year.”
Orders are trending up in all segments: In Hooker Branded, incoming orders increased by 18.6% as compared to the prior-year quarter. In Domestic Upholstery, incoming orders increased by 36.7%.
“As we anticipated, the first half of the year was difficult as the industry worked through bloated inventories and consumers’ spending habits changed,” Hoff said. “We expect demand and business to pick up in the second half for several reasons.
“First, consolidated orders are up in mid-double-digits over this time a year ago, with orders trending up in each segment for the past few months. Secondly, a significant portion of Hooker Branded’s backlog consists of orders for new products launched at the High Point market, and are expected to ship in the second half of this year.” he said, adding, “Thirdly, in the second half, Home Meridian expects to ship to over a thousand retail floors in what we believe to be the largest number of new product placements in its history.”