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Thank you, Michelle, and good morning, everyone. Welcome to our quarterly conference call to review financial results for the fiscal twenty twenty six first quarter which ended 05/04/2025. Joining me this morning is our Chief Executive Officer Jeremy Hoff We appreciate your participation today. During our call, we may make forward looking statements, are subject to risks and uncertainties. A discussion of factors that could cause our actual results to differ materially from expectations is contained in our press release and SEC filing announcing our fiscal twenty twenty six first quarter results. Any forward looking statement speaks only as of today. And we undertake no obligation to update or revise any forward looking statement to reflect events or circumstances after today's call. Earlier today, we reported consolidated net sales of $85,300,000 for the first quarter. A decrease of $8,300,000 or 8.8% compared to the same period last year. Despite the decrease in net sales, we reduced our operating loss by $1,600,000 or 31% to 3,600,000.0 reflecting the impact of cost reduction initiatives implemented in the second half of the prior fiscal year. Comparing to the prior year first quarter, we reduced operating expenses by 2,200,000.0 This reduction occurred despite first quarter results which included $523,000 in restructuring costs primarily severance.
11m 34s
Hooker Branded achieved breakeven for the quarter while Domestic Upholstery and Home Meridian significantly reduced their operating losses by 5517%, respectively. Inclusive of this work, we improved gross margins by 190 basis points driven by improved margins and Home Meridian and Domestic Upholstery. We recorded a net loss of 3,100,000.0 or $0.29 per diluted share. An improvement from the prior year's first quarter's net loss of $4,100,000 or $0.39 per diluted share. Hooker's legacy brand sales were stable during the quarter with Hooker branded net sales increasing slightly driven by higher unit volume while the domestic upholstery segment saw a slight sales decrease compared to the prior year first quarter. The overall decrease in consolidated sales was driven primarily by a double digit sales decrease at HMI, which is positioned in the mid price segment where import tariffs have more sharply curtailed demand. In a key development during this quarter, we expanded our multipronged cost reduction strategy aimed at achieving approximately 25,000,000 in annualized savings by our next fiscal year. As part of our logistics and operations consolidation, opened a new Vietnam warehouse facility last month which we expect will enhance supply chain efficiency and reduce lead times from about six months to four to six weeks.
13m 2s
Initial customer feedback has been very favorable, and we believe this initiative has the potential to improve sales. We'll have more details on our overall cost reduction strategy later in the call. Now I'll turn the call over to Jeremy for his comments on our on our fiscal twenty twenty six first quarter results. Thank you, Earl, and good morning, everyone. We continue to take significant and deliberate actions to stabilize the company.
13m 27s
Drive improved sales and deliver strong gross margins as we execute on our accelerated cost savings program. At the same time, we are determined not to lose focus on developing quality and innovative products, servicing our customers enacting our strategic vision and increasing shareholder value. This was our consecutive quarter of consistent market share gains within Hooker's legacy brands, which includes Hooker branded and domestic upholstery. The spring high point market was exceptional for the company, especially with two new case good collections in our collected living format. In addition, we had significant placements on the debut of our Living Your Way Modular program offered from our Hooker branded upholstery segment brand in both stationary and motion seating multiple scale and cover options. We are continuing to achieve significant cost savings through our ongoing programs. Our year over year operating and gross margin improvements during the first quarter were driven by the $2,200,000 in cost savings from our initial round of cost reductions we announced a year ago. Since the initial announcement, we have expanded our cost reduction initiatives through the exit of the Savannah warehouse and opening of a leased Vietnam warehouse. These moves, particularly our strategic shift to the Vietnam warehouse, will result in accelerated savings improvements as the current fiscal year progresses.
