Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales in the second quarter outperformed the first quarter despite weak market conditions.
- Home Meridian segment saw a 5.6% increase in net sales, driven by strong performance in the hospitality division.
- The company has initiated a cost reduction plan aimed at reducing fixed costs by 10%, with expectations to exceed this target.
- The order backlog remains 20% higher than pre-pandemic levels, indicating strong future demand.
- The company has a strong balance sheet with $42.1 million in cash and cash equivalents and plans to pay off $22 million in term debt.
Negative Points
- Consolidated net sales decreased by $2.7 million or 2.8% compared to the previous year's second quarter.
- The company recorded a consolidated operating loss of $3.1 million and a net loss of $2 million for the second quarter.
- Net sales in the Domestic Upholstery segment decreased by $2.3 million or 7.6%, primarily due to lower unit volumes.
- Persistent low demand for home furnishings driven by macroeconomic uncertainties continues to impact sales.
- The company expects to record $3 million of severance expenses in the fiscal '25 third quarter due to workforce reductions.
Q & A Highlights
Highlights of Hooker Furnishings Corp (HOFT, Financial) Q2 2025 Earnings Call
Q: Can you comment on the progression of shipments and orders during the quarter?
A: Shipments and orders have been steady throughout the quarter, but business still has a lot to recover. We are bouncing along in both orders and shipments at this point. - Paul Huckfeldt, CFO
Q: Did you notice any notable regional or geographic differences in sales patterns?
A: No significant regional differences were observed. The tough market conditions seem to be equally challenging everywhere. - Jeremy Hoff, CEO
Q: Can you expand on the cost cuts and where you are finding opportunities to streamline the business?
A: We initially targeted non-personnel, non-strategic costs across all cost centers. After that, we focused on personnel costs while ensuring we didn't eliminate strategic costs necessary for our growth strategy. We are confident we will surpass the $10 million target in cost savings. - Jeremy Hoff, CEO
Q: What would be a reasonable gross margin for HMI once the business recovers?
A: A 20% gross margin is a reasonable goal for HMI. We have improved margins by exiting unprofitable businesses and focusing on profitable programs. - Jeremy Hoff, CEO and Paul Huckfeldt, CFO
Q: What are you hearing from retail partners about the Labor Day holiday in terms of traffic or order patterns?
A: Retailers reported a reasonably good holiday, which was needed after a tough summer. Our order rates have been good right after the holiday weekend, indicating a positive trend, although it's too early to call it a trend. - Jeremy Hoff, CEO
Q: Are there any green shoots or positive indicators you are keeping an eye on for the next two to four quarters?
A: We are focusing on improving our product line, shipping quickly, and achieving speed to market. Our goal is to strengthen our backlog towards the end of the year, especially focusing on the October market. - Jeremy Hoff, CEO and Paul Huckfeldt, CFO
Q: What caused the sizable jump in other income both sequentially and year-over-year?
A: The biggest item was reversing an accrual for a potential earn-out on an acquisition, which was a nonrecurring item. Additionally, our tax rates were lower this quarter due to profitability and permanent differences. - Paul Huckfeldt, CFO
Q: Do you anticipate any corollary production and maintenance CapEx spending to go along with these cost savings?
A: We are deferring a significant amount of CapEx to preserve cash. Most of our growth initiatives are people and product-related, not capital-intensive. We will reevaluate our capital spending as economic conditions change. - Paul Huckfeldt, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
