Release Date: April 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Profitability increased compared to the prior fiscal year due to the absence of a $24 million inventory write-down and increased profitability in the Hooker Branded segment.
- Consolidated operating income of $12.4 million and net income of $10 million, or $0.91 per diluted share, were significant improvements over the prior year.
- The financial position and balance sheet were strengthened, with cash increasing by $24 million to over $43 million at year-end.
- The successful launch of the new M modern lifestyle brand and the acquisition of BOBO Intriguing Objects to enhance market positioning as a whole home furnishing resource.
- The company has continued its over 50-year history of dividend payments, including its eighth consecutive annual dividend increase.
Negative Points
- Consolidated net sales decreased by $150 million or 25.7% compared to the last year, attributed to industry-wide soft demand and the exit of unprofitable product lines.
- For the fiscal 2024 fourth quarter, consolidated net sales decreased by $34 million or 26% due to sales decreases in all three segments.
- The Home Meridian segment experienced a net sales decrease of $73 million or 34% compared to the prior fiscal year, primarily due to soft demand for home furnishings.
- The Domestic Upholstery segment's net sales decreased by $30 million or 19% compared to the prior fiscal year, with all four divisions experiencing sales decreases.
- The company's order backlog has decreased, with the year-end backlog being 36% lower than the prior year-end for the Domestic Upholstery segment.
Q & A Highlights
Q: Can you talk about unit volumes versus pricing during the fourth quarter?
A: Paul Huckfeldt, CFO, mentioned that unit volume is down about 20%-ish, and pricing is down a little bit, particularly in HMI, but it's mostly unit volume that's down at this point.
Q: How should we think about your ability to sustain these gross margins?
A: Paul Huckfeldt, CFO, believes that fourth-quarter gross margin is probably indicative of what they should sustain going forward and that they are not seeing a lot of discounting.
Q: Given the mid-single digits decrease in orders so far in the fiscal year, how should we think about that from a revenue perspective?
A: Jeremy Hoff, CEO, indicated that the first quarter might be conservative in revenue due to lower backlogs, but the increased order rate building the backlog is encouraging for future quarters.
Q: Are there any particular product collections you're excited about to showcase at the market?
A: Jeremy Hoff, CEO, is excited about new product introductions across all sides of the business, especially improvements in HMI's offerings.
Q: Can you expand on the recent management changes in terms of your merchandising functions?
A: Jeremy Hoff, CEO, explained that the changes were made to invest in the most profitable side of the business and to align different companies within the legacy model to become a whole home resource.
Q: How should we think about inventory going forward and any impact that might have on working capital?
A: Paul Huckfeldt, CFO, expects a modest inventory build if the market rebounds, but processes are in place to better manage inventories, and they are out of the inventory-intensive ACH business in the Home Meridian segment.
Q: What are you seeing in terms of shipping or any disruptions with some of the geopolitical stuff going on around the Red Sea?
A: Paul Huckfeldt, CFO, noted that ocean freight is stable now, and supply chains are in good shape, with some improvement in delivery times as factories need work.
Q: Do you have a sense of what any ideal acquisition targets would look like?
A: Jeremy Hoff, CEO, emphasized focus on treating several of their businesses like new acquisitions and pulling them together into a whole home environment, rather than looking for new acquisitions.
Q: What was the orders for the fourth quarter, and what was the backlog at the end of the quarter again?
A: Paul Huckfeldt, CFO, stated that the backlog at the end of the quarter was $72 million, and orders for the quarter were $94 million, up from $88 million in the prior year.
Q: Has the Board given any thoughts to implementing a new buyback program given where the current stock price is?
A: Paul Huckfeldt, CFO, indicated that with the economic uncertainty, they will be cautious about a buyback, prioritizing stability and growth over share repurchase at this time.
