Hooker (HOFT) Q1 2027 Earnings Transcript

Image source: The Motley Fool.

DATE

Thursday, June 11, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Jeremy R. Hoff
• Chief Financial Officer — C. Earl Armstrong

TAKEAWAYS

• Net Sales -- $67.3 million, down $1.7 million or 2.4% primarily due to lower sales in the Hooker Branded and Domestic Upholstery segments, partially offset by higher hospitality shipments.
• Net Income -- $1.1 million, a $4.1 million improvement versus the prior year period.
• Operating Income -- $1.6 million versus an operating loss of $498 thousand, reflecting a $2.1 million improvement.
• Gross Profit -- Up $2.7 million; gross margin increased 440 basis points, led by stronger profitability in Hooker Branded.
• Hooker Branded Segment -- Net sales decreased $1.8 million or 4.8%; gross profit increased $2.9 million with gross margin up 960 basis points; backlog increased nearly 30% on retailer commitments to new items including Margaritaville.
• Domestic Upholstery Segment -- Net sales declined $558 thousand or 1.9%; gross profit fell $315 thousand and gross margin was down 80 basis points amid continued soft demand and higher overhead; operating loss totaled $689 thousand.
• Backlog & Orders -- Total consolidated end-of-quarter orders were $19.4 million; backlog stood at $39 million, supported by gains in Margaritaville commitments.
• Cash Position -- Cash and equivalents ended at $10.6 million, up $9.5 million from the prior fiscal year end; no debt outstanding at quarter end.
• Inventory -- Levels declined by $3.7 million to $45 million from the previous fiscal year end.
• Share Repurchase Activity -- Approximately 7.6 thousand shares repurchased for $96 thousand at an average price of $12.53; buyback program started on April 21, 2026 with up to $5 million authorized.
• Dividend Policy -- Annual dividend recalibrated to $0.46 per share, starting with the December 31, 2025 payment.
• Borrowing Capacity -- $54.2 million in available borrowing capacity at quarter end, net of standby letters of credit.
• May Incoming Orders -- Consolidated incoming orders increased 8%; backlog up more than 14%, primarily from Margaritaville initial shipments and retailer commitments.
• Margaritaville Expansion -- Commitments reached 100 in-store galleries and 10 freestanding stores, compared with approximately half those numbers in December.
• Capital Allocation -- New share repurchase program and adjusted dividend are intended to balance capital returns with strategic investment flexibility.
• Product Launches -- Introduction of Hooker Custom Upholstery unified Sam Moore and Bradington-Young brands under a premium identity, supported by showroom, marketing, and web enhancements.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• "the broader demand environment remains challenging," with management expressing a "cautious" outlook and noting persistent weak housing activity and low consumer confidence impacting retail demand.
• Domestic Upholstery segment reported a $689 thousand operating loss, attributed to continued weak demand in indoor residential furnishings and increased overhead.
• Gross margin variability tied to product mix and LIFO timing; C. Earl Armstrong said, "I would say 2 things. 1 is, product mix has a lot to do with where gross margin ends up for us. As usual. So depending on certain things that ship and certain things that do not, that can change that dynamic. But number 2, we are on, as we are on LIFO. And, that can significantly change things, depending on the timing of how that LIFO plays out. So those are really the 2 factors."
• Industry data referenced indicates declining retail furniture sales, with Department of Commerce estimates showing April sales dropped 2% month over month and 3.6% year over year.

SUMMARY

Management reported that cost reductions and a more efficient operating model led to a notable turnaround, with the company achieving profitable operations despite lower net sales and persistently soft market conditions. Incoming orders grew in May, driven by accelerated retailer adoption of the Margaritaville collection, and the pipeline for new product launches is robust. The company substantially increased its cash position, eliminated outstanding debt, and initiated both a new share repurchase program and an adjusted dividend structure. Management believes operational discipline and a unified branding strategy have positioned the company for improved earnings performance as market conditions stabilize.

