DALLAS, TX -- April 21st, 2025 --Hooker Furniture Corporation (NASDAQ: HOFT): Stonegate Capital Partners updates their coverage on Hooker Furniture Corporation (NASDAQ: HOFT). HOFT reported revenue, operating income, and adj EPS of $104.5M, ($2.7)M, and ($0.22), respectively. This compares to our/consensus estimates of $101.6M/$101.2M, $3.5M/$2.6M, and $0.21/$0.16. It is noted that revenues were slightly above consensus estimates and posted a 7.9% y/y gain. The gain was primarily attributed to the increased operating days in 4Q25 compared to 4Q24. Despite the macro headwinds, HOFT reported consolidated GPM of 23.3%, an increase of 30bps q/q. The macroeconomic and furniture retail environment remains challenging, with varying interest rates, maintained housing shortage, and elevated home prices contributing to a prolonged downturn. Despite this, the company is focusing on controllable factors to position itself for future growth. As HOFT looks through the current market turbulence it has reached the goal of reducing fixed costs by 10%, or approximately $10.0M. Additionally, the Company has targeted an additional $10.0M in cost savings through the Savannah warehouse exit and additional initiatives. Full realization of these savings are expected by FY27. 

Company Updates:

Capital Allocation: HOFT maintains its commitment to being a consistent dividend payer by distributing $0.23 per share for an annualized rate of $0.92 per share, equivalent to a 12.2% dividend yield. This was flat since the prior quarter and equal to a 4.4% increase from the same quarter last year. To fund capital allocation priorities HOFT ended the quarter with $6.3M in cash. Cash decreased both sequentially and year over year as HOFT did a strategic inventory build in the quarter and saw increased accounts receivable. We believe this inventory build puts the Company in a strong position given the significant uncertainty in the current market environment.

Strengthening Balance Sheet: Despite macro headwinds, the Company has taken impressive steps to normalize its balance sheet and liquidity position over the last year. This is highlighted by the reduction in the Company’s debt levels over the last 4 quarters and strategic increase in inventory levels. Over FY25 the Company reduced debt levels from $76.3M to $70.3M.

Backlog: HOFT reported a backlog of ~$52.6M, a decrease from $71.8M in 4Q24. Despite this sequential decrease in order backlog which can largely be attributed to strong throughput, backlogs are still elevated from pre-pandemic levels. While the macro environment is hard to predict at the moment, we are encouraged by the rightsizing of the Company’s operations, leading to a more streamlined supply chain. The combination of improved warehousing in Vietnam and exiting the Savannah warehouse allows HOFT to decrease lead times from months to weeks, helping to control the backlog. We believe this increased throughput and decreased lead times will give HOFT a speed advantage once the macro environment settles.

Valuation: We use a Dividend Discount Model, DCF Model and EV/EBIT comp analysis to guide our valuation. Our Dividend Discount Model arrives at a valuation range of $17.40 to $21.47 with a mid-point of $19.23. Our DCF analysis produces a valuation range of $14.90 to $18.26 with a mid-point of $16.42. Our EV/EBIT valuation results in a range of $14.22 to $17.34 with a mid-point of $15.78. Lastly, HOFT pays one of the highest dividend yield of the comp set.

About Stonegate
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking services for public and private companies.

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