UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
Commission
file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS employer identification no.) |
(Address of principal executive offices, zip code)
(
(Registrant’s telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated Filer ☐ | |
| Non-accelerated Filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
As
of June 6, 2025, there were
TABLE OF CONTENTS
| PART I. FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 30 |
| Item 4. | Controls and Procedures | 30 |
| PART II. OTHER INFORMATION | ||
| Item 5. | Other Information | 31 |
| Item 6. | Exhibits | 31 |
| Signature | 32 | |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| As of | May 4, | February 2, | ||||||
| 2025 | 2025 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade accounts receivable, net | ||||||||
| Inventories | ||||||||
| Income tax recoverable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Cash surrender value of life insurance policies | ||||||||
| Deferred taxes | ||||||||
| Operating leases right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Trade accounts payable | $ | $ | ||||||
| Accrued salaries, wages and benefits | ||||||||
| Accrued income taxes | ||||||||
| Customer deposits | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Other accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Long term debt | ||||||||
| Deferred compensation | ||||||||
| Operating lease liabilities | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity | ||||||||
| Common stock, no par value, | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| For the | ||||||||
| Thirteen Weeks Ended | ||||||||
| May 4, | April 28, | |||||||
| 2025 | 2024 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Selling and administrative expenses | ||||||||
| Intangible asset amortization | ||||||||
| Operating (loss) / income | ( | ) | ( | ) | ||||
| Other income, net | ||||||||
| Interest expense, net | ||||||||
| (Loss) / income before income taxes | ( | ) | ( | ) | ||||
| Income tax (benefit) / expense | ( | ) | ( | ) | ||||
| Net (loss) / income | $ | ( | ) | $ | ( | ) | ||
| (Loss) / earnings per share | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Cash dividends declared per share | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME
(In thousands)
(Unaudited)
| For the | ||||||||
| Thirteen Weeks Ended | ||||||||
| May 4, | April 28, | |||||||
| 2025 | 2024 | |||||||
| Net (loss) / income | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income: | ||||||||
| Actuarial adjustments | ( | ) | ( | ) | ||||
| Income tax effect on adjustments | ||||||||
| Adjustments to net periodic benefit cost | ( | ) | ( | ) | ||||
| Total comprehensive (loss) / income | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| For the | ||||||||
| Thirteen Weeks Ended | ||||||||
| May 4, | April 28, | |||||||
| 2025 | 2024 | |||||||
| Operating Activities: | ||||||||
| Net (loss) / income | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net income to net cash (used in) / provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Deferred income tax expense | ( |
) | ( |
) | ||||
| Noncash restricted stock and performance awards | ||||||||
| Provision for doubtful accounts and sales allowances | ( |
) | ( |
) | ||||
| Gain on life insurance policies | ( |
) | ( |
) | ||||
| (Gain) / loss on disposal of assets | ||||||||
| Changes in assets and liabilities: | ||||||||
| Trade accounts receivable | ||||||||
| Inventories | ||||||||
| Income tax recoverable | ||||||||
| Prepaid expenses and other assets | ( |
) | ( |
) | ||||
| Trade accounts payable | ( |
) | ||||||
| Accrued salaries, wages, and benefits | ( |
) | ||||||
| Accrued income taxes | ||||||||
| Customer deposits | ||||||||
| Operating lease assets and liabilities | ||||||||
| Other accrued expenses | ( |
) | ( |
) | ||||
| Deferred compensation | ( |
) | ( |
) | ||||
| Net cash provided by operating activities | $ | $ | ||||||
| Investing Activities: | ||||||||
| Purchases of property and equipment | ( |
) | ( |
) | ||||
| Premiums paid on life insurance policies | ( |
) | ( |
) | ||||
| Net cash used in investing activities | $ | ( |
) | $ | ( |
) | ||
| Financing Activities: | ||||||||
| Proceeds from revolving credit facility | ||||||||
| Cash dividends paid | ( |
) | ( |
) | ||||
| Debt issuance cost | ( |
) | ||||||
| Payments for long-term loans | ( |
) | ||||||
| Net cash used in financing activities | $ | ( |
) | $ | ( |
) | ||
| Net increase / (decrease) in cash and cash equivalents | ( |
) | ||||||
| Cash and cash equivalents - beginning of year | ||||||||
| Cash and cash equivalents - end of quarter | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes, net of refund | $ | ( |
) | $ | ||||
| Cash paid for interest, net | ||||||||
| Non-cash transactions: | ||||||||
| Increase / (decrease) in lease liabilities arising from changes in right-of-use assets | $ | $ | ||||||
| Increase in property and equipment through accrued purchases | ||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share data)
(Unaudited)
| Accumulated | ||||||||||||||||||||
| Other | Total | |||||||||||||||||||
| Common Stock | Retained | Comprehensive | Shareholders’ | |||||||||||||||||
| Shares | Amount | Earnings | Income | Equity | ||||||||||||||||
| Balance at January 28, 2024 | $ | $ | $ | $ | ||||||||||||||||
| Net loss for the 13 weeks ended April 28, 2024 | ( | ) | ( | ) | ||||||||||||||||
| Actuarial adjustments on defined benefit plan, net of tax of $ | ( | ) | ( | ) | ||||||||||||||||
| Cash dividends paid and accrued ($ | ( | ) | ( | ) | ||||||||||||||||
| Restricted stock grants, net of forfeitures | ( | ) | ( | ) | ||||||||||||||||
| Restricted stock compensation cost | ||||||||||||||||||||
| Performance-based restricted stock units cost | ||||||||||||||||||||
| Balance at April 28, 2024 | $ | $ | $ | $ | ||||||||||||||||
| Balance at February 2, 2025 | $ | $ | $ | $ | ||||||||||||||||
| Net loss for the 13 weeks ended May 4, 2025 | ( | ) | ( | ) | ||||||||||||||||
| Actuarial adjustments on defined benefit plan, net of tax of $ | ( | ) | ( | ) | ||||||||||||||||
| Cash dividends paid and accrued ($ | ( | ) | ( | ) | ||||||||||||||||
| Restricted stock grants, net of forfeitures | ( | ) | ( | ) | ||||||||||||||||
| Restricted stock compensation cost | ||||||||||||||||||||
| Performance-based restricted stock units cost | ||||||||||||||||||||
| Balance at May 4, 2025 | $ | $ | $ | $ | ||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7
HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in tables, except per share amounts, in thousands unless otherwise indicated)
(Unaudited)
For the Thirteen Weeks Ended May 4, 2025
| 1. | Preparation of Interim Financial Statements |
The condensed consolidated financial statements of Hooker Furnishings Corporation and subsidiaries (referred to as “we,” “us,” “our,” “Hooker” or the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management these statements include all adjustments necessary for a fair statement of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) are condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended February 2, 2025 (“2025 Annual Report”). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect both the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates. Operating results for the interim periods reported herein may not be indicative of the results expected for the fiscal year.
The financial statements contained herein are being filed as part of a quarterly report on Form 10-Q covering the 2026 fiscal year thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “first quarter” or “quarterly period”) that began February 3, 2025 and ended May 4, 2025. This report discusses our results of operations for these periods compared to the 2025 fiscal year thirteen-week period that began January 29, 2024 and ended April 28, 2024; and our financial condition as of May 4, 2025 compared to February 2, 2025.
References in these notes to the condensed consolidated financial statements of the Company to:
| ■ | the 2026 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began February 3, 2025 and will end February 1, 2026; and |
| ■ | the 2025 fiscal year and comparable terminology mean the fifty-three-week fiscal year that began January 29, 2024 and ended February 2, 2025. |
| 2. |
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The new guidance requires enhanced effective tax rate reconciliation and income taxes paid disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (our fiscal 2026). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption.
In November 2024, the FASB issued ASU 2024-03, “Disaggregation of income statement expenses”. The new guidance requires new tabular disclosures to disaggregate prescribed natural expenses underlying any income statement caption. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 (our fiscal 2027). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption.
We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our business or are not expected to have a material effect on our consolidated financial statements as a result of future adoption.
