MARTINSVILLE, Va. – Hooker Furnishings reported $116.8 million in consolidated third quarter net sales, a decrease of $34.7 million, or 22.9% from the same time last year. For the first nine months of the year, sales fell by $115.4 million, or 25.5%.
Once again, the company attributed the decline to continued soft demand for home furnishings, as well its exits from unprofitable operations. Sales fell in all three of the company’s primary segments.
More positively, though, was the company’s Home Meridian (HMI) segment, which recorded its first profit since 2021. The quarterly decline was also less steep than it was last quarter, which saw a $55.1 million (36%) drop.
“Despite a challenging macroeconomic environment for the home furnishings industry, we’re proud of our team for persevering through some difficult decisions and short-term pain to create a more sustainable and profitable business model for Hooker Furnishings,” said Jeremy Hoff, CEO. “After spending considerable time repositioning HMI to focus on its core products and businesses, it is encouraging to see HMI report a quarterly profit for the first time in two years and contribute to our overall profitability. Liquidating excess inventories, rightsizing our overhead and exiting unprofitable businesses have put us in a much stronger overall position.”
In HMI, sales fell by $6.9 million, or 13.6%, compared with last year but increased over the first and second quarters of this year. Despite the decline, gross profit increased by $3.4 million, mainly due to improved margin and the exit of unprofitable sales channels and product lines, as well as lower product costs. Costs were also reduced by lower wage expenses and organizational changes at the company’s Georgia warehouse. The segment recorded a quarterly operating income of $900,000 compared to a $3.2 million operating loss last year.
In Domestic Upholstery, net sales fell by $10.9 million, or 25%, after two years of sales growth. Sales fell in all four domestic upholstery segments. Incoming orders increased at Bradington Young, HF Custom and Shenandoah from last year.
In Hooker Branded, the company said weak demand drove a 31% sales decline. Gross profit and margin both increased, however, driven mainly by significantly lower product costs and reduced ocean freight rates. Incoming orders increased by 7% compared with the prior year’s third quarter and this year’s second quarter.
Although quarter-end order backlog was lower than the prior-year quarter-end, it increased from this year’s second quarter-end and remained nearly 70% higher than pre-pandemic levels at the end of fiscal 2020 third quarter.
Hoff remains optimistic, but he acknowledged challenges in the housing sector.
“While economic indicators remain mixed and furniture industry retail traffic is down about 15% from January through October 2023, we believe the long-term economic outlook has improved, which bodes well for Hooker and the industry,” said Hoff. “Reduced housing activity and high mortgage interest rates are still challenging, but several positives have emerged since last quarter. Core inflation is at the lowest level since 2021, the U.S. economy grew nearly 5% last quarter, unemployment remains at record lows, and a recession appears less likely.
“As we look to the next quarter, we see flat sales for our higher-priced Hooker legacy brands as compared with the prior year fourth quarter. We expect that the current downturn in the furniture retail business will temporarily suppress sales growth at HMI through the fourth quarter. However, significant new retail product placements achieved by HMI recently should begin to buoy sales by the first quarter of next fiscal year as the placements generate orders and backlogs,” he continued.
“We believe that our focus on reducing costs, keeping our balance sheet strong and judiciously deploying capital, along with our investments to promote higher visibility and future growth, will continue to put us in the strongest possible position to leverage a return of furniture demand to more typical levels.”