• Jeremy R. Hoff stated, "We are also encouraged by the positive retailer response and commitments to products debuted at the April 2026 High Point Market," referencing early traction for recently launched brands.
• Operating cash flows were deployed toward debt repayment, dividends, and capital expenditures while maintaining operational flexibility.
• Management indicated that "Meaningful shipments are expected to begin in the second half of fiscal 27 and build through the end of the current fiscal year and beyond."
• Initial feedback from retail partners on recent holiday traffic was described as "pretty good" for Memorial Day, despite overall industry headwinds.

INDUSTRY GLOSSARY

• LIFO: "Last in, first out" inventory accounting method, where the most recently acquired inventory is recognized as cost of goods sold first.
• Backlog: The dollar value of accepted but unfulfilled customer orders at the end of a period, often indicating future revenue visibility.
• Margaritaville: Proprietary licensed collection, being rolled out as a significant new furniture line within Hooker Furnishings.

Full Conference Call Transcript

Despite continued weakness in the housing market, soft retail demand for furniture and home furnishings and persistent macroeconomic challenges, we delivered net income of $1.1 million for the quarter, reflecting the benefits of our cost reduction initiatives improved gross margin performance, and ongoing progress toward a leaner, higher margin operating model. Consolidated net sales decreased $1.7 million or 2.4% compared to the prior year period. The decrease was primarily driven by lower sales on the Hooker branded and domestic upholstery segments partially offset by higher shipments in the all leather components hospitality business. Despite the sales decrease, profitability improved significantly.

The consolidated gross profit increased by $2.7 million while gross margin improved 440 basis points compared to the prior year period. This improvement was primarily driven by stronger profitability in Hooker Branded. For the quarter, the company generated operating income of $1.6 million compared to an operating loss of $498 thousand in the prior year period. Representing a $2.1 million improvement. Consolidated net income was $1.1 million or $0.10 per diluted share. These results reflect the benefit of improved gross margin prior cost reduction initiatives and our continued focus on building a more efficient and profitable business model. Now I will turn the call over to Jeremy for his comments on our fiscal 27 first quarter results.

Jeremy R. Hoff: Thank you, Earl, and good morning, everyone. We are encouraged to report $1.1 million in consolidated net income for the quarter marking a $4.1 million improvement over the prior year first quarter. These results were achieved despite a challenging demand environment characterized by depressed housing activity and low consumer confidence. The improvement reflects the benefit of the $17.5 million reduction in fixed costs related to continuing operations that we achieved in the prior year as well as continued progress toward a more efficient operating model. From a segment perspective, Hooker Branded performed exceptionally well despite lower sales compared to the prior year. Supported by stronger gross margin performance.

Domestic Upholstery's results continue to be impacted by lower sales volume but were supported by operational efficiencies implemented late last year. Looking forward, retailer commitments to Margaritaville products galleries and freestanding stores continue to exceed our expectations with meaningful shipments expected to begin in the second half of fiscal 27. We are also encouraged by the positive retailer response and commitments to products debuted at the April 2026 High Point Market. During market, we introduced Hooker Custom Upholstery, bringing together the Sam Moore and Bradington-Young brands under a unified platform.

This updated market approach combines these upscale product lines under a unified premium Hooker Custom Upholstery identity supported by a refreshed showroom presentation, enhanced marketing efforts, and a mix of new introductions and established products. The initiative is further supported by the capabilities of our new website, launched in February 2026. Once market conditions improve, we believe this strategy will ultimately drive higher sales by creating a more cohesive brand narrative and presenting all offerings under the Hooker name, which carries the strongest brand recognition across our portfolio. Now I want to turn the discussion back over to Earl who will discuss highlights in each of our segments along with our cash, debt, inventory and capital allocation strategies.

