Hooker Furniture Quarterly Sales, Income Gains Led by Hooker Branded Segment
Net sales increased 8.6%, or
“Revenues increased across all three of our business segments during the quarter, with Hooker Branded achieving a 9% sales gain,” said
For the fiscal 2019 first nine months, consolidated net sales were
During the third quarter, consolidated gross profit increased 4.5%, or
For the fiscal 2019 first nine months, consolidated gross profit increased 8.3% or
Consolidated operating income of
During the quarter, a 10% tariff was imposed on furniture and component parts imported from
During the quarter and year-to-date periods, the Company benefited from lower effective tax rates due to the recently enacted Tax Cut and Jobs Act of 2017. Effective tax rates for the quarter and year-to-date periods were 22.9% and 23.0%, respectively, compared to 35.7% and 34.9%, respectively, for the comparable prior year periods.
Segment Reporting: Hooker Branded
After sales were essentially flat last quarter following two consecutive quarters of sales growth, the Hooker Branded Segment strongly rebounded with a 9% year-over-year improvement in both the Casegoods and Upholstery Divisions. “The sales increases were driven by our focus on winning channels of distribution, strong product lines and in-stock positions on best-sellers,” said Toms. “We also had a good Fall High Point Market and expect to enjoy profitable growth in the Hooker Branded Segment for the coming quarter.”
Hooker Casegoods has fueled momentum with a speed-to-market strategy in which the division pre-ordered two major new collections prior to the Fall High Point Market that had been favorably previewed by major retailers in late summer. Because these collections will begin shipping to retailers in early January, several months quicker than the typical product introduction cycle, “We were able to get additional retail placements at market,” Toms said. “Retailers like the opportunity of having exciting new products to offer at the beginning of the year. Not only will shipments of these products have favorable impact on this year’s fourth quarter and next year’s first quarter; we also expect to achieve additional turns at retail next year on these collections,” he said.
The Hooker Branded Segment, along with the domestic upholstery divisions, continue to gain positive traction from a long-range strategy to develop new business in winning channels of distribution, particularly the interior design and e-commerce channels. At the Fall High Point Market, the company launched two comprehensive programs to address interior designers: Design Pro, a paid membership program providing features and benefits to interior designers, and MARQ, a line of modern upholstery and premium bedding designed especially for and available exclusively to the interior design trade. “We had good reception to both programs, which demonstrate our level of commitment to the interior design channel,” said Toms, adding that attendance from interior designers at market was up about 10%, even though overall attendance at the market was down due to Hurricane Florence, which hit the Carolinas and other parts of the region just prior to market.
Segment Reporting: Home Meridian
“Home Meridian’s net sales in the quarter were up approximately 3% over the prior year, with three of our five divisions posting year- over- year gains,” said
“Year to date, net sales are up about 2%, led by gains in e-commerce, which is up 33%, and Hospitality, which is up approximately 40%. Sales to traditional channels were down 7%,” he said. Townsend added, “Several initiatives are now in place to re-energize our business through the traditional channels. These initiatives are across multiple divisions and are expected to begin delivering improved sales results in Q4. We expect improved sales in the 4th quarter will leverage fixed costs and improve profitability for the period.”
“In addition, we have implemented margin improvement measures that will improve profitability with specific customers across multiple divisions. Demand is strong, with orders in the third quarter up 32% and backlog up 21%. We expect fourth quarter shipments to be very strong based on current order and backlog trends.”
Segment Reporting: All Other
Sales growth of nearly 29% for the quarter and nearly 40% year to date in All Other was driven mainly by the inclusion of Shenandoah’s net sales and a 10% net sales increase at upscale leather upholstery specialist Bradington-Young. Bradington-Young’s incoming orders increased about 6%, and backlogs were 30% higher than a year ago. “With the solid growth at Bradington-Young for the last four years, we are investing
He added that “While the top line is solid at Bradington-Young and Shenandoah, we are working on improvements that will help to bring profitability at each division back in line with expectations.”
