Hooker Furniture Navigates Challenges with Cost Cuts and Vietnam Efficiency Gains

Stonegate Capital Partners has updated its coverage on Hooker Furniture Corporation (NASDAQ: HOFT), revealing mixed financial results for the company. HOFT reported revenue of $82.1 million, operating income of ($4.4) million, and adjusted EPS of ($0.31), falling short of both Stonegate's and consensus estimates. The revenue decline of 13.6% year-over-year was primarily driven by a 44.5% drop at HMI due to weak demand, tariff-related buying hesitancy, and a major customer bankruptcy. However, there were bright spots with Hooker Branded net sales growing 1.3% and Domestic Upholstery remaining flat, demonstrating resilience in the Legacy brands. Despite the sales challenges, consolidated gross margin held steady at 20.5%, supported by cost savings and improved labor efficiency.

The company is aggressively pursuing a multi-phase cost reduction program targeting $25 million in annualized fixed-cost savings by FY27, having already achieved $3.7 million in expense reductions in the first half of FY26. Key initiatives include exiting the Savannah warehouse, transitioning inventory to a new Vietnam facility, and streamlining Domestic Upholstery operations to improve efficiency. HOFT has also strengthened its balance sheet, using strong operating cash flows to repay $16.5 million in debt year-to-date while maintaining substantial borrowing capacity. The Vietnam warehouse transition has significantly improved operations, reducing lead times from six months to just four-to-six weeks, allowing for reduced safety stock while maintaining service levels.

Looking ahead, HOFT's order backlog stands at $51.2 million, showing particular strength in Legacy segments with Hooker Branded backlog increasing to $15.7 million and Domestic Upholstery rising to $19.3 million. The company reported encouraging order momentum, with July orders accelerating 24% year-over-year in both segments and continued strength through the Labor Day holiday. Stonegate's valuation analysis using Dividend Discount, DCF, and EV/EBIT models suggests a fair value range with mid-points around $15.90, while noting that HOFT offers one of the highest dividend yields in its peer group. Management remains focused on navigating macroeconomic challenges while positioning the company for a return to profitability.