Hooker Furnishings Reports 14% Q2 Drop

Key Points

• - Revenue fell 13.6% to $82.1 million in Q2 FY2026, with declines concentrated in the Home Meridian segment.

• - Operating loss for Q2 FY2026 was $4.4 million, including $2.0 million in restructuring costs.

• - Quarterly dividend of $0.23 per share maintained; cost reduction efforts continued on schedule.

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Hooker Furnishings (NASDAQ:HOFT), a leading designer, marketer, and importer of home furnishings, reported its fiscal 2026 second quarter results on September 11, 2025. The most notable news was a significant drop in revenue and continued operating losses in Q2 FY2026, particularly in the Home Meridian division. Despite these challenges, the company made progress on its multi-phase cost-reduction plan and kept its dividend unchanged. Overall, the quarter was marked by sharp sales declines, especially in certain business lines, alongside operational restructuring efforts that management says are on track for planned savings.

About the Business and Recent Focuses

Hooker Furnishings operates as a major force in home furniture, supplying casegoods -- which include wood furniture like bedroom and dining sets -- and upholstered furniture such as sofas and chairs. Most of its offerings are imported, with sourcing from Vietnam, China, and other countries making up a large share of sales. The company sells across a diverse range of price points, serving both retail stores and e-commerce, and addressing both residential and some contract (commercial) markets.

In recent years, the company has focused on several critical areas for long-term health. These include managing supply chain risk (especially given heavy reliance on imported goods), broadening product diversity from traditional to modern styles, and scaling operations to match revenue pressure. Segment performance has become a key watchpoint, particularly as the Home Meridian business line has faced sharp declines in both sales and profitability. The ability to control costs and maintain solid supplier and customer relationships rank as key success factors.

Quarter Highlights and Underlying Drivers

The second quarter saw revenue sink by 13.6% compared to the previous year’s period. This dip reflected both broad market softness and specific negative events within individual divisions. The Home Meridian segment, which focuses on affordable furniture for retail and mass channels, experienced a 44.5% sales decrease. Management linked this to the loss of a major customer to bankruptcy and weaker demand, especially in price-sensitive categories. The segment’s gross margin dropped dramatically, from 19.5% in Q2 FY2025 to just 6.2%, as discounting and elevated restructuring expenses hit results. Orders in Home Meridian dropped sharply, with the segment backlog falling by more than 60% year-over-year.

The Hooker Branded segment, which includes premium casegoods and traditional furniture lines, managed to stabilize. Sales rose 1.3% over the prior-year period. Despite $655,000 in restructuring charges, this part of the business reached breakeven operating income and saw order intake rise by 10.6%. Gross margin slipped by about 0.8 percentage points due to pricing pressures and tariffs introduced on Vietnamese imports. Domestic Upholstery, which covers sofas, chairs, and sectionals, kept sales flat year over year but managed to cut its operating loss from $1.3 million to $0.4 million. Gross margin improved, rising by 2.2 percentage points. Notably, indoor product lines recovered, while Sunset West (the outdoor brand) saw sales drop 9.7% due to temporary factory disruptions in Vietnam and China earlier in the quarter.

Across the company, management highlighted progress on its cost-reduction plan. Operating expenses fell by $3.7 million in the first half of FY2026, even as one-time restructuring costs reached $2.0 million. The company is closing its Savannah, Georgia warehouse to streamline logistics, with the transition expected to complete by October 2025. A new facility opened in Vietnam in May 2025 and began operating at approximately two-thirds capacity, reducing lead times for furniture imports from about six months to four to six weeks. Tariffs of 20% on Vietnamese product imports became effective August 1, 2025, and the company responded by adjusting product lines and price points and seeking new materials and suppliers where required. The loss of a major Home Meridian customer accounted for roughly a quarter of that segment’s sales drop, demonstrating the vulnerability that comes with customer concentration in certain divisions.

On capital and cash flow, the company highlighted improvements in operating cash flow—$18.1 million in the first half of FY2026, compared to $5.3 million in the first half of FY2024. This resulted from reductions in accounts receivable and inventory, as inventory fell about $12 million since year-end (from $70.8 million at FY2025 year-end to $58.5 million at Q2 FY2026). Long-term debt was paid down by $16.5 million, leaving $5.2 million outstanding as of Q2 FY2026. However, the company’s cash balance at the end of Q2 FY2026 was $821,000, improving to $1.9 million as of the release date. Total borrowing capacity remains strong at nearly $58 million, supporting ongoing needs as the restructuring plan continues.

No new environmental or social governance (ESG) projects were announced in the quarter. Previous quarters noted steps to centralize logistics and improve supply chain efficiency. The current focus remains on cost, operational efficiency, and regaining marketplace momentum after a challenging first half of the year.

Outlook and What to Watch Ahead

The company reaffirmed its commitment to completing expense restructuring and achieving a new, lower fixed cost base by the end of Q3 FY2026. Management projects annual expense savings of $25 million by FY2027, with $15 million expected to be realized in FY2026. There was a clear emphasis on executing strategies within the company’s control, such as launching new products and optimizing the supply chain. However, management gave no direct forward revenue or earnings guidance for the next quarter or year. Instead, it repeated confidence in the cost-reduction plan and the anticipated launch of the Margaritaville licensed collection later this year. Industry factors like higher mortgage rates and slow home sales are still weighing on demand, which may continue to pressure results in the near term.

These include whether the new product launches can drive sales, if management continues to lower costs as planned, and if the Home Meridian segment stabilizes or requires more drastic changes. Margin pressures from tariffs, ongoing supply chain adjustments, and sensitivity to the broader housing market remain front and center. Backlogs in core business lines ended the quarter steady or higher, while Home Meridian’s backlog dropped sharply, showing divergent trends between divisions. Effective management of cash and inventory will be important, particularly given the low cash balance of $821,000 and improved borrowing capacity of $57.7 million as of Q2 FY2026. The company maintained its quarterly dividend at $0.23 per share for Q2 FY2026, unchanged from the prior period.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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