Hooker Furniture (HOFT) Misses Q2 EPS by 15c, Revenues Miss; 'Cautiously Optimistic About 2H'

Hooker Furniture (NASDAQ: HOFT) reported Q2 EPS of $0.35, $0.15 worse than the analyst estimate of $0.50. Revenue for the quarter came in at $152.2 million versus the consensus estimate of $162.7 million.

“Our business was significantly impacted by tariffs on finished goods and component parts imported from China and weak retail demand through the first six months of the year,” said Paul B. Toms Jr., chairman and chief executive officer.

“Looking across our industry, many public companies in the furniture industry are reporting weaker sales and reduced earnings. Business disruptions from the 10% tariff imposed last fall and the additional 15% tariff imposed this summer have impacted both our top and bottom line,” Toms said. “Revenues have been negatively affected by tariff rhetoric in the marketplace and tariff-related price increases, which have reduced retailer and consumer demand. Profitability has been negatively impacted by higher costs, which have lowered margins,” Toms said.

“Despite all the headwinds, we believe we’re doing a credible job executing various measures to mitigate the impact of tariffs on our business going forward. These include negotiating vendor price concessions, passing along price increases to our customers in the form of surcharges that can be lifted, if tariffs are reduced or eliminated and adjusting pricing on new product introductions imported from China. Most importantly,” Toms said, “we are on schedule in shifting production away from China. While slightly over 40% of our product line was imported from China at the end of our most recent fiscal year, we expect less than about 22% of our products will be produced in China by the end of this fiscal year; however, we expect to be selling through remaining China-sourced product into next year.”

“At the end of the quarter in July, incoming orders began to improve at HMI,” said Doug Townsend, HMI co-president. “Pulaski, Samuel Lawrence Furniture and Samuel Lawrence Hospitality all finished the quarter with double-digit increases in backlogs versus the prior year period,” he added.

The incoming order picture also brightened on a consolidated basis in July, Toms said. “Incoming orders are trending positively compared to both last quarter and the year-ago period. Since July, large retailers have been asking us to expedite orders so they can stock up for the upcoming fall selling season, which is traditionally the strongest of the year for furniture sales. Backlogs also are improving, with six of our eleven business units reporting higher backlogs than a year ago,” Toms said.

Outlook

“We remain cautiously optimistic about the second half of the year and still expect that retail business and demand will improve to better levels beginning this fall, traditionally the strongest season of the year for furniture sales,” said Toms. “Requests from some large retailers to expedite orders so they’ll have adequate inventory for the fall selling season have been encouraging.”

“Our tariff mitigation strategies and sourcing shift away from China are well underway and we are reducing costs and non-essential spending, along with delaying some capital expenditures until the environment improves. We expect the real benefits of our tariff mitigation strategies and re-sourcing will begin to be felt in the 4th quarter and increasingly thereafter.

“Even with the uncertain business environment, we’re proactively taking many steps to expand, including launching new business units and product line extensions in numerous businesses. At the Fall High Point Market, we will introduce a product licensing program with football legend Terry Bradshaw at our PRI division, launch a new HMI division targeting mass merchants and introduce an expanded upholstery offering at Sam Moore. We remain highly engaged as a management team in strategic planning and continue to benefit from having a diverse portfolio of 11 operating units across many different distribution channels, price points and product categories. We remain confident in our business model, market position and strategies and believe we will adapt successfully to any challenges ahead,” Toms concluded.

For earnings history and earnings-related data on Hooker Furniture (HOFT) click here.

You May Also Be Interested In

• Tesla touts acceleration of new models, but Q1 results fall short of estimates
• IDEX Corp. (IEX) Tops Q1 EPS by 13c ; Offers Guidance
• West Fraser Timber Co. Ltd. (WFG) Tops Q1 EPS by 17c