C. Earl Armstrong: Thank you, Jeremy. Starting with Hooker Branded, net sales decreased $1.8 million or 4.8% in the first quarter of fiscal 27. 70% of that decrease was primarily due to lower volume in the imported upholstery part of that business. These headwinds were partially offset by higher average selling prices, from price increases implemented to mitigate higher product costs. Despite the decrease in sales, Hooker Branded gross profit increased $2.9 million and gross margin improved 960 basis points. The segment contributed $1.2 million of the operating income to the company's consolidated operating income of $1.6 million for the quarter. Backlog increased nearly 30% compared to the prior year first quarter reflecting retailer commitments to new products, including Margaritaville.

With meaningful shipments expected to begin in the second half of the current fiscal year. Turning to domestic upholstery. Net sales decreased $558 thousand or 1.9% in the first quarter. Of fiscal 27. Primarily due to the continued soft demand environment. Gross profit decreased $315 thousand and gross margin decreased 80 basis points driven by primarily by lower revenue and higher overhead. The segment recorded an operating loss of $689 thousand primarily driven by its indoor residential furnishings businesses. Domestic upholstery backlog increased modestly compared to both the prior year first quarter and fiscal 26 year end. In all other, performance was driven largely by increased sales and operating income in the hospitality division.

Improved operating income reflected higher sales as well as lower costs resulting from cost cutting measures implemented in the previous fiscal year. Turning now to cash, debt and inventory. Cash and cash equivalents stood at $10.6 million at quarter end an increase of $9.5 million from the prior year fiscal end. And the company had no debt. Cash generated from operations was used to repay $3.6 million in the principal amount of our outstanding loans distribute $1.3 million in cash dividends, and fund $403 thousand in capital expenditures. Inventory levels decreased by $3.7 million from $48.7 million at fiscal 26 year end. to $45 million at the end of the first quarter.

Despite these outflows, the company maintained its financial flexibility with $54.2 million in available borrowing capacity, under its amended and restated loan agreement as of quarter end net of standby letters of credit. And no outstanding balance on the credit facility. As of yesterday, the company had over $15 million in cash on hand. Finally, I will discuss our capital allocation strategy. In late fiscal 26, we announced that our board authorized a new share repurchase program under which we intend to repurchase up to $5 million of our outstanding common shares beginning in fiscal 27.

In connection with the repurchase authorization, the board recalibrated the annual dividend to $0.46 per share, beginning with the company's December 31, 2025 dividend payment. The share repurchase program began on April 21, 2026, pursuant to a plan structured to comply with the safe harbor of Rules 10b5-1 and 10b-18, which included a customary 90-day waiting period before the first purchases were made. During the quarter, we purchased about 7.6 thousand shares of our stock for approximately $96 thousand. At an average price of $12.53 per share. As we position the company for sustainable growth, the new share repurchase program and adjusted dividend provide a balanced framework for returning capital to shareholders while preserving flexibility to invest in strategic priorities.

We believe this approach supports both near term returns and long term shareholder value. Now I will turn the discussion back to Jeremy for his outlook.

Jeremy R. Hoff: Thank you, Earl. Looking at the early part of the second quarter, consolidated incoming orders increased 8% in May compared to the prior year period, while backlog was up more than 14% year over year. This improvement was primarily driven by Margaritaville orders which had their initial shipments in May. Retailer commitments to Margaritaville products, galleries, and freestanding stores continue to exceed our expectations. To date, we have commitments for 100 in store galleries and 10 freestanding retail stores compared with approximately half those numbers when we reported in December. Meaningful shipments are expected to begin in the second half of fiscal 27 and build through the end of the current fiscal year and beyond.

While these order and backlog trends are encouraging, the broader demand environment remains challenging. Housing activity remains pressured and recent consumer confidence readings continue to reflect a very cautious consumer environment. The Department of Commerce's April advance monthly estimate showed retail sales for furniture and home furnishing stores decreased 2% from March and 3.6% from the prior year. Given these macroeconomic pressures, our outlook for fiscal 2027 second quarter remains cautious, while we do not expect meaningful near term improvement in market conditions, our more efficient cost structure and streamlined portfolio should help position us to deliver improved results versus the prior year period even if current conditions persist.