14m 52s
By enhancing supply chain efficiency, enabling our retail customers to mix a variety of collections on containers and reducing lead times from about six months to four to six weeks we see the Vietnam warehouse as a game changer and win win for us and our customers. In total, from the June 2024 start of our initiative, we anticipate reducing our total annual spend rate by approximately 25% These savings alone will substantially improve profitability. And as conditions improve, our position for growth strengthens accordingly as will our ability to drive value for shareholders through disciplined execution and capital stewardship. Our progress is steady and we are executing within all aspects of the business that we're able to control, notwithstanding our progress the home furnishings industry continues to navigate a challenging environment driven by persistent softness in the housing market higher mortgage rates, and declining consumer sentiment. Existing home sales remain well below pre pandemic levels and the sharp rise in borrowing cost has dampened housing mobility, which traditionally fuels furniture demand. At the same time, tariff uncertainties are negatively impacted impacting consumer confidence, which has dropped to near historic lows with many households pulling back on discretionary spending. These macroeconomic headwinds are weighing heavily on our industry and we remain focused on adapting to the realities of today's market.
16m 23s
I'd like to take a minute to specifically address the import tariff increases and uncertainties that impact the entire furniture industry. Believe we've successfully mitigated the across the board 10% tariff through participation by our source factories and through a 5% price increase effective last month. Like everyone else, we are waiting to hear in July what the final tariff may be for Vietnam, where we source over 80% of our product. We will act responsibly not reactively, and are positioned with a solid financial foundation and balance sheet that are built to navigate challenging times. Now I want to turn the discussion back over to Earl who will outline details of our multiphase cost reduction strategy as well as discuss highlights in each of our segments.
17m 10s
Thank you, Jeremy. As I referenced earlier, Hooker Furnishings is executing a phased cost reduction strategy. Aimed at achieving approximately $25,000,000 in annualized savings by next year. We'll discuss these initiatives in two phases. Phase one of this plan, which began last year, included the following actions, impacts and achievements. [indiscernible] we reduced fixed costs by over $10,000,000 through facility downsizing workforce and fixed cost reductions. Phase one financial impact. We incurred $4,900,000 in restructuring charges including $3,600,000 in severance. [indiscernible] we achieved over $3,000,000 in fiscal twenty twenty five and expect to realize over $10,000,000 annually this fiscal year. Phase two is the logistics and operations consolidation aspect of our plan. It began this current year and continues to the end of our current fiscal year. [indiscernible] We initiated and expect full full closure and release for the Savannah warehouse by October 31, 2025. Vietnam warehouse, opened the new facility in May 25 to enhance supply chain efficiency reduce lead times from about six months to four to six weeks. We expect this will have a significant positive impact on cash utilization overall. Going forward, we expect further cost savings opportunities will be realized through operational streamlining. Phase two financial impact.
18m 48s
We are expecting 2,000,000 to $3,000,000 in net charges in fiscal twenty six. Phase II savings. We anticipate net savings of $3,400,000 in fiscal twenty twenty six, net of expected charges and other offsets. We are projecting net savings of about $14,000,000 annually beginning in fiscal twenty twenty seven. In total, we expect to eliminate a approximately 25,000,000 or roughly 25% of our fixed cost with about an $11,000,000 impact to warehouse and distributions. We include in cost of sales. And about $14,000,000 impact in selling and administration expenses. In fiscal twenty twenty six, Hooker expects to realize about $14,000,000 in cost savings net of offsets and special charges. By fiscal twenty twenty seven, Hooker expects to realize $25,000,000 in net annualized savings through these phased initiatives which should enhance profitability, operational efficiency and long term shareholder value. Importantly, our cost reduction should not impact our strategic growth priorities included our Collected Living merchandising platform the Vietnam Warehouse Advantage and our upcoming Margaritaville license collection. Now I'll highlight quarterly performance of each of our segments. In Hooker Branded, the segment experienced a modest increase in sales driven by higher unit volume but tempered by lower average selling prices and increased discounts.