While sales at Sam Moore continued to run below prior-year levels for the quarterly and year-to-date periods, better-controlled labor costs and other expenses improved Sam Moore’s gross and operating margins. Incoming orders decreased slightly, but quarter-end backlog was 27% higher than the prior year period. The division is currently actively searching for a new president, after the departure of the previous president. “We expect to have a new president in place by the end of the fiscal year,” Toms said.
“H Contract is on the front end of a strategy to broaden its product line and pursue a more aggressive product introduction strategy,” Toms said. “Orders were up nearly 8% in the quarter, and quarter-end backlog is up over 26% compared to the same period last year.”
Cash, Debt and Inventory
“We intentionally grew inventories during the quarter for several reasons,” Toms said. “First, to prepare for the strong fall and winter selling periods and second, to bring in more inventory from
The Company finished the fiscal first nine months with
Outlook
“As of quarter end on
The company views macroeconomic trends as “a bit more mixed and uncertain than in recent months,” said Toms, pointing to a bumpy stock market, a slow-down in the housing sector and “continued uncertainty about a further increase in the tariffs on products imported from
“However, based on incoming order trends, higher backlogs at HMI and overall momentum in our businesses, we are bullish as we look to the fourth quarter, encouraged by recent progress in negotiations between the U.S. and
Dividends
On
Conference Call Details
Certain statements made in this release, other than those based on historical facts, may be forward-looking statements. Forward-looking 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 negative thereof, or other variations thereon, 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, and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing or (ii) customers and 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, including duties or tariffs imposed on those products by foreign governments or the U.S. government, such as the current U.S. administration imposing a 10% tariff on certain goods imported into
Table I | |||||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
(In thousands, except per share data) | |||||||||||
For the | |||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||
October 28, | October 29, | October 28, | October 29, | ||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Net sales | $ | 171,474 | $ | 157,934 | $ | 483,026 | $ | 445,114 | |||
Cost of sales | 135,638 | 123,656 | 379,579 | 349,576 | |||||||
Gross profit | 35,836 | 34,278 | 103,447 | 95,538 | |||||||
Selling and administrative expenses | 22,979 | 22,318 | 68,150 | 63,746 | |||||||
Intangible asset amortization | 596 | 624 | 1,788 | 1,291 | |||||||
Operating income | 12,261 | 11,336 | 33,509 | 30,501 | |||||||
Other income, net | 200 | 199 | 275 | 659 | |||||||
Interest expense, net | 354 | 327 | 1,099 | 860 | |||||||
Income before income taxes | 12,107 | 11,208 | 32,685 | 30,300 | |||||||
Income tax expense | 2,775 | 4,006 | 7,504 | 10,574 | |||||||
Net income | $ | 9,332 | $ | 7,202 | $ | 25,181 | $ | 19,726 | |||
Earnings per share: | |||||||||||
Basic | $ | 0.79 | 0.62 | 2.14 | 1.70 | ||||||
Diluted | $ | 0.79 | 0.61 | 2.13 | 1.69 | ||||||
Weighted average shares outstanding: | |||||||||||
Basic | 11,763 | 11,679 | 11,758 | 11,596 | |||||||
Diluted | 11,780 | 11,700 | 11,779 | 11,626 | |||||||
Cash dividends declared per share | $ | 0.14 | $ | 0.12 | $ | 0.42 | $ | 0.36 |
Table II | ||||||||||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||||
(In thousands) | ||||||||||||||||
