Hooker Furnishings Cuts Costs in Q2

Hooker Furnishings(NASDAQ:HOFT) reported fiscal 2026 second quarter results on September 11, 2025, with consolidated net sales down 13.6% year over year to $82.1 million and a net loss of $3.3 million, or $0.31 per share. The quarter featured $2.0 million in restructuring costs, a 44.5% year-over-year decline in Home Meridian segment sales, and management progress toward a 25% fixed cost reduction by the end of the fiscal 2026 third quarter. The following insights highlight key strategic actions, segment performance, and forward-looking priorities discussed on the call.

Cost reduction plan positions Hooker Furnishings for profitability

Management is executing a multiphase plan to eliminate $25 million in fixed costs, representing 25% of the prior cost structure, with most reductions expected by the end of the fiscal 2026 third quarter. The company achieved $3.7 million in expense reductions in the first half of fiscal 2026, despite $1.7 million in restructuring charges, and expects annualized savings to begin in fiscal 2027.

"We are well into our multiphase cost reduction plan to eliminate $25,000,000 or 25% of our fixed cost. This includes an estimated $11,000,000 in warehousing and distribution expenses, which is reported in cost of sales, and $14,000,000 in selling and administrative expenses. In fiscal 2025, we identified $10,000,000 in expense reductions and were able to achieve $3,000,000 in savings in that fiscal year. In fiscal 2026, we identified an additional $15,000,000 expense reductions. In the '26, we achieved $3,700,000 in expense reductions despite having recorded $1,700,000 in restructuring charges. We expect to achieve additional savings in the second half of the year from both initiatives, and we believe we are on track to achieve $25,000,000 in annualized cost savings beginning in fiscal 2027, which should largely be in place by the end of the fiscal 2026 third quarter."
-- Earl Armstrong, CFO

This cost structure overhaul lowers the company’s breakeven point and enhances future earnings leverage as demand recovers, without constraining operational capacity.

Home Meridian segment drives revenue decline for Hooker Furnishings

The Home Meridian segment experienced a $13.6 million, or 44.5% year-over-year, sales decline, with 25% of the drop due to a major customer bankruptcy, 35% from macroeconomic and tariff-related order hesitancy, and 40% from reduced project-based hospitality shipments. Gross margin for Home Meridian contracted by 590 basis points in the first six months of fiscal 2026, reflecting inventory liquidation and higher expenses amid sharply lower volume.

"Home Meridian. The Home Meridian segment's net sales declined $13,600,000 or about 44.5% in the '26. About 40% of the decline came from the project-based hospitality business where two large projects entered the shipping phase in the second quarter of last year. 35% of the decline came from traditional furniture channels due to macroeconomic pressures and tariff-related hesitancy. And 25% of the decline came from the loss of a major customer that filed for bankruptcy last year. Average selling prices also dropped sharply due to unfavorable product mix, inventory liquidation at the Georgia warehouse ahead of its closure."
-- Earl Armstrong, CFO

Until new customers are secured and demand stabilizes, Home Meridian’s results remain exposed to volume shocks, but cost discipline should reduce future volatility.

Order growth at Hooker Branded and Domestic Upholstery signals resilience

Net sales at Hooker Branded increased 1.3% year over year on higher average selling prices, while Domestic Upholstery sales were steady as three divisions offset a roughly 10% decline at the Outdoor brand due to supply chain disruption. Both segments reported order growth—nearly 11% for Hooker Branded and 1.6% for Domestic Upholstery—supported by broad-based retail momentum in July.

"At the beginning and end of the quarter, we saw encouraging momentum in Hooker legacy orders with July orders up 24% year over year at both Hooker Branded and Domestic Upholstery. For the quarter, Hooker Branded orders were up nearly 11% and Domestic Upholstery were up 1.6%."
-- Jeremy Hoff, CEO

Order momentum in these segments, despite industry-wide demand headwinds, suggests improving competitiveness and positions the company for outperformance when market conditions recover.

Looking Ahead

Management expects the targeted 25% fixed cost reduction to be largely complete by the end of the fiscal 2026 third quarter, unlocking $25 million in annualized savings as the company enters fiscal 2027. Tariff mitigation strategies are tailored by segment and already implemented, while the October launch of the Margaritaville Collection and operational efficiencies from the new Vietnam warehouse are expected to drive growth. No explicit quantitative revenue or earnings guidance was provided for upcoming quarters.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.