Our advantage is a sharper focus on our core businesses a more disciplined operating model, and an organization aligned around profitable growth. We believe the actions taken over the past year have positioned the company to generate improved and more consistent earnings as market conditions improve. Combined with continued momentum in incoming orders, across our core businesses, we believe we are well positioned to capitalize on opportunities as demand recovers. This ends the formal part of our discussion and at this time, I will turn the call over to our operator, Michelle, for questions.

Operator: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. Our first question is going to come from the line of Anthony Lebiedzinski with Sidoti. Your line is open. Please go ahead.

Anthony Lebiedzinski: Thank you. Good morning, everyone, and thanks for taking the questions. Certainly nice to see the improved bottom line results here. So guess as we look back at the just reported quarter, just wondering if you guys saw any significant monthly variations in revenue as you went from February to April given all the JUUL geopolitical noise that we saw, during the quarter and, just wondering since typically, seasonally speaking, fiscal Q1 tends to be lower in terms of revenue than fiscal Q4. So maybe you could just speak to that as to how the quarter flowed during again, from February through April.

Jeremy R. Hoff: I would say that as we get further removed from what we dealt with in the latter part of last year, which was you could probably categorize as turmoil trying to sell the 2 companies and everything we did, to position the company where we are. I think that, earlier in the quarter, we were getting our feet under us. And as the quarter progressed, we are getting more and more focused and I would just say that the longer we have, the better I think we get at. Position ourselves to where we are headed. If that makes sense.

Anthony Lebiedzinski: Okay. Got it. And then could you just speak to pricing versus unit volumes? I know you guys typically put this in your 10-Q, but the if you could just maybe give us a just general framework as to what pricing was versus unit volumes in the quarter?

C. Earl Armstrong: Anthony, we do not have that in front of us. Like you said, it will be in the in the queue for tomorrow that we file tomorrow afternoon. I would say definitely yeah. Go ahead.

Anthony Lebiedzinski: Okay. Mhmm. Go ahead, Anthony. Okay. No. No. So I know there was some notion of increased pricing. During the quarter. So alright. So we will wait for the details in the 10-Q. that is fine. Okay. And then I guess my next question as for the gross margin, it was up more than expected, especially at Hooker Branded. Was there anything unusual to speak of? Or do you think this type of gross margin is sustainable going forward?

C. Earl Armstrong: I would say 2 things. 1 is, product mix has a lot to do with where gross margin ends up for us. As usual. So depending on certain things that ship and certain things that do not, that can change that dynamic. But number 2, we are on, as we are on LIFO. And, that can significantly change things, depending on the timing of how that LIFO plays out. So those are really the 2 factors.

Anthony Lebiedzinski: Gotcha. Okay. And lastly, can you talk about what you have seen or heard from your retail partners about Memorial Day traffic, which has historically been a big holiday event for the furniture industry. So if you could just maybe speak to what you have heard in regards to your, retail partners as far as what they have talked about as far as traffic and any buying activity around the key holiday Yeah.

Jeremy R. Hoff: I would say the contacts we made with our customers and partners, were pretty optimistic about what they experienced over the Memorial Day holiday. With sales and whatnot and traffic, they said was pretty good. We, considering what we are in with everything we talked about. So pretty good is the general sentiment on Memorial weekend.

Anthony Lebiedzinski: Well, alright. That sounds great. Well, thank you very much. I will pass it along.

Jeremy R. Hoff: We appreciate it.

C. Earl Armstrong: Thanks, Anthony.

Operator: Thank you. And 1 moment for our next question. Our next question comes from the line of Dave Storms with Stonegate. Your line is open. Please go ahead.

Dave Storms: Good morning, and thank you for taking my questions. I wanted to start with Margaritaville. You doubled the number of commitments from 50 to 100 for galleries and then added the 10 freestanding retail stores. But how should we think about that going forward? As you start to ship meaningfully in the second half here, would we expect to see those in store commitments numbers to increase, or do you think it will level out and it will be a pivot to volumes and shipments?