For the | ||||||||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
October 28, | October 29, | October 28, | October 29, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net Income | $ | 9,332 | $ | 7,202 | $ | 25,181 | $ | 19,726 | ||||||||
Other comprehensive income: | ||||||||||||||||
Amortization of actuarial loss | 43 | 15 | 129 | 46 | ||||||||||||
Income tax effect on amortization | (10 | ) | (5 | ) | (31 | ) | (17 | ) | ||||||||
Adjustments to net periodic benefit cost | 33 | 10 | 98 | 29 | ||||||||||||
Reclassification of tax effect due to the adoption | ||||||||||||||||
of ASU 2018-02 | - | - | 111 | - | ||||||||||||
Total comprehensive Income | $ | 9,365 | $ | 7,212 | $ | 25,390 | $ | 19,755 | ||||||||
Table III | ||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(In thousands) | ||||||
As of | October 28, | January 28, | ||||
2018 | 2018 | |||||
Assets | (Unaudited) | |||||
Current assets | ||||||
Cash and cash equivalents | $ | 29,449 | $ | 30,915 | ||
Trade accounts receivable, net | 86,978 | 92,461 | ||||
Inventories | 100,743 | 84,459 | ||||
Prepaid expenses and other current assets | 6,667 | 5,314 | ||||
Insurance proceeds receivable | 4,000 | - | ||||
Total current assets | 227,837 | 213,149 | ||||
Property, plant and equipment, net | 28,105 | 29,249 | ||||
Cash surrender value of life insurance policies | 23,499 | 23,622 | ||||
Deferred taxes | 2,979 | 3,264 | ||||
Intangible assets, net | 36,351 | 38,139 | ||||
Goodwill | 40,058 | 40,058 | ||||
Other assets | 1,453 | 2,235 | ||||
Total non-current assets | 132,445 | 136,567 | ||||
Total assets | $ | 360,282 | $ | 349,716 | ||
Liabilities and Shareholders’ Equity | ||||||
Current liabilities | ||||||
Current portion of term loans | $ | 6,112 | $ | 7,528 | ||
Trade accounts payable | 38,355 | 32,685 | ||||
Accrued salaries, wages and benefits | 9,019 | 9,218 | ||||
Income tax accrual | 1,419 | 3,711 | ||||
Customer deposits | 3,480 | 3,951 | ||||
Other accrued expenses | 3,464 | 2,894 | ||||
Legal contingency | 4,000 | - | ||||
Total current liabilities | 65,849 | 59,987 | ||||
Long term debt | 31,574 | 45,778 | ||||
Deferred compensation | 11,433 | 11,164 | ||||
Pension plan | - | 2,441 | ||||
Other long-term liabilities | 1,002 | 886 | ||||
Total long-term liabilities | 44,009 | 60,269 | ||||
Total liabilities | 109,858 | 120,256 | ||||
Shareholders’ equity | ||||||
Common stock, no par value, 20,000 shares authorized, | ||||||
11,785 and 11,762 shares issued and outstanding on each date | 49,390 | 48,970 | ||||
Retained earnings | 200,457 | 180,122 | ||||
Accumulated other comprehensive income | 577 | 368 | ||||
Total shareholders’ equity | 250,424 | 229,460 | ||||
Total liabilities and shareholders’ equity | $ | 360,282 | $ | 349,716 | ||
Table IV |
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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
(In thousands) | |||||||||||||
(Unaudited) | |||||||||||||
For the | |||||||||||||
Thirty-Nine Weeks Ended | |||||||||||||
October 28, | October 29, | ||||||||||||
2018 | 2017 | ||||||||||||
Operating Activities: | |||||||||||||
Net income | $ | 25,181 | $ | 19,726 | |||||||||
Adjustments to reconcile net income to net cash | |||||||||||||
provided by operating activities: | |||||||||||||
Depreciation and amortization | 5,558 | 4,399 | |||||||||||
Gain on disposal of assets | (66 | ) | (37 | ) | |||||||||
Deferred income tax expense | 254 | 1,735 | |||||||||||
Noncash restricted stock and performance awards | 919 | 1,175 | |||||||||||
(Benefit from)/provision for doubtful accounts and sales allowances | (1,692 | ) | 125 | ||||||||||
Gain on life insurance policies | (608 | ) | (453 | ) | |||||||||