20m 21s
Gross profit and margin increased by $393,000 and 130 basis points, respectively. Primarily due to reduced margins on discounted items partially mitigated by reduced warehousing and distribution expenses. Hooker Branded achieved breakeven for the quarter. Incoming orders grew by 2.4% year over year. The quarter end backlog was 21.3% lower than the previous year's first quarter primarily due to better inventory position, which resulted in quicker shipments. Quarter end order backlog increased by nearly 3% from year end. At Home Meridian, that segment's net sales decreased by 7,600,000.0 or about 29% in the first quarter of the fiscal twenty six. Primarily due to a significant reduction in unit volume. Approximately 30% of the net sales decrease resulted from the loss of a major customer due to its bankruptcy in the prior year. With the remainder attributed to reduced sales due to tariff related buying hesitancy among HMI's customers. Most of whom are situated in the mid priced and commercial segment of the market. This decrease was partially offset by a $1,700,000 increase in sales in the hospitality business. Despite the significant sales decrease gross profit only decreased by 568,000 with a 200 basis point increase in gross margin. Driven by improved product margins and reduced allowances.
21m 51s
These decreases were partially offset by lower warehousing and distribution costs from restructuring efforts that ultimately reduced the operating loss from $3,400,000 to 2,800,000.0 Incoming orders and backlog decreased due to reduced demand from traditional traditional channels, and the loss of a major customer last fiscal year. Due to its bankruptcy. Compounded by fewer orders in the project based hospitality business In domestic upholstery, the segment's net sales decreased by about $1,000,000 or about 3.7% in the first quarter, primarily due to reduced demand for indoor residential home furnishings. This decrease was partially offset by a 12.7% sales increase in the outdoor furnishings business, Sunset West, following its bi coastal expansion. Despite the sales decrease, gross profit increased by $575,000 and gross margin increased by two sixty basis points driven by 80 basis point decrease in direct material cost 100 basis point decrease in direct labor cost. Both from the cost reduction plan and reduced work hours. Warehouse and distribution expenses also decreased. Domestic upholstery segment significantly reduced operating losses by $713,000 or 55% despite the sales decrease. Incoming orders fell 2.6% with quarter end backlog unchanged from the prior year's first quarter but up 7.1% from year end. [indiscernible] Turning now to cash, debt and inventory.
23m 26s
Cash and cash equivalents stood at $18,000,000 an increase of $11,700,000 from year end due primarily to accounts receivable collections. Inventory levels decreased from about $71,000,000 at year end to about $64,000,000 at quarter end. Company utilized cash for several key expenditures during the fiscal twenty twenty six first quarter. Including $2,500,000 in cash dividends to shareholders and about $850,000 in capital expenditures. Despite these outflows, the company maintained its financial flexibility with about $40,000,000 in available borrowing capacity under its revolving credit facility as of quarter end. Subsequent to the end of our first quarter, we paid down all outstanding borrowings on our revolving credit facility. As of yesterday, we had approximately $3,000,000 in cash on hand, with about $63,000,000 in available borrowing capacity net of standby letters of credit. Last week, we announced our regular quarterly dividend reflecting our ongoing confidence in our outlook and extending our over fifty year track record of uninterrupted dividend payments. We are focused on disciplined capital deployment that supports both shareholder returns and operational resilience. The significant progress we've made in reducing debt even while returning capital through dividends reflects the structural cost savings initiatives we've implemented across the business. These actions are not only improving near term liquidity, but also positioning us to pursue strategic growth with a stronger, more efficient balance sheet.
25m 1s
As we move through the year, we remain committed to capital allocation decisions that enhance long term value creation through a combination of our cost savings initiatives and our strategic growth priorities. Now I'll turn the discussion back to Jeremy for his outlook.
25m 17s
According to U. S. Census Bureau monthly retail trade survey, furniture retail sales have shown modest improvement in recent months. April sales were slightly higher compared to January to March period and increased 5.6% year over year However, existing home sales remain subdued, currently operating at approximately 75% of typical pre pandemic levels for the consecutive year. Despite these headwinds, inflation and employment indicators have remained relatively stable. To navigate the ongoing economic challenges, we continue to prioritize product innovation cost optimization and operational excellence, These strategic imperatives position us to capitalize on emerging opportunities as economic conditions improve ultimately driving long term shareholder value. Key initiatives include the launch of our new Marguerite of fill licensing program, a best in class international warehouse that enables us to reduce domestic safety stock preserve working capital and shorten lead times and our and collective livings whole home merchandising approach, which receives strong validation that the April high point market We are very encouraged by fiscal May orders at Hooker Legacy, which were the highest since February 2023, On the Hooker legacy side, May orders were up nearly 33% as compared to the prior year. Hooker branded orders were up nearly 40% and domestic upholstery orders were up 25%, both as compared to fiscal May of the prior year.
