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Hooker Furniture Q1 Report

VIRGINIA, USA: Hooker furniture reported its consolidated net sales at US$121.8 million with a net income of $2.5 million, $0.22 per diluted share, for its fiscal 2017 first quarter ended May 1st, 2016. Home Meridian International (Home Meridian) is included in this fiscal-year report for the first time since its acquisition on February 1, 2016.

This quarter saw doubling of net sales compared to last year, due to the acquisition of Home Meridian but Hooker Casegoods segment sales dropped 7% lower. Share earnings have decreased to $0.22 per share from $0.32 in the previous year quarter.

“As expected, the first quarter was impacted by the weaker casegood demand we, and our industry, have experienced since late last year,” said Paul B. Toms, chief executive officer. “Yet, in spite of lower sales and about $1 million in acquisition-related costs, we were able to deliver nearly a 7% operating income margin in our legacy business.”

Tom added, “Since the end of our first quarter, we have seen improvement in the incoming order rate for both hooker and Home Meridian case goods versus the first quarter. During the same period, there’s been an uptick in consumer spending, stabilization of the stock market and uptick in housing. We expect these factors will result in an improved furniture retail environment, with less hesitation on the part of consumers to invest in larger-ticket purchases like case goods,” he said.

Consolidated gross profit increased 62.4%, or 10.2 million during this quarter primarily because of the Home Meridian acquisition. The Company’s Upholstery segment contributed to the increase with higher sales and better efficiencies, along with the increased net sales at H Contract from the All Other segment.

Consolidated operating income decreased 1.2 million, 23% to 4.0 million because of the decreased operating profit from Hooker Casegoods segment. Amortization expenses were recorded at $1.7 million related to acquisition intangibles. Amortization expense is expected to be lowered to $814,000 in the second quarter of fiscal 2017 and to $334,000 in the third and fourth quarters.

“High-ticket, deferrable product categories like case goods appear to have been hardest hit during the retail slowdown, beginning late last year and through Q1 this year.” Toms said. “Upholstery outperformed case goods both in our Company and the industry as a whole during the last two quarters,” Same Moore, their custom upholstery brand, had reported an operating income improvement of almost 50% during the quarter.

Even though Home Meridian was impacted by the lower demand this quarter just like Hooker, it still met Hooker expectations. “Long term, we believe our expansion into lower price points and additional channels of distribution will be extremely beneficial to our company and are confident Home Meridian will be a significant contributor to both top and bottom line growth.” Toms said. The Company’s All Other segment have continued to grow with H Contract shipments up 82% from last year and a three-fold improvement in operating income compared to the previous year.

According to Globe News Wire, Hooker finished the fiscal 2017 first quarter with 32.4 million in cash and cash equivalents and $52 million in acquisition-related debt. A total of $28.2 million was available on its $30.0 million revolving credit facility, net of 1.8 million reserved for standby letters of credit. Consolidated inventories are at $77.7 million.

“Beginning in the second half of last year through the first quarter of this fiscal year, we’ve experienced lower demand for most of our products compared to the same period a year ago.” Toms said. “However, in May we have seen an improvement in consumer spending, significant increases in new and existing home sales as well as other positive factors, resulting in an uptick in incoming case good orders. While the summer months are historically the weakest at retail in the furniture industry, we expect an improving environment and are preparing for an expected upturn in business during the late summer.” Toms concluded.