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Hooker 1Q sales up 2.9% as net income drops 27%

By Furniture Today Staff -- Furniture Today, April 3, 2005

Martinsville, Va. — Hooker Furniture's first-quarter net income declined 27% from the same period a year ago despite a 2.9% gain in sales, the manufacturer and importer reported.

The company said it earned $3 million on sales of $80.5 million in the quarter ended Feb. 28. Earnings per share came to 25 cents, down from 35 cents in the 2004 quarter.

Hooker attributed the earnings decline to a lower operating profit margin, higher selling and administrative expenses as a percentage of sales, and a pretax restructuring and asset impairment charge of $366,000, or a net of 2 cents per share. The charge was related to the previously announced closing of its factory in Maiden, N.C.

Earnings fell well short of the 44 cents per share expected by Wall Street analysts, on average, according to Reuters Estimates. BB&T Capital last week downgraded the stock from buy to hold.

Chairman and CEO Paul Toms said Hooker was pleased with its 13th consecutive quarter of sales growth.

The company said sales of its Bradington-Young leather upholstery grew 29.3% from a year earlier to $15.9 million, while imported wood and metal furniture sales rose 12.5% to $43.4 million. Helping to fuel the import gain was an increase in container-direct shipments, helped by the company's inventory investment in a warehouse in China.

Shipments of U.S.-made wood furniture declined 22.4% from a year ago to $21.2 million.

"Hooker made significant progress in the quarter in shipping its products to customers more quickly," Toms said. "We are implementing a state-of-the-art supply chain planning and management system. This investment, along with our investments in warehouse and distribution infrastructure, management, personnel and inventory, should enable us to ship product faster."

The company said its selling and administrative expenses were higher in the quarter partly because of higher professional expenses to comply with new federal corporate governance guidelines. Hooker also took a one-time depreciation expense of $520,000 in the quarter related to improvements to its High Point showroom.

The gross profit margin for U.S.-made wood furniture suffered because of higher discounting for discontinued or slow-moving product, and higher raw material, labor and overhead costs as a percentage of sales. Production costs also rose because of temporary inefficiencies caused as operations were transferred from the Maiden facility.

Hooker said it maintained a strong cash flow in the quarter, with cash and cash equivalents more than doubling since the 2004 year end.

"As we look toward the second quarter, the outlook is positive for continued near-term growth in the upholstered leather business and imported wood and metal furniture business," Toms said.

He said the company has a "cautiously optimistic outlook for the second quarter, based on mixed results at retail." He said recent incoming order rates were flat with last year, and net sales in the current period should be "on a par with last year's record second quarter."

Hooker Furniture
Owns Bradington-Young
Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
Quarter ended 2/28	2005	2004	Change
(a) Includes a $27,000 after-tax charge for restructuring and related asset impairment charges.
Sales	$80,526,000	$78,222,000	2.9%
Operating income	5,445,000	6,840,000	(20.4%)
Net income	(a)2,950,000	4,040,000	(27.0%)
Earnings per share	0.25	0.35	(28.6%)

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Hooker 1Q sales up 2.9%

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