26m 54s
Additionally, we are preparing to launch a redesigned corporate website in October, which we expect will enhance digital customer experience improve lead generation and support omnichannel growth, also drive consumer engagement, streamline e commerce navigation and support our retail partners and serve as a hub for product education and lifestyle inspiration increasing time on-site and conversion rates. Within our Hooker Branded segment, the newly introduced Live Your Way strategy is designed to deliver customized customizable lifestyle oriented solutions tailored to evolving consumer preferences offer tailored upholstery options that align with today's diverse lifestyles and consumer expectations focus on modularity, flexibility and personalized comfort meeting the needs of of design savvy customers and it emphasizes customization and quality craftsmanship reinforcing our leaders in the upscale upholstery segment. We are simultaneously driving operational efficiencies across the segment and are beginning to observe measurable improvements in performance. Putting it all together, we are actively transforming the profile of the company while maintaining stability. The initiatives underway are broad reaching across the entire organization and touch all aspects of our business from production and enhanced lead times to realigning our cost structure to better meet the realities of the operating environment. While there is more to do, we have been able to undertake significant steps without sacrificing quality or service.
28m 29s
The end result is our expectation that we are well positioned for an upturn in the market and poised to create value for our shareholders. This ends the formal part of our discussion. And at this time, I will turn the call back over to our operator, Michelle, for questions.
28m 44s
Thank you. You. Our question comes from Anthony Lebiedzinski Sidoti and Company. Your line is open.
29m 3s
Good morning and thank you for taking the questions.
29m 7s
So looking back at the first quarter, can you comment on the cadence of shipments from February through April? And I'm particularly interested as to how was the last month of the quarter after Liberation Day?
29m 24s
I can definitely tell you that the cadence changed pretty drastically for us with the tariffs. Definitely affects what we call the mega customer which is really the HMI customer more so than the many customers we have that are very different on Hooker branded and domestic upholstery side of our business.
29m 48s
Thanks, Jeremy. Okay. And then as far as gross margin, so you did show some nice improvement on a year over year basis. It looks like there was some impact from discounting that hurt margins at Hooker Branded. Any way that you guys can quantify how much that was as far as the impact of the discount they get at Hooker Branded?
30m 14s
No. We don't have that in front of us, Anthony. Okay. I could follow-up with you about that. Okay. And then just switching gears to the commentary about the current quarter. So what's driving the higher orders at the Hooker legacy brands in May? That's a pretty notable increase. So maybe you could share with us as to what's driving that and And also, conversely, just wanted to get an update on HMI, whether you've seen any changes since April.
30m 52s
I would say what's driving the order rate that I just talked about is really that we significantly broadened our merchandising strategy with collected living and the things we've talked about and it's starting we believe it's starting to have a positive effect So really, what you're if you think about it, you're comparing to orders last year, of course, and last year would have been following a market where we had not implemented those new strategies. And I believe they've really kicked in and I think it's showing.
31m 31s
Got you. And as far as HMI, any comments as what you're seeing so so far in May and early June?
31m 43s
Yes. We're still seeing significant uncertainty due to tariffs because there really hasn't been other than know the 10%, but it's there's a July 9 date out there that until there's clarification, that definitely hurts.
32m
Got you. Okay. And I guess my last question before I pass it on to others. Memorial Day, as you guys know, is a big holiday event for the furniture Just wondering what you've seen or heard from your retail partners as to how they went for them.
32m 20s
We do a lot of checking on what you just asked and the overall sentiment that we found was that it was relatively positive for most retailers. For Memorial Day and it was actually a lot of there was a lot of pretty decent news.