8
| 3. | Accounts Receivable |
| May 4, | February 2, | |||||||
| 2025 | 2025 | |||||||
| Gross accounts receivable | $ | $ | ||||||
| Customer allowances | ( | ) | ( | ) | ||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Trade accounts receivable | $ | $ | ||||||
| 4. | Inventories |
| May 4, | February 2, | |||||||
| 2025 | 2025 | |||||||
| Finished furniture | $ | $ | ||||||
| Furniture in process | ||||||||
| Materials and supplies | ||||||||
| Inventories at FIFO | ||||||||
| Reduction to LIFO basis | ( | ) | ( | ) | ||||
| Inventories | $ | $ | ||||||
| 5. | Property, Plant and Equipment |
| Depreciable Lives | May 4, | February 2, | ||||||||
| (In years) | 2025 | 2025 | ||||||||
| Buildings and land improvements | $ | $ | ||||||||
| Machinery and equipment | ||||||||||
| Computer software and hardware | ||||||||||
| Leasehold improvements | ||||||||||
| Furniture and fixtures | ||||||||||
| Other | ||||||||||
| Total depreciable property at cost | ||||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||||
| Total depreciable property, net | ||||||||||
| Land | ||||||||||
| Construction-in-progress | ||||||||||
| Property, plant and equipment, net | $ | $ | ||||||||
| 6. | Cloud Computing Hosting Arrangement |
We are implementing a common Enterprise Resource Planning (ERP) system across all divisions. The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions and for consolidated reporting in early September 2023. Due to our cost reduction initiatives, we have temporarily paused the ERP project in the Home Meridian segment beginning in the third quarter of fiscal 2025. Based on the provisions of ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software, we capitalize implementation costs associated with hosting arrangements that are service contracts. These costs are recorded in “other noncurrent assets” of our consolidated balance sheets. We amortize on a straight-line basis over 10-years term. The amortization expenses are recorded as a component of selling and administrative expenses in our consolidated statements of operations.
9
Implementation
costs of $
| May 4, 2025 | February 2, 2025 | |||||||||||||||
| Gross carrying amount | Accumulated amortization | Gross carrying amount | Accumulated amortization | |||||||||||||
| Implementation Costs | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Interest Expenses | ( | ) | ( | ) | ||||||||||||
| 7. | Fair Value Measurements |
Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability (an exit price) in an orderly transaction between market participants on the applicable measurement date. We use a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
| ■ | Level 1, defined as observable inputs such as quoted prices in active markets for identical assets and liabilities; |
| ■ | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
| ■ | Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
As of May 4, 2025 and February 2, 2025, Company-owned life insurance was measured at fair value on a recurring basis based on Level 2 inputs. The fair value of the Company-owned life insurance is determined by inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Additionally, the fair value of the Company-owned life insurance is marked to market each reporting period and any change in fair value is reflected in income for that period.
Our assets measured at fair value on a recurring basis at May 4, 2025 and February 2, 2025, were as follows:
| Fair value at May 4, 2025 | Fair value at February 2, 2025 | |||||||||||||||||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
| Assets measured at fair value | ||||||||||||||||||||||||||||||||
| Company-owned life insurance | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
10
| 8. | Intangible Assets |
Our
intangible assets with indefinite lives consist of: goodwill related to the Shenandoah, Sunset West and BOBO Intriguing Objects acquisitions;
and trademarks and tradenames related to the acquisitions of Bradington-Young, Home Meridian and BOBO Intriguing Objects. Our intangible
assets with definite lives are recorded in our Home Meridian and Domestic Upholstery segments.
| May 4, 2025 | February 2, 2025 | |||||||||||||||
| Gross carrying amount | Impairment / Accumulated Amortization | Gross carrying amount | Impairment / Accumulated Amortization | |||||||||||||
| Intangible assets with indefinite lives: | ||||||||||||||||
| Goodwill | ||||||||||||||||
| Domestic Upholstery - Shenandoah * | ||||||||||||||||
| Domestic Upholstery - Sunset West | ||||||||||||||||
| All Other - BOBO Intriguing Objects | ||||||||||||||||
| Goodwill | ||||||||||||||||
| Trademarks and Trade names * | ||||||||||||||||
| Intangible assets with definite lives: | ||||||||||||||||
| Customer Relationships | ( | ) | ( | ) | ||||||||||||
| Trademarks and Trade names | ( | ) | ( | ) | ||||||||||||
| Intangible assets, net | ( | ) | ( | ) | ||||||||||||
| *: | The
amounts are net of impairment charges of $ |
Amortization
expenses for intangible assets with definite lives were $
| 9. | Leases |
We
have operating leases for warehouses, showrooms, manufacturing facilities, offices and equipment. We recognized sublease income of $
The components of lease cost and supplemental cash flow information for leases for the first quarters of fiscal 2026 and 2025 were:
| Thirteen Weeks Ended | ||||||||
| May 4, 2025 | April 28, 2024 | |||||||
| Operating lease cost | $ | $ | ||||||
| Variable lease cost | ||||||||
| Short-term lease cost | ||||||||
| Total operating lease cost | $ | $ | ||||||
| Operating cash outflows | $ | $ | ||||||
11
The right-of-use assets and lease liabilities recorded on our condensed consolidated balance sheets as of May 4, 2025 and February 2, 2025 were as follows:
| May 4, 2025 | February 2, 2025 | |||||||
| Real estate | $ | $ | ||||||
| Property and equipment | ||||||||
| Total operating leases right-of-use assets | $ | $ | ||||||
| Current portion of operating lease liabilities | $ | $ | ||||||
| Long term operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
The
weighted-average discount rate is
The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance sheets on May 4, 2025:
| Undiscounted Future Operating Lease Payments | ||||
| Remainder of fiscal 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 and thereafter | ||||
| Total lease payments | $ | |||
| Less: impact of discounting | ( | ) | ||
| Present value of lease payments | $ | |||
| 10. | Long-Term Debt |
On December 5, 2024, the Company and its wholly owned subsidiaries, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian Group, LLC (together with the Company, the “Borrowers”), entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”) with Bank of America, N.A. (“BofA”), as lender. The Amended and Restated Loan Agreement amends, restates and replaces the Second Amended and Restated Loan Agreement, dated as of September 29, 2017, between the Borrowers and BofA, as amended (the “Existing Loan Agreement”). The outstanding principal amount of loans and letters of credit issued under the Existing Loan Agreement and used to collateralize certain insurance arrangements and for imported product purchases will remain outstanding as loans and letters of credit under the Amended and Restated Loan Agreement.
The
Amended and Restated Loan Agreement provides for a revolving credit facility in a committed principal amount of up to $
Availability of loans and letters of credit under the Revolving Commitment is capped by a borrowing base formula calculated as of any date as the sum for the Borrowers of (a) the value of their accounts receivable, (b) the value of their inventory, (c) the value of their in-transit inventory and (d) the life insurance cash surrender value of company-owned life insurance policies, in each case subject to eligibility requirements, advance rates, valuation metrics, reductions for write-offs and other dilutive items and reserves (the “Borrowing Base”). The lesser of the Revolving Commitment and the Borrowing Base, in each case net of the principal amount of outstanding loans and the face amount of letters of credit, constitutes “Availability” under the Amended and Restated Credit Agreement.
12
Outstanding
loans under the Amended and Restated Loan Agreement will bear interest at a rate per annum equal to the then-current
We may prepay any outstanding principal amounts borrowed under the Amended and Restated Loan Agreement at any time, without penalty provided that any payment is accompanied by all accrued interest owed. Subject to the Borrowers having sufficient borrowing base capacity and customary conditions precedent to borrowing, amounts repaid may be reborrowed. The Revolving Commitment will terminate, and all amounts outstanding thereunder will be due and payable, on December 5, 2029.
The obligations under the Amended and Restated Loan Agreement are secured by a first priority security interest in substantially all of the assets of the Borrowers, other than real estate, including all Company-owned life insurance policies, all accounts receivable, all inventory, all intellectual property, all equipment and all other personal property.
The
Amended and Restated Loan Agreement includes customary representations and warranties and requires the Borrowers to comply with customary
affirmative and negative covenants, including, among other things, a financial covenant requiring the maintenance of a ratio of (x) EBITDA
net of capital expenditures (to the extent not paid using Borrowed Money) to (y) the sum of debt service and dividends paid, in each
case as of the last day of each month for the trailing twelve-month period ending on such day, of at least 1.0 to 1.0, if an event of
default has occurred and is continuing or Availability has fallen below 10% of the Revolving Commitment at any time (until such time
as both Availability is 10% or greater and no event of default exists, for the
The Amended and Restated Loan Agreement also limits the Borrowers’ right to incur other indebtedness, make certain investments and create liens upon our assets, subject to certain exceptions, among other restrictions. The Amended and Restated Loan Agreement does not restrict the Company’s ability to pay cash dividends on, or repurchase, shares of its common stock, subject to (a) no default existing prior to or resulting from such dividend or repurchase, (b) Availability is not less than 15% of the Revolving Commitment for each of the preceding 45 days prior to announcement of such dividend or repurchase and after giving pro forma effect to such dividend or repurchase and (c) if Availability is less than 20% of the Revolving Commitment on any day in such 45-day period, the Borrowers are in compliance with the financial covenant described above after giving effect to such dividend or repurchase.
