Hooker 3Q profit falls 79.3%, sales down 2.3%
By Furniture Today Staff -- Furniture Today, October 9, 2005
Martinsville, Va. — Case goods and upholstery manufacturer and importer Hooker Furniture said net income in its third quarter tumbled 79.3%, mainly because of charges related to a plant closing.
Earnings in the quarter ended Aug. 31 came to $664,000, or 6 cents per share, down from $3.2 million, or 27 cents per share, in the comparable quarter a year ago. Sales of $82.4 million were down 2.3%.
In the latest quarter, Hooker had restructuring and impairment charges related to the closing of its Pleasant Garden, N.C., facility of $2.9 million after tax, or 25 cents per share. In the 2004 third quarter, the company had a similar although smaller charge of $1.2 million, or 10 cents per share, related to closing a plant in Maiden, N.C.
For the first nine months, net sales were $251.6 million, a decrease of 0.9% from a year earlier. Earnings for the year to date were $8.5 million, or 72 cents per share, down 33.6% from the 2004 pace.
In addition to the restructuring charges and lower net sales, the company said its income declined because of lower gross profit margins on U.S.-made wood furniture and higher warehousing and distribution costs for imported wood furniture.
Sales of Bradington-Young upholstered leather furniture in the third quarter increased 6.3% from a year earlier to $14.8 million. Sales of Hooker's wood and metal furniture fell 4% to $67.6 million in the 2005 quarter.
In the wood and metal segment, sales of imports rose 10.5% to $50.7 million in the latest quarter, while sales of domestically made products tumbled by 30.9% to $16.9 million. In the first nine months, shipments of domestic wood products accounted for 23% of revenues, compared with 30% in 2004.
"As we forecasted in the second quarter, we've seen continuing strength in demand for our imported products as the year has progressed, along with more modest growth in our upholstered furniture sales," said Chairman and CEO Paul Toms. "Unfortunately these gains have been more than offset by the continuing challenges for domestic wood furniture orders, leading to our recently announced Pleasant Garden plant closing."
Hooker expects to reduce production costs by $2 million to $2.5 million annually, once the transfer of Pleasant Garden production to the company's two remaining wood furniture plants is complete. Hooker also expects to record another $400,000 to $600,000 in restructuring charges in subsequent periods related to Pleasant Garden.
"While disappointed in the short-term financial impact of the restructuring costs associated with the plant closing, we continue to have an optimistic long-term outlook as we employ our strategies to improve our logistics, marketing and systems," Toms said. "Two recently introduced, well-received whole-home collections — Preston Ridge and Casa del Sol — are shipping now to dealers, which should have a positive impact on sales through the fall."
The company said it is succeeding in its strategy to gain more display space with dealers. Hooker is on target to open several in-store display galleries with existing retailers by year's end, featuring an assortment of Hooker and Bradington-Young products. More than 60 in-store boutiques dedicated to Hooker's Intimate Home furniture collection are scheduled to be in place this fall with retailers across the country.
"We are concerned about retail conditions heading into the fall," Toms said. "Business at retail has been choppy, at best, with some regions of the country experiencing better demand than others. The recent hurricanes affecting the Gulf and Southeast regions also have taken their toll on business. Our thoughts and prayers are with the people and families displaced by the storms."
Because of concerns with unpredictable energy costs and their effect on consumer confidence and spending, the company "is forecasting a decline in net sales of 3% to 7% for the 2005 fourth quarter compared to the record quarterly net sales reported for the 2004 quarterly period," Toms said.
| Hooker Furniture | |||
|---|---|---|---|
| Owns Bradington-Young | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 8/31 | 2005 | 2004 | Change |
| (a) Includes pretax restructuring and related asset impairment charges of $4.7 million in the 2005 quarter, $5 million in the 2005 nine months and $2 million in the 2004 periods. |
|||
| Sales | $82,398,000 | $84,309,000 | (2.3%) |
| Operating income | 5,869,000 | 7,336,000 | (20.0%) |
| Net income (a) | 664,000 | 3,203,000 | (79.3%) |
| Earnings per share | 0.06 | 0.27 | (77.8%) |
| 9 months ended 8/31 | 2005 | 2004 | Change |
| Sales | $251,622,000 | $254,021,000 | (0.9%) |
| Operating income | 19,619,000 | 23,501,000 | (16.5%) |
| Net income (a) | 8,473,000 | 12,757,000 | (33.6%) |
| Earnings per share | 0.72 | 1.09 | (33.9%) |
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