MARTINSVILLE, Va. – Hooker Furnishings reported sales of $93.6 million in consolidated first quarter net sales, a 23.2% decline, or $28.2 million from last year. The company saw an operating loss of $5.2 million, with a negative margin of 5.5%, compared with $2 million in operating income and 1.6% margin last year.
“The ongoing weak demand that’s adversely impacting the furniture industry made our first quarter challenging,” said CEO Jeremy Hoff, who cited a 14th consecutive month of reduced furniture store sales. “However, we remain confident that the strategies we are pursuing in operations, marketing and merchandising are transformative.
“While we are disappointed to report a rare operating loss this quarter, the loss was almost entirely driven by the sales reductions in each segment, and we strongly believe we’ll return to profitability once demand and revenues rebound,” he continued. “We do, however, expect some short-term volatility in earnings until the industry-wide downturn ends.”
With all three segments reporting declines, the company is focused on maintaining a healthy balance sheet, it said. A new cost reduction plan will be implemented, with a goal of saving 10% in costs by 2025.
“Our fixed overhead is $100 million,” said Paul Huckfeldt, chief financial officer. “We expect to reduce that by $10 million. Some of that will happen in the second quarter, but the better part of it should be realized in the third and fourth quarters.”
The company has $41 million in cash and inventory levels that are “well-aligned to current demand.”
“Given the uncertainty in the furniture industry and the general economy, we remain committed to our capital allocation policy,” he said. “Our short-term capital allocation strategy is focused on preserving capital until we begin to see an industry-turnaround, while also protecting our 50-plus year history of quarterly dividends and continuing to invest in organic growth.”
Hooker is beginning to position the company as a “more integrated, whole-home, consumer-centric resource with an elevated aesthetic and presentation.” This strategy is being led by recently appointed Chief Creative Officer Caroline Hipple,
Sales by segment
Hooker Branded segment net sales decreased by $8.1 million, or 18.6%, compared with the prior year’s first quarter. This decrease was primarily due to decreased unit volume and, to a lesser extent, lower average selling prices resulting from price reductions (due to lower ocean freight costs) implemented late last year.
“The soft demand across the home furnishings industry led to a 13% decrease in incoming orders during the quarter, with a corresponding 14% decrease in backlog compared to the prior year quarter-end,” said Huckfeldt. “Quarter-end order backlog remained nearly 40% higher than pre-pandemic levels at the end of fiscal 2020 first quarter.”
Home Meridian segment net sales decreased by $15.5 million, or 37% in the fiscal 2025 first quarter. Huckfeldt said nearly half of the revenue decline was attributed to the absence of Accentrics Home after exiting that business last year.
“The remaining decreases were due to lower sales through major furniture chains, independent furniture stores and the hospitality business, driven by anemic industry demand,” Huckfeldt said. “On a more positive note, fixed overhead costs were reduced by $2 million from business repositioning, including redeploying space at our Georgia warehouse to support Sunset West’s East Coast expansion.”
Incoming orders increased by 6.4% compared with the prior year’s first quarter, with Samuel Lawrence Hospitality incoming orders more than tripling. The quarter-end backlog was 22% higher than the same period last year and 37% higher than the fiscal 2024 year-end in January.
Domestic Upholstery net sales decreased by $5.1 million, or 14.5% due to decreased volume at Bradington-Young, HF Custom and Shenandoah. In contrast, Sunset West experienced a 20% sales increase compared with the previous year’s first quarter, attributed to its expansion to East Coast distribution and the stabilization of its 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.”
While incoming orders increased by 2.8% during the quarter, quarter-end backlog for the segment decreased compared with prior year quarter-end but increased from fiscal 2024 year-end. Excluding Sunset West, order backlog was 38% higher than the pre-pandemic fiscal 2020 first quarter-end.
Outlook
“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.”
“This environment has necessitated the adjustment of our cost footprint to current and expected medium-term demand through a realignment of operations, which we expect will lead to a 10% reduction in overall fixed costs, the largest cut in our history, but one necessitated by current industry conditions,” Hoff added. “Planned actions include consolidating BOBO into Hooker Branded, further reducing our Georgia warehouse footprint and consolidating certain other operations and additional fixed cost reductions. We’re still finalizing those plans and expect to have more information in the current fiscal quarter. We’re intensely focused on creating an appropriate expense structure, while not jeopardizing the pace and impact of our strategic initiatives, which we believe will have a significant positive impact on Hooker once demand normalizes. We expect to be profitable in the current fiscal year and beyond.”