32m 37s
That's good to hear. Well, thank you very much, and best of luck.
32m 41s
You're welcome, Anthony. Thank you. Thank you. Our next question comes from Dave Stormt with Stonegate. Your line is open.
32m 56s
Good morning. Thanks for taking my question.
32m 58s
Good morning. Just wanna start with the cost savings initiatives. And see if you had if you could tell us maybe how the cadence would go for that for the rest of the year It looks like the severance costs you've incurred have only been about 15% of your total expected for the year. And I just wanted to see if that would ramp more, if that will be steady through the year, and maybe just any other thoughts around that.
33m 22s
For the rest of the year, we would expect due to Phase one, the $10,000,000 cost savings initiative from last year, we'd expect about $2,500,000 less in cost compared to last year. With Phase II and these new cost initiatives we'd expect probably $250,000 net impact positive impact in Q2. Probably the opposite of that in Q3. I think the Phase II initiatives are we expect really to hit pretty significantly in Q4. The tune of about $3,500,000 All that still yet to be seen, but that's what we expect right now.
34m 7s
Understood. That's very helpful. Thank you. And then just thinking about your capital allocation, and correct me if I'm wrong, but I think it's fair to say that your priorities go dividend debt, then just trying to think about what your priorities are after that, could there be share buybacks on the horizon? Is it just strengthening the balance sheet? How should we be thinking about your priorities there?
34m 31s
I would say strengthening the balance sheet right now is priority one. And you're right on dividends being very high priority for us. And I don't really have anything further to say on share buybacks, but we are the main message is our number one focus is to make that balance sheet as strong as possible, and we believe we're on the way to doing that.
35m
Understood. Thank you. And then just one more for me, if I could. Thinking about the seasonality for the year, you had a really strong May and, great to hear that was positive for most retailers. Do you believe that this is strong momentum for carryover into the rest of the year and will see the typical 45% to 55 split in revenue between first half and second half or this gonna be maybe a weird year from a seasonal standpoint?
35m 28s
I believe the second half will be stronger than the first half and I'm mainly saying that based on that's been our that's been what we have pretty much for our company kind of every year for pretty long time. So that's a historical trend that I'm fairly confident in. I'm not as confident to say that our May trend will continue and that that's that's real momentum starting for the rest of the year because I just don't know I mean, I guess it's a terrible strategy, but I'm hoping.
36m
Understood. Okay. That is perfect. I appreciate the color and good luck in q two.
36m 5s
Okay. Thank you.
36m 7s
Thank you. I'm showing no further questions at this time. I'd like turn the call back over to Jeremy Hoff for closing remarks.
36m 15s
I'd like to thank everyone on the call for their interest in Hooker Furnishings. We look forward to sharing our fiscal twenty twenty six second quarter results in September. Take care.
36m 25s
Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone have a great day.
Key Insights
Q1 FY26 consolidated net sales were $85.3M, down 8.8% YoY, but operating loss improved by 31% to $3.6M due to cost reduction initiatives; net loss was $3.1M ($0.29/share), better than prior year’s $4.1M ($0.39/share).
Company is executing a two-phase cost reduction strategy targeting $25M in annualized savings by FY27 (about 25% of fixed costs), with $14M in net savings expected in FY26 and full $25M in FY27; major initiatives include warehouse consolidation (Savannah exit, new Vietnam facility) and workforce reductions.
Gross margin improved by 190 basis points YoY, driven by cost reductions and operational efficiencies; Hooker Branded segment achieved breakeven, while Domestic Upholstery and Home Meridian significantly reduced operating losses.
May orders for Hooker legacy brands were the highest since February 2023, up nearly 33% YoY (Hooker Branded +40%, Domestic Upholstery +25%), attributed to broadened merchandising strategies; however, HMI segment continues to face uncertainty due to tariffs and loss of a major customer.
Cash position improved to $18M at quarter end (up $11.7M from year end), inventory reduced to $64M, and all revolver borrowings paid down post-quarter; company maintains focus on strengthening the balance sheet and sustaining dividends, with no current plans for share buybacks.