We
incurred $
As
of May 4, 2025, we had $
| 11. | Earnings Per Share |
We refer you to the discussion of Earnings Per Share in Note 1. Summary of Significant Accounting Policies, in the financial statements included in our 2024 Annual Report, for additional information concerning the calculation of earnings per share (EPS).
All stock awards are designed to encourage retention and to provide an incentive for increasing shareholder value. We have issued restricted stock awards to non-employee members of the board of directors since 2006 and to certain non-executive employees since 2014. We have issued RSUs to certain senior executives since fiscal 2012 under the Company’s Stock Incentive Plan. Each RSU entitles an executive to receive one share of the Company’s common stock if the executive remains continuously employed with the Company through the applicable vesting date. The RSUs may be paid in shares of our common stock, cash or both at the discretion of the Compensation Committee of our board of directors. We have issued PSUs to certain senior executives since fiscal 2019 under the Company’s Stock Incentive Plan. Each PSU entitles the executive officer to receive one share of our common stock based on the achievement of two specified performance conditions if the executive officer remains continuously employed through the end of the three-year performance period. Historically, one target is based on our annual average growth in our EPS over the performance period and the other target is based on EPS growth over the performance period compared to our peers. For the PSUs issued under the Company’s 2024 Plan in fiscal 2025 and afterwards, one target is the Company’s annual EPS growth over the performance period and the other target is the Company’s total shareholder return during the performance period compared to the Company’s peer group. The payout or settlement of the PSUs will be made in shares of our common stock.
13
We expect to continue to grant these types of awards annually in the future. The following table sets forth the number of outstanding restricted stock awards and RSUs and PSUs, net of forfeitures and vested shares, as of the fiscal period-end dates indicated:
| May 4, | February 2, | |||||||
| 2025 | 2025 | |||||||
| Restricted shares | ||||||||
| RSUs and PSUs | ||||||||
All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share.
The following table sets forth the computation of basic and diluted earnings per share:
| Thirteen Weeks Ended | ||||||||
| May 4, | April 28, | |||||||
| 2025 | 2024 | |||||||
| Net (loss) / income | $ | ( | ) | $ | ( | ) | ||
| Less: Unvested participating restricted stock dividends | ||||||||
| Net earnings allocated to unvested participating restricted stock | ||||||||
| (Loss) / Earnings available for common shareholders | ( | ) | ( | ) | ||||
| Weighted average shares outstanding for basic earnings per share | ||||||||
| Dilutive effect of unvested restricted stock, RSU and PSU awards | ||||||||
| Weighted average shares outstanding for diluted earnings per share | ||||||||
| Basic (loss) / earnings per share | $ | ( | ) | $ | ( | ) | ||
| Diluted (loss) / earnings per share | $ | ( | ) | $ | ( | ) | ||
Due
to net losses in the first quarters of fiscal 2026 and 2025, approximately
| 12. | Income Taxes |
We
recorded income tax benefits of $
No material and non-routine positions have been identified as uncertain tax positions.
Tax years ending January 29, 2023 through February 2, 2025 remain subject to examination by federal and state taxing authorities.
14
| 13. | Segment Information |
As a public entity, we are required to present disaggregated information by segment using the management approach. The objective of this approach is to allow users of our financial statements to see our business through the eyes of management based upon the way management reviews performance and makes decisions. The management approach requires segment information to be reported based on how management internally evaluates the operating performance of the company’s business units or segments. The objective of this approach is to meet the basic principles of segment reporting as outlined in ASC 280 Segments (“ASC 280”), which are to allow the users of our financial statements to:
| ■ | better understand our performance; |
| ■ | better assess our prospects for future net cash flows; and |
| ■ | make more informed judgments about us as a whole. |
We define our segments as those operations our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources. The Company’s CODM is the Chief Executive Officer. The CODM regularly reviews net sales, gross profit, and operating income by segment as the primary measures of segment performance. The CODM reviews net sales as a primary indicator of operational performance, assessing how much revenue is brought in from core business activities, after returns, allowances, and discounts, which reflects demand and execution of each segment’s strategy. Gross profit is reviewed by the CODM as a diagnostic metric, particularly useful in evaluating margin trends. Operating income is the key profitability metric used to assess performance across segments and make decisions related to resource allocation, including capital expenditures, headcount, and other investment initiatives. These metrics are considered in budgeting, forecasting, and operational planning decisions.
For
financial reporting purposes, we are organized into
| ■ | Hooker Branded, consisting of the operations of our imported Hooker Casegoods and Hooker Upholstery businesses; |
| ■ | Home Meridian, is a stand-alone, mostly autonomous business that serves a different type or class of customer than do our other operating segments and at much lower margins; |
| ■ | Domestic Upholstery, which includes the domestic upholstery manufacturing operations of Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West; and |
| ■ | All Other, consisting of intercompany eliminations and operating segments that are not individually reportable. Due to a change in the way management internally evaluates operating performance, beginning with the fiscal 2026 first quarter, Hooker Branded and Domestic Upholstery segments’ results now include all the sales of products formerly included in H Contract’s results. Fiscal 2025 results discussed below have been recast to reflect this change. |
15
The following tables present segment information for the periods, and as of the dates, indicated.
| Thirteen Weeks Ended | ||||||||||||||||
| May 4, 2025 |
April 28, 2024 |
|||||||||||||||
| % Net | % Net | |||||||||||||||
| Net Sales | Sales | Sales | ||||||||||||||
| Hooker Branded | $ | % | $ | % | ||||||||||||
| Home Meridian | % | % | ||||||||||||||
| Domestic Upholstery | % | % | ||||||||||||||
| All Other | % | % | ||||||||||||||
| Consolidated | $ | % | $ | % | ||||||||||||
| Gross Profit | ||||||||||||||||
| Hooker Branded | $ | % | $ | % | ||||||||||||
| Home Meridian | % | % | ||||||||||||||
| Domestic Upholstery | % | % | ||||||||||||||
| All Other | ( |
) | - |
% | ( |
) | - |
% | ||||||||
| Consolidated | $ | % | $ | % | ||||||||||||
| Selling and Administrative Expenses | ||||||||||||||||
| Hooker Branded | $ | % | $ | % | ||||||||||||
| Home Meridian | % | % | ||||||||||||||
| Domestic Upholstery | % | % | ||||||||||||||
| All Other | % | % | ||||||||||||||
| Consolidated | $ | % | $ | % | ||||||||||||
| Intangible assets amortization | ||||||||||||||||
| Home Meridian | $ | % | $ | % | ||||||||||||
| Domestic Upholstery | % | % | ||||||||||||||
| Consolidated | $ | % | $ | % | ||||||||||||
| Operating (Loss) / Income | ||||||||||||||||
| Hooker Branded | $ | % | $ | % | ||||||||||||
| Home Meridian | ( |
) | - |
% | ( |
) | - |
% | ||||||||
| Domestic Upholstery | ( |
) | - |
% | ( |
) | - |
% | ||||||||
| All Other | ( |
) | - |
% | ( |
) | - |
% | ||||||||
| Consolidated | $ | ( |
) | - |
% | $ | ( |
) | - |
% | ||||||
| Other Income, net | ||||||||||||||||
| Hooker Branded | $ | % | $ | % | ||||||||||||
| Home Meridian | % | % | ||||||||||||||
| Domestic Upholstery | % | % | ||||||||||||||
| All Other | % | % | ||||||||||||||
| Consolidated | $ | % | $ | % | ||||||||||||
| Interest expense - Corporate | $ | % | $ | % | ||||||||||||
| Income taxes - Corporate | $ | ( |
) | - |
% | $ | ( |
) | - |
% | ||||||
| Net (loss) / income - Corporate | $ | ( |
) | - |
% | $ | ( |
) | - |
% | ||||||
| Restructuring Costs | ||||||||||||||||
| Hooker Branded | $ | $ | ||||||||||||||
| Home Meridian | ||||||||||||||||
| Domestic Upholstery | ||||||||||||||||
| All Other | ||||||||||||||||
| Consolidated | $ | $ | ||||||||||||||
| Capital Expenditures | ||||||||||||||||
| Hooker Branded | $ | $ | ||||||||||||||
| Home Meridian | ||||||||||||||||
| Domestic Upholstery | ||||||||||||||||
| All Other | ||||||||||||||||
| Consolidated | $ | $ | ||||||||||||||
| Depreciation & Amortization | ||||||||||||||||
| Hooker Branded | $ | $ | ||||||||||||||
| Home Meridian | ||||||||||||||||
| Domestic Upholstery | ||||||||||||||||
| All Other | ||||||||||||||||
| Consolidated | $ | $ | ||||||||||||||
16
| As of May 4, |
As of February 2, |
|||||||||||||||
| 2025 | %Total | 2025 | %Total | |||||||||||||
| Assets | Assets | Assets | ||||||||||||||
| Hooker Branded | $ | % | $ | % | ||||||||||||
| Home Meridian | % | % | ||||||||||||||
| Domestic Upholstery | % | % | ||||||||||||||
| All Other | % | % | ||||||||||||||
| Consolidated Assets | $ | % | $ | % | ||||||||||||
| Consolidated Goodwill and Intangibles | ||||||||||||||||
| Total Consolidated Assets | $ | $ | ||||||||||||||
Sales by product type are as follows:
| Net Sales (in thousands) | ||||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||||
| May 4, 2025 | %Total | April 28, 2024 | %Total | |||||||||||||
| Casegoods | $ | % | $ | % | ||||||||||||
| Upholstery | % | % | ||||||||||||||
| $ | % | $ | % | |||||||||||||
| 14. | Subsequent Events |
Dividends
On
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
All references to the “Company,” “we,” “us” and “our” in this document refer to Hooker Furnishings Corporation and its consolidated subsidiaries, unless specifically referring to segment information. All references to the “Hooker,” “Hooker Division(s),” “Hooker Legacy Brands” or “traditional Hooker” divisions or companies refer to all current business units and brands except for those in the Home Meridian segment. The Hooker Branded segment includes Hooker Casegoods and Hooker Upholstery. The Domestic Upholstery segment includes Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West. All Other includes intercompany eliminations and operating segments that are not individually reportable.
