Hooker Furniture's Q1 net income increases 31.9% year-over-year to US$2.8M on net sales of US$61.4M, up 9.1% from a year ago; company saw significant growth in casegoods and upholstery sales, lower distribution expenses

MARTINSVILLE, Virginia , June 5, 2014 (press release) – Hooker Furniture (Nasdaq:HOFT) today reported net sales of $61.4 million and net income of $2.8 million, or $0.26 per share, for its fiscal 2015 first quarter which began on February 3, 2014 and ended May 4, 2014.

Net income increased 31.9% compared to $2.1 million, or $0.20 per share, during last year's first quarter, driven primarily by higher sales in the casegoods segment.

Net sales for the first quarter increased $5.1 million, or 9.1%, compared to $56.3 million for the same period a year ago, primarily due to increased casegoods unit volume against essentially flat consolidated average selling prices. Casegoods and upholstery segment net sales increased 10.1% and 7.3%, respectively, compared to the fiscal 2014 first quarter.

"We're gratified to see casegoods growing again," said Paul B. Toms Jr., chairman and chief executive officer. Noting that the 31.2% or $1.0 million gain in consolidated operating profitability was driven by increased casegoods volume, he added, "While upholstery sales have grown faster than casegoods sales over the last few years, we're seeing indications of a recovery in casegoods sales and improved retailer ability to sell large-ticket bedroom, dining and home office furniture."

"Significant increases in container-direct shipments to retailers from Hooker's Asia warehouse program helped lead the way in the quarter's solid sales performance," Toms said. "We have strengthened our container-direct offering with a strong service position on a broader selection of best sellers. Retailers are also more comfortable committing to the larger container purchases when they don't have to buy as deep on any particular item," he said.

Gross profit increased in the quarter due to increased sales in both operating segments and lower casegoods segment warehouse and distribution expenses, both in absolute terms and as a percentage of net sales.

Selling and administrative expenses decreased as a percentage of net sales but increased in absolute terms, due partially to additional operating costs for the Company's new start-up businesses, H Contract and Homeware.

Hooker's new business ventures, H Contract and Homeware, reported operating losses for the quarter of $357,000. These new initiatives decreased net income by $233,000 after tax or $0.02 per share. H Contract, which offers upholstered seating and casegoods to upscale senior living facilities, is now operating near break-even versus operating losses a year ago. Homeware, an online-only, direct-to-consumer brand of furnishings and home décor, "continues to have operating losses, but is operating close to expectations as we continue to invest in marketing to build brand awareness," Toms said.

Cash, Inventory and Debt Levels

"Our inventory and cash positions were highlights of the quarter," Toms said. "Inventories are in target range, with a good composition of best sellers, and service levels remain high. We were able to increase cash by almost $8 million." The Company finished the fiscal 2015 first quarter with $31.7 million in cash and cash equivalents and no long-term debt. Additionally, $13.3 million was available on its $15.0 million revolving credit facility, net of $1.7 million reserved for standby letters of credit. Consolidated inventories stood at $43.6 million, down $5.4 million from the fiscal 2014 year-end.

Business Outlook

"Orders for the quarter were up over the prior-year period, but not quite as strong as we would have hoped this spring during the post-furniture market period," Toms said. "While we are positioned very well internally, we're concerned about the retail demand environment," he said, "and a little less bullish than earlier in the year due to a slower housing market, inconsistency at retail and an economy not as robust as expected. However, as we head into the summer months, we expect to capitalize on any improvements in external conditions with our good inventory position on best sellers, strong product line, progress in our upholstery segment and success with our new business initiatives."

Dividends

At its June 5, 2014 meeting, the Company's board of directors declared a quarterly cash dividend of $0.10 per share, payable on June 30, 2014 to shareholders of record at June 16, 2014.

Conference Call Details

Hooker Furniture will present its fiscal 2015 first quarter results via teleconference and live internet web cast Thursday afternoon, June 5th, 2014 at 3:00 PM Eastern Time. The dial-in number for domestic callers is 877-665-2466, and 678-894-3031 is the number for international callers. The call will be simultaneously web cast and archived for replay on the Company's web site at www.hookerfurniture.com in the Investor Relations section.

Ranked among the nation's top 10 largest publicly traded furniture sources based on 2013 shipments to U.S. retailers, Hooker Furniture Corporation is a residential wood, metal and upholstered furniture resource in its 90th year of business. Major casegoods product categories include home entertainment, home office, accent, dining, and bedroom furniture primarily in the upper-medium price points sold under the Hooker Furniture brand. Hooker's residential upholstered seating product lines include: Bradington-Young, a specialist in upscale motion and stationary leather furniture; Sam Moore Furniture, a specialist in upscale occasional chairs, settees, sofas and sectional seating with an emphasis on cover-to-frame customization; and Hooker Upholstery which focuses on imported leather upholstered furniture targeted at the upper-medium price-range. The Homeware product line offers direct-to-consumer, customer-assembled, modular upholstered and casegoods products designed for younger and more mobile furniture customers. The H Contract product line supplies upholstered seating and casegoods to upscale senior living facilities. Please visit our websites at hookerfurniture.com, bradington-young.com, sammoore.com, homeware.com, and hcontractfurniture.com.

 
Table I
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
 (Unaudited)
   
     
  Thirteen Weeks Ended
  May 4, May 5,
  2014 2013
     
Net sales $ 61,396 $ 56,295
     
Cost of sales  45,786  42,379
     
Gross profit  15,610  13,916
     
Selling and administrative expenses  11,367  10,682
     
Operating income  4,243  3,234
     
Other income (expense), net  46  (32)
     
Income before income taxes  4,289  3,202
     
Income tax expense  1,485  1,076
     
Net income $ 2,804 $ 2,126
     
Earnings per share:    
Basic $ 0.26 $ 0.20
Diluted $ 0.26 $ 0.20
     
Weighted average shares outstanding:  
Basic 10,724 10,717
Diluted 10,762 10,747
     
Cash dividends declared per share $ 0.10 $ 0.10
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