MARTINSVILLE, Va. – When furniture industry giant Hooker Furnishings reported a 23.2% decline in its first quarter consolidated net sales earlier this week, the company also outlined some of its plans to get back to profitability.
Here are 5 takeaways:
1. A cost reduction plan is in place
CEO Jeremy Hoff and CFO Paul Huckfeldt said the company is in the midst of finalizing and implementing a cost reduction plan, which aims to save around 10% in fixed costs beginning in the second half of fiscal 2025. With fixed overhead of around $100 million, that would mean $10 million in savings. Hoff said the cut would be the largest in company history.
The executives didn’t go into too much detail in how costs would be reduced, but they did mention a further reduction in its Georgia footprint, a consolidation of Bobo Intriguing Objects into Hooker Branded, and “consolidating other operations and additional fixed cost reductions.”
2. Housing and low demand are at the forefront
“Much remains unsettled on the macroeconomic front,” Hoff said. “Economic indicators remain mixed with unemployment continuing under 4% and inflation easing slightly in April, leading to record stock market performance in mid-May. However, consumer sentiment index fell nearly 10% in May after holding steady for months, indicating a deterioration in optimism across age, income and education levels.
“Additionally, in both March and April, existing home sales decreased year-over-year,” he continued. “Because the Federal Reserve has yet to cut interest rates this year, we believe home sales may be ‘stuck.’ As long as interest rates remain high, we believe the housing industry – and therefore home furnishings demand – will remain subdued.”
3. Orders are still up from last year, but trending downward
In Home Meridian, which saw sales fall 37% from last year, incoming orders rose 6.4%, with Samuel Lawrence Hospitality orders more than tripling. Incoming orders in domestic upholstery rose 2.8%. The one division to see reduced incoming orders was Hooker Branded, which saw a decline of 13%.
Hoff explained in December how sales are down when orders are up year-over-year:
“Last year, Hooker and other furniture suppliers had backlogs that were very high, so order rates were low then because people were waiting on what they already ordered. Order rates are increasing now because they’re actually turning.”
Order rates, with low consumer demand, are trending downward sequentially. In Hooker Branded, for example, the segment saw a 7% increase in incoming orders two quarters ago. This was followed by flat orders last quarter and now the 13% dip.
4. Sunset West is a standout
Despite domestic upholstery sales falling 14.5% from last year, Hooker’s outdoor Sunset West segment saw a 20% sales increase, which Hoff attributed to an East Coast expansion and the stabilization of a new ERP system over the past year.
Additionally, Sunset West saw a 9% increase in incoming orders compared with the prior year’s first quarter.
“For much of last year, Sunset West experienced some speed bumps related to onboarding a new operating system and building out the resources and personnel needed to expand its distribution,” Hoff said, adding, “Sunset West is now beginning to hit its stride for a positive trajectory going forward.”
Hooker acquired Sunset West in early 2022 for $23.5 million in cash.
5. The company strongly believes in Caroline Hipple’s collaboration efforts
Hooker is beginning a remerchandising of its Hooker Legacy Brands to reposition it as a “more integrated, whole-home, consumer-centric resource with an elevated aesthetic and presentation.” This strategy is being led by Chief Creative Officer Caroline Hipple, who joined Hooker in April .
“We see tremendous upside potential to take our flagship Hooker Legacy Brands product lines from good to great,” Hoff said. “The addition of Caroline Hipple to the new position of chief creative officer was extremely well-received by our retailers, designers and sales representatives at the recent High Point Market. She has significant credibility in the industry, and her ability to pull people together for collaboration is powerful.
“As part of the executive leadership team, she will direct a collaborative merchandising approach across our brands that integrates case goods, import and domestic upholstery and outdoor furnishings, as well as lighting, accessories and accents. As we bring our divisions into full alignment and move forward in the same creative direction, inspired by consumer trends in style, materials, color and aesthetics, we can become a whole-home resource offering a more forward-facing product line and presentation.”