Forward-Looking Statements
Certain statements made in this report, including statements under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the notes to the consolidated financial statements included in this report, are not based on historical facts, but are forward-looking statements. These statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as “believes,” “expects,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “would,” “could,” or “anticipates,” or the negatives thereof, or other variations thereof, or comparable terminology, or by discussions of strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to:
(1) general economic or business conditions, both domestically and internationally, including the current macro-economic uncertainties and challenges to the retail environment for home furnishings along with instability in the financial and credit markets, in part due to fluctuating interest rates and housing market volatility, which can affect consumer spending patterns, existing home sales, and demand for home furnishings, including their potential impact on (i) our sales and operating costs and access to financing, (ii) customers, and (iii) suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses;
(2) adverse political acts or developments in, or affecting, the international markets from which we import products and some components used in our Domestic Upholstery segment, including duties or tariffs imposed on those products by foreign governments or the U.S. government, such as the current ten percent tariff and potential additional higher reciprocal tariffs on imports from key sourcing countries , affecting the countries from which we source imported home furnishings and components, including the possible adverse effects on our sales, earnings, and liquidity;
(3) the cyclical nature of the furniture industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers’ income available for discretionary purchases, and the availability and terms of consumer credit;
(4) risks associated with the ultimate outcome of our cost reduction plans, including the amounts and timing of savings realized and the ability to scale the business appropriately as customer demand increases or decreases based on the macroeconomic environment;
(5) risks associated with the ongoing restructuring and review of the Home Meridian (HMI) segment, including uncertainties related to the successful execution of cost reduction plans, the impact of exiting unprofitable product lines and facilities, and the potential to achieve consistent profitability in the future, including the buying hesitancy of its customer base due to tariff and other economic uncertainties;
(6) risk associated with the planned exit of our Savannah, Georgia warehouse, including executing a timely exit, the costs and availability of temporary warehousing, moving and start-up costs, ERP and technology-related risks, the timing and amounts of related restructuring charges and expected cost savings, as well as possible related disruptions to sales, earnings, revenue;
(7) risks associated with our new warehouse facility in Vietnam, including our ability to execute the planned shift of inventories from domestic facilities to Vietnam without increasing overall inventories and adversely affecting working capital levels and start-up risks including technology-related risks or disruption in our offshore suppliers or the transportation and handling industries, including labor stoppages, strikes, or slowdowns, and the ability to timely fulfill customer orders;
(8) the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers, including the loss of several large customers through business consolidations, failures or other reasons, or the loss of significant sales programs with major customers;
(9) risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, customs issues, freight costs, including the price and availability of shipping containers, ocean vessels, domestic trucking, and warehousing costs and the risk that a disruption in our supply chain or the transportation and handling industries, including labor stoppages, strikes, or slowdowns, could adversely affect our ability to timely fulfill customer orders;
(10) the impairment of our long-lived assets, which can result in reduced earnings and net worth;
(11) difficulties in forecasting demand for our imported products and raw materials used in our domestic operations;
(12) our inability to collect amounts owed to us or significant delays in collecting such amounts;
(13) the risks associated with our Amended and Restated Loan Agreement, including the fact that our asset-based lending facility is secured by substantially all of our assets and contains provisions which limit the amount of our future borrowings under the facility, as well as financial and negative covenants that, among other things, may limit our ability to incur additional indebtedness;
18
(14) interruption, inadequacy, security breaches or integration failure of our information systems or information technology infrastructure, related service providers or the internet or other related issues including unauthorized disclosures of confidential information, hacking or other cybersecurity threats or inadequate levels of cyber insurance or risks not covered by cyber insurance;
(15) risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of skilled labor, and environmental compliance and remediation costs;
(16) risks associated with our self-insured healthcare and workers compensation plans, which utilize stop-loss insurance for aggregate claims above specified thresholds and can be impacted by higher healthcare inflation and expenditures, all of which may cause our healthcare and workers compensation costs to rise unexpectedly, adversely affecting our earnings, financial condition, and liquidity;
(17) disruptions and damage (including those due to weather) affecting our Virginia, North Carolina or Georgia warehouses, our Virginia, North Carolina or California administrative and manufacturing facilities, our High Point, Las Vegas, and Atlanta showrooms or our representative offices or warehouses in Vietnam and China;
(18) changes in U.S. and foreign government regulations and in the political, social and economic climates of the countries from which we source our products;
(19) risks associated with product defects, including higher than expected costs associated with product quality and safety, regulatory compliance costs related to the sale of consumer products and costs related to defective or non-compliant products, product liability claims and costs to recall defective products and the adverse effects of negative media coverage;
(20) the direct and indirect costs and time spent by our associates related to the implementation of our Enterprise Resource Planning system (“ERP”), including costs resulting from unanticipated disruptions to our business;
(21) achieving and managing growth and change, and the risks associated with new business lines, acquisitions, including the selection of suitable acquisition targets, restructurings, strategic alliances and international operations;
(22) risks associated with distribution through third-party retailers, such as non-binding dealership arrangements;
(23) changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of our imported products and raw materials;
(24) price competition in the furniture industry;
(25) changes in consumer preferences, including increased demand for lower-priced furniture.
Our forward-looking statements could be wrong considering these and other risks, uncertainties and assumptions. The future events, developments or results described in this report could turn out to be materially different. Any forward-looking statement we make speaks only as of the date of that statement, and we undertake no obligation, except as required by law, to update any forward-looking statements whether as a result of new information, future events or otherwise and you should not expect us to do so.
Also, our business is subject to significant risks and uncertainties, any of which can adversely affect our business, results of operations, financial condition or future prospects. For a discussion of risks and uncertainties that we face, see the Forward-Looking Statements detailed above and Item 1A, “Risk Factors” in our 2025 Annual Report.
Investors should also be aware that while we occasionally communicate with securities analysts and others, it is against our policy to selectively disclose to them any material nonpublic information or other confidential commercial information. Accordingly, investors should not assume that we agree with any projection, forecast or report issued by any analyst regardless of the content of the statement or report, as we have a policy against confirming information issued by others.
19
Quarterly Reporting
This quarterly report on Form 10-Q includes our unaudited condensed consolidated financial statements for the 2026 fiscal year thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “first quarter” or “quarterly period”) that began February 3, 2025 and ended May 4, 2025. This report discusses our results of operations for this period compared to the 2025 fiscal year thirteen-week period that began January 29, 2024 and ended April 28, 2024; and our financial condition as of May 4, 2025 compared to February 2, 2025.
References in this report to:
| ■ | the 2026 fiscal year and comparable terminology mean the fiscal year that began February 3, 2025, and will end February 1, 2026; and |
| ■ | the 2025 fiscal year and comparable terminology mean the fiscal year that began January 29, 2024, and ended February 2, 2025. |
Dollar amounts presented in the tables below are in thousands except for per share data.
