Hooker Furniture has net loss of $456,000 in first quarter
Expects next quarter to be challenging, but sees signs of improvement
Jay McIntosh -- Furniture Today, June 9, 2009
MARTINSVILLE, Va. — Hooker Furniture swung to a net loss of $456,000 from a profit a year earlier as the case goods and upholstery source's sales declined 26.7% to $52.1 million in the fiscal first quarter, ended May 3.
In the same quarter last year, the company had earned $2.6 million on sales of $71 million.
A $673,000 pretax asset impairment charge to write down the value of its Bradington-Young leather upholstery division trade name reduced the latest quarter's earnings, the company said.
The quarterly loss was 4 cents per share, compared with earnings of 23 cents per share a year earlier.
Hooker's operating margin was a negative 1.2% in the quarter, compared with a positive 5.6% a year earlier, mainly because of lower net sales, higher overhead and operating expenses as a percentage of sales, and the Bradington-Young charge.
"We're not satisfied with our results on any level, but realize we are being impacted by the worst economic downturn in anyone's memory," said Paul Toms Jr., chairman, CEO and president.
"We continue to successfully manage our balance sheet, reducing inventories and increasing cash," he added. "We are also focused on controlling costs, improving product quality and maintaining service levels. We're thankful to have posted a small operating profit before impairment charges despite steepening sales declines across the company and significant excess capacity and fixed costs in our upholstery division."
Because initiatives to reduce fixed costs in the upholstery division haven't kept up with the sales declines, gross profit declined to $11.2 million in the first quarter from $16.7 million a year ago, the company said.
"Gross profit margins at Hooker's wood furniture division have remained steady because unit product costs are relatively fixed compared to volume with our importing business model," Toms said.
Hooker said its cash and cash equivalents rose by $14.4 million during the quarter to $26.2 million, mainly because of inventory reductions. Total long-term and short-term debt is less than $5 million, Toms added.
"We expect the upcoming quarter will also be very challenging, but we continue to believe that business will improve marginally this fall," he said. "We are actually more confident in an uptick later this year than we were eight weeks ago due to improvements in consumer confidence, solid gains in the stock market and increased housing activity."
He said the company has received "more favorable reports" from retail customers about business since early May, and that the company's cost-reduction moves have left it in a better position for improved profits when sales rebound.