Changes in assets and liabilities: | |||||||||||||
Trade accounts receivable | 8,147 | 16,179 | |||||||||||
Income tax recoverable | - | (954 | ) | ||||||||||
Inventories | (16,862 | ) | (5,867 | ) | |||||||||
Prepaid expenses, other current assets and insurance proceeds receivable | (484 | ) | (836 | ) | |||||||||
Trade accounts payable and legal contingency | 5,566 | (3,529 | ) | ||||||||||
Accrued salaries, wages, and benefits | (484 | ) | (539 | ) | |||||||||
Accrued income taxes | (2,412 | ) | (4,323 | ) | |||||||||
Customer deposits | (470 | ) | (1,314 | ) | |||||||||
Other accrued expenses | 503 | (254 | ) | ||||||||||
Deferred compensation | (2,253 | ) | (435 | ) | |||||||||
Other long-term liabilities | 122 | 267 | |||||||||||
Net cash provided by operating activities | $ | 20,919 | $ | 25,065 | |||||||||
Investing Activities: | |||||||||||||
Acquisitions | - | (32,650 | ) | ||||||||||
Purchases of property and equipment | (2,464 | ) | (2,708 | ) | |||||||||
Proceeds received on notes from sale of assets | 99 | 98 | |||||||||||
Proceeds received on life insurance policies | 1,225 | - | |||||||||||
Premiums paid on life insurance policies | (620 | ) | (639 | ) | |||||||||
Net cash used in investing activities | (1,760 | ) | (35,899 | ) | |||||||||
Financing Activities: | |||||||||||||
Proceeds from long-term debt | - | 12,000 | |||||||||||
Payments for long-term debt | (15,679 | ) | (4,393 | ) | |||||||||
Debt issuance cost | - | (39 | ) | ||||||||||
Cash dividends paid | (4,946 | ) | (4,169 | ) | |||||||||
Net cash (used in)/provided by financing activities | (20,625 | ) | 3,399 | ||||||||||
Net decrease in cash and cash equivalents | (1,466 | ) | (7,435 | ) | |||||||||
Cash and cash equivalents - beginning of year | 30,915 | 39,792 | |||||||||||
Cash and cash equivalents - end of quarter | $ | 29,449 | $ | 32,357 | |||||||||
Supplemental disclosure of cash flow information: | |||||||||||||
Cash paid for income taxes | $ | 9,661 | $ | 14,103 | |||||||||
Cash paid for interest, net | 973 | 754 | |||||||||||
Non-cash transactions: | |||||||||||||
Acquisition cost paid in common stock | $ | - | $ | 8,396 | |||||||||
Increase in property and equipment through accrued purchases | 104 | 26 |
Table V | ||||||||||||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||||||||||||||
NET SALES AND OPERATING INCOME BY SEGMENT | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
Unaudited | ||||||||||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||||
October 28, | October 29, | October 28, | October 29, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
% Net | % Net | % Net | % Net | |||||||||||||||
Net Sales | Sales | Sales | Sales | Sales | ||||||||||||||
Hooker Branded | $ | 46,479 | 27.1 | % | $ | 42,573 | 27.0 | % | $ | 129,801 | 26.9 | % | $ | 120,934 | 27.2 | % | ||
Home Meridian | 95,013 | 55.4 | % | 92,068 | 58.3 | % | 266,631 | 55.2 | % | 262,173 | 58.9 | % | ||||||
All other | 29,982 | 17.5 | % | 23,293 | 14.7 | % | 86,594 | 17.9 | % | 62,007 | 13.9 | % | ||||||
Consolidated | $ | 171,474 | 100 | % | $ | 157,934 | 100 | % | $ | 483,026 | 100 | % | $ | 445,114 | 100 | % | ||
Operating Income | ||||||||||||||||||
Hooker Branded | $ | 5,712 | 12.3 | % | $ | 4,964 | 11.7 | % | $ | 17,381 | 13.4 | % | $ | 15,047 | 12.4 | % | ||
Home Meridian | 4,829 | 5.1 | % | 4,637 | 5.0 | % | 10,168 | 3.8 | % | 10,748 | 4.1 | % | ||||||
All other | 1,720 | 5.7 | % | 1,735 | 7.4 | % | 5,960 | 6.9 | % | 4,706 | 7.6 | % | ||||||
Consolidated | $ | 12,261 | 7.2 | % | $ | 11,336 | 7.2 | % | $ | 33,509 | 6.9 | % | $ | 30,501 | 6.9 | % |
For more information, contact:
Chairman and Chief Executive Officer
Phone: (276) 632-2133, or
Phone: (276) 666-3949
Source: Hooker Furniture Corporation