The following discussion should be read in conjunction with the condensed consolidated financial statements, including the related notes, contained elsewhere in this quarterly report. We also encourage users of this report to familiarize themselves with all our recent public filings made with the SEC, especially our 2025 Annual Report. Our 2025 Annual Report contains critical information regarding known risks and uncertainties that we face, critical accounting policies and information on commitments and contractual obligations that are not reflected in our condensed consolidated financial statements, as well as a more thorough and detailed discussion of our corporate strategy and new business initiatives.
Our 2025 Annual Report and other public filings made with the SEC are available, without charge, at www.sec.gov and at http://investors.hookerfurnishings.com.
Overview
Hooker Furnishings Corporation, incorporated in Virginia in 1924, is a designer, marketer, and importer of casegoods (wooden and metal furniture), leather furniture, fabric-upholstered furniture, lighting, accessories, and home décor for the residential, hospitality and contract markets. We also domestically manufacture premium residential custom leather, custom fabric-upholstered furniture and outdoor furniture.
Orders and Backlog
In the discussion below and herein, we reference changes in sales orders or “orders” and sales order backlog (unshipped orders at a point in time) or “backlog” over and compared to certain periods of time and changes discussed are in sales dollars and not units of inventory, unless stated otherwise. We believe orders are generally good current indicators of sales momentum and business conditions. If the items ordered are in stock and the customer has requested immediate delivery, we generally ship products in about seven days or less from receipt of order; however, orders may be shipped later if they are out of stock or there are production or shipping delays or the customer has requested the order to be shipped at a later date or has requested that we ship the order “in-full”, meaning all products ordered for the end-user must ship together. It is our policy and industry practice to allow order cancellation for casegoods up to the time of shipment or, in the case of container direct orders, up until the time the container is booked with the ocean freight carrier; therefore, customer orders for casegoods are not firm. However, domestically produced upholstered products are predominantly custom-built and consequently, cannot be cancelled once the leather or fabric has been cut. Additionally, our hospitality products are highly customized and are generally not cancellable. Similarly, for our outdoor furnishings, most orders require a deposit upon order and the balance before production is started, and hence are generally not cancellable.
For the Hooker Branded and Domestic Upholstery segments, we generally consider backlogs to be one helpful indicator of sales for the upcoming 30-day period, but because of our relatively quick delivery and our cancellation policies, we do not consider order backlogs to be a reliable indicator of expected long-term sales. We generally consider the Home Meridian segment’s backlog to be one helpful indicator of that segment’s sales for the upcoming 90-day period. Due to (i) the average sales order sizes of its mass and mega account channels of distribution, (ii) the proprietary nature of many of its products and (iii) the project nature of its hospitality business, for which average order sizes tend to be larger and consequently, the Home Meridian segment’s order backlog tends to be larger.
20
There have been exceptions to the general predictive nature of our orders and backlogs noted in this paragraph, such as during times of extremely high demand and supply chain challenges as experienced during the immediate aftermath of the initial COVID-19 crisis and subsequent recovery. Orders were not being converted to shipments as quickly as would be expected compared to the pre-pandemic environment due to the lack and cost of shipping containers and vessel space as well as limited overseas vendor capacity. As a result, backlogs were significantly elevated and reached historical levels at the end of fiscal 2021 and 2022.
At May 4, 2025, our backlog of unshipped orders was as follows:
| Order Backlog | ||||||||||||
| (Dollars in 000s) | ||||||||||||
| Reporting Segment | May 4, 2025 | February 2, 2025 | April 28, 2024 | |||||||||
| Hooker Branded | $ | 13,479 | $ | 13,109 | $ | 17,129 | ||||||
| Home Meridian | 18,069 | 21,002 | 49,396 | |||||||||
| Domestic Upholstery | 19,401 | 18,123 | 19,236 | |||||||||
| All Other | 254 | 402 | - | |||||||||
| Consolidated | $ | 51,203 | $ | 52,636 | $ | 85,761 | ||||||
The consolidated order backlog at the end of the first quarter of fiscal 2026 decreased by 2.7% compared to the year-end on February 2, 2025, and by 40.3% compared to the end of the previous year’s first quarter. This decrease was primarily driven by the Home Meridian segment, where incoming orders and backlog fell due to reduced demand and the loss of orders from a major customer that filed for bankruptcy in 2024. These trends reflect broader macroeconomic pressures and tariff-related buying hesitancy among our customers, particularly affecting value-focused segments.
Executive Summary
Macroeconomic factors affecting our results
The home furnishings industry continues to face significant challenges due to macroeconomic factors dampening consumer demand. Demand in this category is historically linked to existing home sales, as consumers often buy furnishings after moving. However, the housing market remains sluggish due to housing affordability, high mortgage rates and low consumer confidence. According to the National Association of Realtors, existing home sales have hovered around 75% of pre-pandemic levels for the past three years, despite the addition of over seven million jobs. This indicates that employment growth hasn’t translated into greater housing mobility or home-related spending. Notably, despite the U.S. population growing by over 50% since 1978, fewer existing homes were sold in 2024 than in 1978, underscoring deep housing market stagnation.
In calendar 2025, the average 30-year fixed mortgage rate has hovered around 6.8%. This marks a significant increase compared to the pandemic-era lows of approximately 3% in 2020 and 2021. The doubling of borrowing costs has effectively cooled the housing market, discouraging both first-time buyers and existing homeowners from moving. This stagnation has, in turn, suppressed demand for new furnishings typically associated with home moves.
Consumer sentiment has deteriorated sharply, as reflected in the University of Michigan’s Consumer Sentiment Index, which fell to 52.2 in May 2025. This marks a nearly 30% drop since January 2025, underscoring a steep erosion in public confidence. During the home furnishings sales boom in 2021, this index consistently hovered around 80, highlighting just how far optimism has fallen. The recent decline is fueled by concerns over inflation, trade uncertainty, and rising unemployment expectations—factors that are prompting consumers to delay discretionary purchases like furniture.
21
Results of Operations
We reported consolidated net sales of $85.3 million for the first quarter, a decrease of $8.3 million, or 8.8%, compared to the same period last year. Home Meridian accounted for over 90% of the sales decrease, primarily due to ongoing challenges in the home furnishings industry driven by macroeconomic pressures and tariff-related buying hesitancy among Home Meridian’s customers, who tend to be more cost conscious. In addition, the absence of sales due to the bankruptcy of a former major customer in the prior year accounted for approximately 30% of the segment’s net sales decrease.
We maintained gross profit levels, with gross margin increasing by 180 bps, driven by higher margins at Home Meridian and Domestic Upholstery. Despite the decrease in net sales, we reduced our consolidated operating loss by $1.6 million, or 31%, to $3.6 million, reflecting the impact of cost reduction initiatives implemented in the second half of the prior year. In the first quarter of fiscal 2026, we saw clear results from those reductions as we reduced operating expenses by $2.2 million versus the prior year quarter. This reduction occurred despite our first quarter fiscal 2026 results including $523,000 in restructuring costs, primarily severance. Hooker Branded achieved breakeven in operating results for the quarter, while Domestic Upholstery and Home Meridian significantly reduced their operating losses by $713,000 (55%) and $584,000 (17%), respectively. We recorded a net loss of $3.1 million, or ($0.29) per diluted share, an improvement from the prior year first quarter’s net loss of $4.1 million, or ($0.39) per diluted share.
Multi-Phased Cost Reduction Initiatives
We are executing a multi-phase cost reduction strategy aimed at achieving approximately $25 million in annualized savings by next year (fiscal year 2027).
Phase 1: Initial Cost Reductions (last year - fiscal year 2025)
| ● | Actions: Reduced fixed costs by over $10 million through facility downsizing, workforce reductions and fixed cost reductions. |
| ● | Financial Impact: Incurred $4.9 million in restructuring charges, including $3.6 million in severance. |
| ● | Savings: Achieved over $3 million in fiscal 2025 and expect to realize over $10 million annually this year (fiscal year 2026). |
Phase 2: Logistics & Operations Consolidation (current year – fiscal year 2026)
| ● | Actions: |
| o | Savannah Warehouse: We initiated and expect full closure and formal release from the Savannah warehouse lease by October 31, 2025, previously used for the discontinued Accentrics Home product line. |
| o | Vietnam Warehouse: Opened new facility in May 2025 to enhance supply chain efficiency, reducing lead times from about 6 months to 4–6 weeks. |
| o | Further cost-saving opportunities through operational streamlining and potential outsourcing. |
| ● | Financial Impact: Expecting $2-$3 million in net charges in fiscal 2026, including the $523,000 in restructuring costs, primarily severance, reported in the first quarter of fiscal 2026. |
| ● | Savings: Anticipate net savings of $3.4 million in fiscal 2026, net of expected charges and other offsets; projecting net savings of over $14 million annually from fiscal 2027. |
Summary
In total, we expect to eliminate approximately $25 million or 25% of our fixed costs due to these cost reduction initiatives, consisting of $11 million in warehousing and distribution expenses under cost of goods sold and $14 million in selling and administrative expenses. In fiscal 2026, we expect to realize about $14 million in cost savings net of offsets and special charges. By fiscal 2027, we expect to realize approximately $25 million in net annualized savings through these phased initiatives, enhancing profitability, operational efficiency, and long-term shareholder value. Our cost reductions should not impact our strategic growth priorities, including our collected living merchandising platform, the Vietnam warehouse advantage, and our upcoming Margaritaville licensed collection.
