Hooker Furniture earnings rise in quarter, but sales decline 11.4%
Thomas Russell -- Furniture Today, June 5, 2012
MARTINSVILLE, Va. — Case goods and upholstery resource Hooker Furniture reported an increase in net income during its first quarter despite an 11.4% drop in sales the company said was driven in part by inventory issues involving some key imported products.
The company said net sales during its fiscal first quarter ended April 29 were $51.7 million, down from $58.4 million for the same quarter last year. In part, the decline was attributed to decreased discounting and some delayed shipments resulting from vendor shifts from China to other source countries.
Net income totaled $1 million, up from $523,000 a year earlier, reflecting improved profitability in the company's upholstery business, which had a $760,000 bottom-line increase.
"This quarter's sales results are disappointing because stock-outs on key items and groups offset the progress we have made in so many other facets of our business," said Paul Toms Jr., chairman and CEO, in a statement.
"We're extremely pleased to have recorded a small operating profit in the upholstery segment this quarter. In addition, we have successfully worked through the heavy product discounting that impacted the first three quarters of last year, and ocean freight rates have stabilized at more favorable levels. The freshening of our product line has been rewarded with strong retailer acceptance of recent product introductions," Toms said.
He also said the company has reduced its domestic upholstery losses by about 90%, due largely to the transfer of leather upholstery resource Bradington-Young's manufacturing operations to a newer, more efficient plant in Hickory, N.C.
"We turned around an over $1 million operating loss in last year's first quarter to a slight profit for the upholstery segment in the current quarter," Toms said.
Michael Delgatti, president of Hooker upholstery, said the upholstery business has improved due to "purging the business of non-value added costs" as well as the "introduction of creative and innovative programs and products at higher gross margins."
He added that the company also experienced sales growth in its Seven Seas seating and Sam Moore custom fabric upholstery business. Sam Moore sales were up 9% in the quarter, the fifth consecutive quarter of year-over-year increases, the company said.
Toms said the improvements in upholstery profitability are sustainable and that its out-of-stock challenges in imported leather and case goods are manageable.
"We have already addressed these issues by strengthening our team in Asia, which we expect will result in improved vendor performance and alignment and improved quality and delivery times," he said. "We expect our best-selling and new product inventory availability to improve by the middle of the second quarter, which will position us to regain the momentum we've lost."
The company also said its cash position also improved during the quarter, rising to $48 million, from $40.4 million since Jan. 29. This resulted from a combined $5.5 million decrease in inventories and accounts receivable.
Toms added that the company also had a strong April High Point Market, with a 20% increase in attendance resulting from both its introductions and its new showroom. However, he said that retailers reported a slowdown in business in March and April, which resulted in weaker orders in the first quarter.
He said the company expects to improve its in-stock position during the typically slow summer selling season and that it doesn't expect a significant improvement in demand until the fall.