Jeremy R. Hoff: Well, I will answer that just based off of my experience with things that you launch with that type of magnitude, which I would guess I would have say I have never been a part of something that we feel like is that big, which I said I think it is the largest 1 Hooker has had. But however, when you first launch, you get some, people that-- customers that jump on right away, and then the more-- if the program's right and if you execute, you can get more and more participation, more and more galleries. So I mean, I am definitely taking a glass half full approach with it.

I am optimistic that we will keep increasing what we have already done, and that is, of course, the goal. Understood. So would expect some traction there.

Dave Storms: And then I guess and this is kinda going back to the margins question. From earlier. I know your backlog is starting to represent some of the Margaritaville ordering. Is there any sense of the texture of the margin profile of that backlog? Should we expect it to be maybe similar or a little bit stronger than maybe this last quarter?

Jeremy R. Hoff: Yeah. I would say the word is consistent. We are not separating that out as a as a different margin profile publicly, but I would say we are going to be consistent with what we are trying to do from a margin standpoint.

Dave Storms: that is very fair. Maybe 1 more for me. I know you mentioned or it was mentioned in your release. That there were some supply constraints and shipping delays in custom upholstery. Maybe taking a more macro view on that, are you seeing any sort of supply chain constraints across the industry in terms of maybe rate increases due to the shutdown of-- you know, anything like that is causing supply chain, hiccups?

Jeremy R. Hoff: No. So just first of all, it was not custom upholstery that we said was the delay. We said that on import upholstery. Custom upholstery is our domestic upholstery business. So very different. Regarding the other part of your question, we really have not had noticeable delays or whatnot from the Strait of Hormuz or anything going on in the world. Thankfully. it is not-- supply chain from overseas is never perfect, but we feel pretty good about our position right now. And we had-- the issues really were pretty, targeted on that Hooker Upholstery import upholstery model, Had a couple of factories where we had some issues, but that is not across the board. Understood.

Thank you for taking my questions. Good luck in the quarter.

C. Earl Armstrong: Yeah. You are welcome.

Jeremy R. Hoff: Thank you.

Operator: Thank you. And 1 moment for our next question. Our next question comes from the line of John Deysher with Pinnacle. Your line is open. Please go ahead.

John Deysher: Most of my questions were answered, but I just was curious what was the backlog and the orders numbers for the first quarter, please?

C. Earl Armstrong: 1 second. Let me see. Pardon me.

John Deysher: For Hooker Branded, at the end of Q1, You can just give me the total if it is easier.

C. Earl Armstrong: I think total consolidated at the end of Q1 was orders were 19.4. Backlog was 39 million.

John Deysher: Orders, 19.4, and backlog, 39 million? Correct. Okay. Great. And in terms thank you. And in terms of the tariffs, can you give us any feel for the rebate number that you are seeking? And when that might be received.

C. Earl Armstrong: John, we have-- we decided not to disclose that publicly, at least on the call. I think that process is still ongoing. And there will be some additional disclosure in the queue. But the way we are working with it now is that we have not recorded anything in the first quarter anticipating any of that. Under US GAAP, it is not realized or realizable at this point. The receipt's not probable. That is why we have not recognized anything. But to date, we have not disclosed that number publicly. Just because there is so much uncertainty regarding the refunds themselves.

John Deysher: Right. Okay. That makes sense. Do you know if any other industry players have actually received checks?

C. Earl Armstrong: Yeah. We do not have that type of information from others. No.

John Deysher: Okay. Alright. Fair enough. We will take a look at the queue. Thank you.

C. Earl Armstrong: Okay. Thank you.

Operator: And I would now like to hand the conference back over to Jeremy R. Hoff for closing remarks.

Jeremy R. Hoff: I would like to thank everyone on the call for their interest in Hooker Furnishings. We look forward to sharing our fiscal 2027 second quarter results in September. Take care.

Operator: This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were 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. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.