Our fiscal 2026 first quarter performance is discussed in greater detail below under “Results of Operations.”
22
Results of Operations
The following table sets forth the percentage relationship to net sales of certain items included in the condensed consolidated statements of income included in this report.
| Thirteen Weeks Ended | ||||||||
| May 4, | April 28, | |||||||
| 2025 | 2024 | |||||||
| Net sales | 100 | % | 100 | % | ||||
| Cost of sales | 77.7 | 79.5 | ||||||
| Gross profit | 22.3 | 20.5 | ||||||
| Selling and administrative expenses | 25.4 | 25.1 | ||||||
| Intangible asset amortization | 1.1 | 1.0 | ||||||
| Operating (loss)/income | (4.2 | ) | (5.5 | ) | ||||
| Other income, net | 0.1 | 0.7 | ||||||
| Interest expense | 0.4 | 0.4 | ||||||
| (Loss)/income before income taxes | (4.5 | ) | (5.3 | ) | ||||
| Income tax (benefit) / expense | (0.9 | ) | (0.9 | ) | ||||
| Net (loss)/income | (3.6 | ) | (4.4 | ) | ||||
Fiscal 2026 First Quarter Compared to Fiscal 2025 First Quarter
| Net Sales | ||||||||||||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||||||||||||
| May 4, | April 28, | |||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| % Net Sales | % Net Sales | $ Change | % Change | |||||||||||||||||||||
| Hooker Branded | $ | 37,108 | 43.5 | % | $ | 36,808 | 39.3 | % | $ | 300 | 0.8 | % | ||||||||||||
| Home Meridian | 18,811 | 22.0 | % | 26,424 | 28.2 | % | (7,613 | ) | -28.8 | % | ||||||||||||||
| Domestic Upholstery | 28,913 | 33.9 | % | 30,027 | 32.1 | % | (1,114 | ) | -3.7 | % | ||||||||||||||
| All Other | 484 | 0.6 | % | 312 | 0.3 | % | 172 | 55.1 | % | |||||||||||||||
| Consolidated | $ | 85,316 | 100 | % | $ | 93,571 | 100 | % | $ | (8,255 | ) | -8.8 | % | |||||||||||
| Unit Volume | FY26 Q1 vs. FY25 Q1 Change | Average Selling Price (“ASP”) | FY26 Q1 vs. FY25 Q1 Change | |||||||
| Hooker Branded | 5.4 | % | Hooker Branded | -3.5 | % | |||||
| Home Meridian | -35.8 | % | Home Meridian | 7.8 | % | |||||
| Domestic Upholstery | -0.2 | % | Domestic Upholstery | -3.4 | % | |||||
| Consolidated | -21.2 | % | Consolidated | 15.4 | % | |||||
Consolidated net sales decreased by $8.3 million, or 8.8%, in the first quarter of fiscal 2026 driven by the decrease at Home Meridian, and to a lesser extent, at Domestic Upholstery. Despite the lower overall unit volume down 21.2% on a consolidated basis, the consolidated Average Selling Price (ASP) rose by 15.4% compared to the prior year. This significant increase in ASP reflects a favorable shift in product mix: sales of lower-priced Home Meridian products fell sharply, while sales of higher-priced Hooker Branded and Domestic Upholstery products made up a larger share of the total.
| ■ | The Hooker Branded segment’s net sales increased slightly by $300,000, or 0.8%, in the first quarter of fiscal 2026, due to higher unit volume, while partially offset by lower ASP. Gross revenue in this segment increased by 1.8%; however, increased discounts reduced net sales. |
23
| ■ | The Home Meridian segment’s net sales decreased by $7.6 million, or 28.8%, in the first quarter of fiscal 2026, 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 macroeconomic pressures and tariff-related buying hesitancy among our customers. The ASP increase was driven by the growth in the hospitality business and a decreased proportion of lower-priced sales through traditional channels. |
| ■ | The Domestic Upholstery segment’s net sales decreased by $1.1 million, or 3.7%, in the first quarter of fiscal 2026, primarily due to decreased sales of indoor residential home furnishings, driven by ongoing challenges in demand. In contrast, outdoor furnishings business, benefiting from recent expansion of bicoastal operations, outperformed the prior year’s first quarter with a 12.7% sales increase. |
| Gross Profit / (Loss) and Margin | ||||||||||||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||||||||||||
| May 4, | April 28, | |||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| % Net Sales |
% Net Sales |
$ Change | % Change | |||||||||||||||||||||
| Hooker Branded | $ | 11,065 | 29.8 | % | $ | 11,457 | 31.1 | % | $ | (392 | ) | -3.4 | % | |||||||||||
| Home Meridian | 2,733 | 14.5 | % | 3,301 | 12.5 | % | (568 | ) | -17.2 | % | ||||||||||||||
| Domestic Upholstery | 5,280 | 18.3 | % | 4,705 | 15.7 | % | 575 | 12.2 | % | |||||||||||||||
| All Other | (76 | ) | -15.7 | % | (242 | ) | -77.6 | % | 166 | 68.6 | % | |||||||||||||
| Consolidated | $ | 19,002 | 22.3 | % | $ | 19,221 | 20.5 | % | $ | (219 | ) | -1.1 | % | |||||||||||
Consolidated gross profit remained nearly unchanged despite lower net sales, with consolidated gross margin increasing due to improvements at Home Meridian and Domestic Upholstery, partially offset by a slight decrease at Hooker Branded.
| ■ | The Hooker Branded segment’s gross profit and margin decreased by $392,000 and 130 bps, respectively, in the first quarter of fiscal 2026, primarily driven by reduced margins on heavily discounted products. This margin loss was partially offset by decreased warehousing and distribution expenses, resulting from lower overall spending including labor costs and Asian operations expenses, partially offset by higher medical costs. |
| ■ | The Home Meridian segment’s gross profit decreased by only $568,000, while its gross margin increased by 200 bps in the first quarter of fiscal 2026, despite a significant decrease in net sales. This performance was driven by improved product margins, reduced allowances, and lower warehousing and distribution expenses in both Asian and domestic operations, all resulting from the restructuring efforts focused on restoring the segment’s profitability. |
| ■ | The Domestic Upholstery segment’s gross profit increased by $575,000, and its gross margin increased by 260 bps in the first quarter of fiscal 2026, despite a decrease in net sales. Direct material costs decreased slightly by 80 bps, while direct labor costs fell by 100 bps, driven by the cost reduction plan, as well as reduced work hours. Indirect costs remained stable as a percentage of net sales, as savings from the cost reduction plan—including lower indirect labor costs and overall spending—were largely offset by increased benefits expenses. Additionally, warehousing and distribution expenses decreased by 60 bps due to reduced labor costs and freight-out expenses. |
24
| Selling and Administrative Expenses (S&A) | ||||||||||||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||||||||||||
| May 4, | April 28, | |||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| % Net Sales | % Net Sales | $ Change | % Change | |||||||||||||||||||||
| Hooker Branded | $ | 11,037 | 29.7 | % | $ | 11,277 | 30.6 | % | $ | (240 | ) | -2.1 | % | |||||||||||
| Home Meridian | 5,245 | 27.9 | % | 6,394 | 24.2 | % | (1,149 | ) | -18.0 | % | ||||||||||||||
| Domestic Upholstery | 5,290 | 18.3 | % | 5,419 | 18.0 | % | (129 | ) | -2.4 | % | ||||||||||||||
| All Other | 81 | 16.7 | % | 377 | 120.8 | % | (296 | ) | -78.5 | % | ||||||||||||||
| Consolidated | $ | 21,653 | 25.4 | % | $ | 23,467 | 25.1 | % | $ | (1,814 | ) | -7.7 | % | |||||||||||
Consolidated selling and administrative (“S&A”) expenses decreased by $1.8 million in the first quarter of fiscal 2026, driven by cost reduction measures implemented across all three segments. S&A expenses increased slightly as a percentage of net sales due to the overall decrease in net sales.
