Hooker CEO talks layoffs, other takeaways from Q2 earnings report

This story is republished with permission from Furniture Today.

Martinsville-based Hooker Furnishings reported $95.1 million in consolidated net sales for the second quarter last week, a 2.8% drop from last year. It marked the second consecutive quarterly loss for the company, at $3.1 million.

Other than the usual sales figures, there were a few notable things brought up in the report and on the subsequent earnings call. One was that the company announced layoffs. CEO Jeremy Hoff didn’t reveal how many layoffs there were at first, but said they would result in annual savings of around $6 million, and that around $3 million in severance expenses will be shown next quarter.

Hoff gave more information this week, saying that there were 44 layoffs in total, representing 4% of the company’s total workforce. Twenty-four of those were in the form of early retirement packages.

“We did a more expensive option of offering early retirement in order to pull forward people who were going to retire anyway,” he told Furniture Today. “It helped us save jobs and I’m proud of how we did that.”

“Workforce reduction decisions like this are rare for our company and were incredibly difficult for us, as we’re acutely aware of the impact it will have on affected employees,” he said on the earnings call.

The layoffs will help expedite the company’s goal of saving $10 million in fixed costs in the second half of this fiscal year. Around $5 million in savings is expected to come by the end of the fiscal year, split between the third and fourth quarters. Other than layoffs, reductions will come from the consolidation of certain operations, including reducing the company’s Savannah, Georgia, warehouse footprint by half, restructuring the BOBO business into the Hooker Branded business, and eliminating BOBO’s retail store and separate warehouse, among other measures.

“Our first objective was to go to every cost center we have throughout the company and try to find any non-personnel, non-strategic cost that we could eliminate,” Hoff said on the earnings call. “Once we were through that exercise, we went to personnel as well. But even there, we focused on not eliminating strategic costs to execute our organic growth strategy that’s in place. I will tell you that when we say we’re confident we will surpass the $10 million, we’re very confident that we will surpass the $10 million.”

The bleeding slowed from last quarter

Despite the $3.1 million loss, the company’s loss in the first quarter was higher at $5.2 million. Sales fell 23.2% last quarter, compared to this quarter’s 2.8% decline. Sales were also $1.5 million higher than last quarter. A negative margin of 3.3% this quarter was an improvement over last quarter’s negative 5.5%.

Home Meridian gains

Hooker’s Home Meridian segment has suffered the past several years. In 2023, the company opted to exit the unprofitable Accentrics Home business, resulting in a $34 million non-cash charge and short-term revenue losses. But now, light seems to be appearing at the end of the tunnel.

Net sales increased by $1.6 million, or 5.6%, from last year in the segment, primarily driven by strong performance in its hospitality division. Last quarter, sales had fallen by $15.5 million. This marked the first year-over-year quarterly sales increase for the segment in two years.

“All metrics are up for HMI,” Hoff told Furniture Today. “For three years now we have seen straight improvement.”

The segment still reported a loss though, but at less than $1 million. The loss was lower than previous losses ($3.4 million last quarter and $3.3 million last year). Gross margin was 19.5%, one of the highest levels seen since the acquisition of the business in 2016, the company said.

“We believe we have reached the point at HMI where we have a significant path to profitability that is sustainable for the foreseeable future as demand normalizes in the home furnishings industry,” said Paul Huckfeldt, chief financial officer, on the earnings call.

When the business does improve, the margin goal for the segment is around 20%.

“And to stress, we haven’t raised prices,” Hoff said. “We’ve simply been able to exit businesses that were dragging that number down.

“Now it’s just a matter of growing sales,” Huckfeldt added.