| ■ | The Hooker Branded segment’s S&A expenses decreased by $240,000, or 90 bps, in the first quarter of fiscal 2026 compared to the same period in the prior year. This reduction resulted from lower overall spending nearly across the board, including headcount and showroom expenses. However, the decrease was partially offset by increased IT-related expenses, which were approximately $443,000 higher than the prior year’s first quarter, due to the continued refinement of the ERP system—an effort expected to persist into the foreseeable future. Benefits costs also increased by approximately $325,000 compared to the same quarter last year, which included a sizable gain from life insurance proceeds. Additional impacts included $127,000 in severance costs related to the Company’s cost reduction plan and a slight increase in selling expenses resulting from higher net sales. |
| ■ | The Home Meridian segment’s S&A expenses decreased by $1.1 million in the first quarter of fiscal 2026, primarily driven by the Company’s cost reduction plan, which included headcount reductions and reduced overall spending, as well as lower bad debt expense and selling costs associated with decreased net sales. Home Meridian recorded $144,000 in severance costs in the quarter associated with the Company’s cost reduction plan. S&A expenses increased by 370 bps due to decreased net sales. |
| ■ | The Domestic Upholstery segment’s S&A expenses decreased by $129,000 in the first quarter of fiscal 2026, due to reduced selling costs, lower bonus accruals, decreased advertising supplies, and other spending reductions. This decrease was partially offset by severance costs of approximately $113,000 and higher sample and product development costs for the High Point Market. |
| Intangible Asset Impairment and Amortization | ||||||||||||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||||||||||||
| May 4, | April 28, | |||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| % Net Sales | % Net Sales | $ Change | % Change | |||||||||||||||||||||
| Intangible asset amortization | 913 | 1.1 | % | 924 | 1.0 | % | -11 | -1.2 | % | |||||||||||||||
25
Intangible asset amortization decreased slightly compared to the first quarter of the previous year, due to the full amortization of Sam Moore trade name. See Note 8 to our Condensed Consolidated Financial Statements for additional information.
| Operating (Loss) / Profit and Margin | ||||||||||||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||||||||||||
| May 4, | April 28, | |||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| % Net Sales |
% Net Sales |
$ Change | % Change | |||||||||||||||||||||
| Hooker Branded | $ | 27 | 0.1 | % | $ | 179 | 0.5 | % | $ | (152 | ) | -84.9 | % | |||||||||||
| Home Meridian | (2,840 | ) | -15.1 | % | (3,423 | ) | -13.0 | % | 583 | 17.0 | % | |||||||||||||
| Domestic Upholstery | (595 | ) | -2.1 | % | (1,308 | ) | -4.4 | % | 713 | 54.5 | % | |||||||||||||
| All Other | (156 | ) | -32.2 | % | (618 | ) | -198.1 | % | 462 | 74.8 | % | |||||||||||||
| Consolidated | $ | (3,564 | ) | -4.2 | % | $ | (5,170 | ) | -5.5 | % | $ | 1,606 | 31.1 | % | ||||||||||
In the first quarter of fiscal 2026, we recorded an operating loss of $3.6 million, primarily due to lower sales volume. However, our cost reduction initiatives and other factors outlined earlier reduced the operating loss by $1.6 million versus the prior year.
| Income taxes | ||||||||||||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||||||||||||
| May 4, | April 28, | |||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| % Net Sales | % Net Sales | $ Change | % Change | |||||||||||||||||||||
| Consolidated income tax (benefit) / expense | $ | (764 | ) | -0.9 | % | $ | (816 | ) | -0.9 | % | $ | 52 | 6.4 | % | ||||||||||
| Effective Tax Rate | 20.0 | % | 16.6 | % | ||||||||||||||||||||
We recorded income tax benefit of $764,000 and $816,000 for the fiscal 2026 and 2025 first quarters. The effective tax rates for the fiscal 2026 and 2025 first quarters were 20.0% and 16.6%, respectively. The increase in the fiscal 2026 first quarter effective tax rate was primarily attributable to a non-taxable life insurance gain recognized in the prior-year period, which reduced the comparative effective tax rate.
| Net (Loss) / Income | ||||||||||||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||||||||||||
| May 4, | April 28, | |||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| % Net Sales | % Net Sales | $ Change | % Change | |||||||||||||||||||||
| Consolidated net (loss) / income | $ | (3,052 | ) | -3.6 | % | $ | (4,091 | ) | -4.4 | % | $ | 1,039 | 25.4 | % | ||||||||||
| Diluted (loss) / earnings per share | $ | (0.29 | ) | $ | (0.39 | ) | ||||||||||||||||||
Outlook
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 the January–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 third consecutive year. Despite these headwinds, inflation and employment indicators appear to be relatively stable.
To navigate the ongoing economic challenges, we continue to prioritize product innovation, cost optimization, and operational excellence. These strategic imperatives position the business to capitalize on emerging opportunities as macroeconomic conditions improve, ultimately driving long-term shareholder value.
Key initiatives include the launch of the new Margaritaville licensing program, the development of a best-in-class international warehouse that reduces the need for domestic safety stock, preserves working capital, and shortens lead times, and the Collected Living whole-home merchandising approach, which received strong validation at the April High Point Market.
26
In addition, a redesigned corporate website is scheduled to launch in October. The updated site is expected to:
| ● | enhance digital customer experience, improve lead generation, and support omni-channel growth; |
| ● | drive consumer engagement, streamline e-commerce navigation, and support retail partners; and |
| ● | serve as a hub for product education and lifestyle inspiration, increasing time-on-site and conversion rates. |
Within the Hooker Branded segment, the newly introduced Live Your Way strategy is designed to:
| ● | deliver 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 design-savvy customers; and |
| ● | emphasize customization and quality craftsmanship, reinforcing leadership in the premium upholstery segment. |
We are simultaneously driving operational efficiencies across the segments and are beginning to observe measurable improvements in performance.
Financial Condition, Liquidity and Capital Resources
Cash Flows – Operating, Investing and Financing Activities
| Thirteen Weeks Ended | ||||||||
| May 4, | April 28, | |||||||
| 2025 | 2024 | |||||||
| Net cash provided by operating activities | $ | 14,663 | $ | 1,477 | ||||
| Net cash used in investing activities | (967 | ) | (959 | ) | ||||
| Net cash used in financing activities | (1,980 | ) | (2,802 | ) | ||||
| Net increase / (decrease) in cash and cash equivalents | $ | 11,716 | $ | (2,284 | ) | |||
During fiscal 2026 first quarter, cash provided by operating activities totaled $14.7 million for the first quarter of fiscal 2026, compared to $1.5 million for the comparable prior-year period. This increase was primarily driven by favorable changes in working capital and a reduction in net loss.
| ● | Net Loss: we reported a net loss of $3.1 million in the first quarter of fiscal 2026, an improvement from a $4.1 million net loss in the first quarter of fiscal 2025. |
| ● | Key drivers of operating cash flow increase |
| o | Improved collections of trade receivables resulted in a $18.8 million cash increase, compared to $2.1 million in the prior year first quarter, primarily related to large, project-based receipts. |
| o | Inventory optimization efforts resulted in a $6.4 million cash increase, compared to $5.2 million in the prior year first quarter, where we transitioned from previously elevated seasonal inventory build-up to active sell-through, especially at Hooker Branded, resulting in a net inventory reduction and significant positive cash impact. |
| o | Changes in prepaid expenses and other assets resulted in a $928,000 cash decrease, compared to a $2.2 million cash decrease in the prior year first quarter, reflecting approximately $1.3 million in less spending due primarily to the pause in ERP system implementation. |
| o | Lower compensation-related payments resulted in a $155,000 cash increase, compared to $1.8 million cash decrease in the prior year first quarter, attributed to absence of bonus payouts in the current period and decreased headcount and reduced salary and wage expenses. |
| ● | Offsetting Factors |
| o | These cash inflows were partially offset by a decline in accounts payable, which resulted in a $8.5 million cash decrease, compared to a $2.1 million cash increase in the prior year first quarter, as we reduced purchasing activity and did not continue building inventory levels during the quarter. |
27
Cash used in investing activities totaled $967,000 compared to $959,000 in the first quarter of the prior year. Cash used in financing activities totaled $2.0 million compared to $2.8 million in the prior year first quarter, due to $534,000 proceeds from revolving credit facility and the absence of term loan payments during the current quarter.
Liquidity, Financial Resources and Capital Expenditures
Our financial resources include:
| ■ | available cash and cash equivalents, which are highly dependent on incoming order rates and our operating performance; |
| ■ | expected cash flow from operations; |
| ■ | available lines of credit; and |
| ■ | cash surrender value of Company-owned life insurance. |
The most significant components of our working capital are inventory, accounts receivable and cash and cash equivalents reduced by accounts payable and accrued expenses.
Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for inventory, lease payments and payroll), quarterly dividend payments and capital expenditures related primarily to our ERP project, showroom renovations and upgrading systems, buildings and equipment. The timing of our working capital needs can vary greatly depending on demand for and availability of raw materials and imported finished goods but is generally the greatest in mid-summer because of inventory build-up for the traditional fall selling season. Long term cash requirements relate primarily to funding lease payments and repayment of long-term debt.
Loan Agreements and Revolving Credit Facility
On December 5, 2024, the Company and its wholly owned subsidiaries, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian Group, LLC (together with the Company, the “Borrowers”), entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”) with Bank of America, N.A. (“BofA”), as lender. The Amended and Restated Loan Agreement amends, restates and replaces the Second Amended and Restated Loan Agreement, dated as of September 29, 2017, between the Borrowers and BofA, as amended (the “Existing Loan Agreement”). The outstanding principal amount of loans and letters of credit issued under the Existing Loan Agreement and used to collateralize certain insurance arrangements and for imported product purchases will remain outstanding as loans and letters of credit under the Amended and Restated Loan Agreement.
The Amended and Restated Loan Agreement provides for a revolving credit facility in a committed principal amount of up to $70,000,000 (the “Revolving Commitment”), including subline of $8,000,000 for letters of credit, and an option to increase the Revolving Commitment by up to $30,000,000 upon meeting certain conditions, including agreement by BofA to increase the Revolving Commitment by such amount. Proceeds of loans and letters of credit under the Amended and Restated Loan Agreement will be available (a) on entry into the Amended and Restated Loan Agreement to replace the outstanding loans and letters of credit outstanding under the Existing Loan Agreement and to pay fees and expenses related to entry into the Amended and Restated Loan Agreement and (b) from and after entry into the Amended and Restated Loan Agreement, for general working capital and other corporate purposes of the Borrower.
Availability of loans and letters of credit under the Revolving Commitment is capped by a borrowing base formula calculated as of any date as the sum for the Borrowers of (a) the value of their accounts receivable, (b) the value of their inventory, (c) the value of their in-transit inventory and (d) the life insurance cash surrender value of company-owned life insurance policies, in each case subject to eligibility requirements, advance rates, valuation metrics, reductions for write-offs and other dilutive items and reserves (the “Borrowing Base”). The lesser of the Revolving Commitment and the Borrowing Base, in each case net of the principal amount of outstanding loans and the face amount of letters of credit, constitutes “Availability” under the Amended and Restated Credit Agreement.
28
Outstanding loans under the Amended and Restated Loan Agreement will bear interest at a rate per annum equal to the then-current Term SOFR Rate for a period of one month plus 0.10% plus a margin of 1.75%. The Term SOFR Rate will be adjusted on a monthly basis. Letters of credit are subject to a letter of credit fee equal to the actual daily amount of undrawn letters of credit multiplied by a per annum rate of 1.75% and a fronting fee equal to the actual daily amount of undrawn letters of credit multiplied by a per annum rate of 0.125%. We must also pay a monthly unused commitment fee that is based on the average daily unused amount of Revolving Commitment multiplied by a per annum rate of 0.25%. All accrued interest and fees are payable in cash monthly in arrears.
We may prepay any outstanding principal amounts borrowed under the Amended and Restated Loan Agreement at any time, without penalty provided that any payment is accompanied by all accrued interest owed. Subject to the Borrowers having sufficient borrowing base capacity and customary conditions precedent to borrowing, amounts repaid may be reborrowed. The Revolving Commitment will terminate, and all amounts outstanding thereunder will be due and payable, on December 5, 2029.
The obligations under the Amended and Restated Loan Agreement are secured by a first priority security interest in substantially all of the assets of the Borrowers, other than real estate, including all Company-owned life insurance policies, all accounts receivable, all inventory, all intellectual property, all equipment and all other personal property.
The Amended and Restated Loan Agreement includes customary representations and warranties and requires the Borrowers to comply with customary affirmative and negative covenants, including, among other things, a financial covenant requiring the maintenance of a ratio of (x) EBITDA net of capital expenditures (to the extent not paid using Borrowed Money) to (y) the sum of debt service and dividends paid, in each case as of the last day of each month for the trailing twelve-month period ending on such day, of at least 1.0 to 1.0, if an event of default has occurred and is continuing or Availability has fallen below 10% of the Revolving Commitment at any time (until such time as both Availability is 10% or greater and no event of default exists, for the 30 consecutive days prior to such month end).
The Amended and Restated Loan Agreement also limits the Borrowers’ right to incur other indebtedness, make certain investments and create liens upon our assets, subject to certain exceptions, among other restrictions. The Amended and Restated Loan Agreement does not restrict the Company’s ability to pay cash dividends on, or repurchase, shares of its common stock, subject to (a) no default existing prior to or resulting from such dividend or repurchase, (b) Availability is not less than 15% of the Revolving Commitment for each of the preceding 45 days prior to announcement of such dividend or repurchase and after giving pro forma effect to such dividend or repurchase and (c) if Availability is less than 20% of the Revolving Commitment on any day in such 45-day period, the Borrowers are in compliance with the financial covenant described above after giving effect to such dividend or repurchase.
We incurred $480,000 in fiscal 2025 and an additional $17,000 in fiscal 2026 first quarter in debt issuance costs in connection with our term loans. As of May 4, 2025, unamortized loan costs of $456,000 were netted against the carrying value of our term loans on our consolidated balance sheets.
As of May 4, 2025, we had $22.6 million principal amount of outstanding loans and $6.7 million face amount of letters of credit. We had $40.7 million of Availability based on the current Borrowing Base. There were no additional borrowings outstanding under the Amended and Restated Loan Agreement as of May 4, 2025.
Capital Expenditures
We expect to spend approximately $2 to $3 million in capital expenditures over the remainder of fiscal 2026 to maintain and enhance our operating systems and facilities, excluding any possible spending decreases resulting from the cost reduction plan discussed above.
Enterprise Resource Planning Project
During calendar 2021, our Board of Directors approved an upgrade to our current ERP system and implementation efforts began shortly thereafter. The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions in early September 2023. Due to our cost reduction initiatives, we have temporarily paused the ERP project in the Home Meridian segment.
29
Dividends
On June 3, 2025, our board of directors declared a quarterly cash dividend of $0.23 per share which will be paid on June 30, 2025, to shareholders of record at June 16, 2025.
Critical Accounting Policies
There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2025 Annual Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate changes, raw materials price risk and changes in foreign currency exchange rates, which could impact our results of operations or financial condition. We manage our exposure to this risk through our normal operating activities.
Interest Rate Risk
Borrowings under the Amended and Restated Loan Agreement will bear interest at a rate per annum equal to the then-current Term SOFR Rate for a period of one month plus 0.10% plus a margin of 1.75%. The Term SOFR Rate will be adjusted on a monthly basis. As such, these debt instruments expose us to market risk for changes in interest rates. As of May 4, 2025, we had $22.6 million in principal amount of outstanding loans. At current borrowing levels, a 1% increase in the SOFR rate would result in an annual increase in interest expenses of approximately $226,000. There were no additional borrowings outstanding under the Amended and Restated Loan Agreement as of May 4, 2025.
Raw Materials Price Risk
We are exposed to market risk from changes in the cost of raw materials used in our domestic upholstery manufacturing processes; principally, wood, fabric, and foam products. Increases in home construction activity could result in increases in wood and fabric costs. Additionally, the cost of petroleum-based foam products we utilize are sensitive to crude oil prices, which vary due to supply, demand, and geo-political factors.
Currency Risk
For imported products, we generally negotiate firm pricing denominated in U.S. Dollars with our foreign suppliers, typically for periods of at least one year. We accept the exposure to exchange rate movements beyond these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. Most of our imports are purchased from suppliers located in Vietnam and China. The Chinese currency floats within a limited range in relation to the U.S. Dollar, resulting in exposure to foreign currency exchange rate fluctuations.
Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effect of any price increases from suppliers in the prices we charge for imported products. However, these changes could adversely impact sales volume or profit margins during affected periods.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended May 4, 2025. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of May 4, 2025 to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the fiscal quarter ended May 4, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
30
PART II. OTHER INFORMATION
Item 5. Other Information
During
the three months ended May 4, 2025, no director or officer of the Company
Item 6. Exhibits
| * | Filed herewith |
| ** | Furnished herewith |
31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HOOKER FURNISHINGS CORPORATION | ||
| Date: June 13, 2025 | By: | /s/ C. Earl Armstrong III |
| C. Earl Armstrong III | ||
| Chief Financial Officer and | ||
| Senior Vice President – Finance | ||
32