Executive Summary
Hooker Furnishings reported QQ1 2026 net sales of $85.316 million, down 8.8% versus the year-ago period, as demand softened in the mid-priced/MID-market segment (notably Home Meridian Brands). Despite weaker volumes, the company narrowed operating losses and improved gross margins through a multi-phase cost-reduction program and operational efficiencies. Management reiterated a strategic objective to realize approximately $25 million in annualized cost savings by FY2027, with Phase 1 already delivering more than $3 million in savings in fiscal 2025 and Phase 2 expected to yield $3.4 million in net savings in fiscal 2026 (net of charges), progressing toward the $14 million annualized savings in 2026 and the full $25 million by 2027. A key structural lever is the Vietnam warehouse opened in May 2025, designed to cut lead times from six months to 4–6 weeks and reduce total supply-chain costs, potentially supporting improved sell-through and margins. We note that May 2025 order dynamics were favorable for Hooker Legacy and Hooker Branded, with Hooker Legacy orders up ~33% YoY and Hooker Branded orders up ~40% YoY, suggesting early validation of merchandising and product initiatives (Collected Living and Live Your Way). The quarter also reflected ongoing macro headwinds—soft housing demand, tariffs, and consumer confidence weakness—offset by disciplined capital allocation, ongoing dividend payments, and robust operating cash flow generation (operating cash flow of $14.66 million and free cash flow of $13.81 million). These factors shape an investment thesis that is constructive on a gradual margin recovery and improved cash generation, but remains contingent on tariff clarity, housing-market stabilization, and sustained execution of cost-structure optimization.
Key Performance Indicators
QoQ: -18.33% | YoY:-10.27%
QoQ: -21.90% | YoY:-4.98%
QoQ: -34.24% | YoY:-13.18%
QoQ: -30.82% | YoY:-56.43%
QoQ: -31.82% | YoY:-52.63%
Key Insights
Revenue: $85.316 million, down 8.8% YoY; Gross profit: $19.002 million, gross margin 22.27%; Operating income: -$3.564 million (margin -4.18%); EBITDA: -$1.235 million; Net income: -$3.052 million (net margin -3.58%); EPS: -$0.29; Weighted average shares: 10.563 million; Cash from operations: $14.663 million; Free cash flow: $13.812 million; Capital expenditures: $0.851 million; Dividends paid: $2.497 million; Net debt: $51.007 million; Total debt: $69.018 million; Cash and cash equivalents: $18...
Financial Highlights
Revenue: $85.316 million, down 8.8% YoY; Gross profit: $19.002 million, gross margin 22.27%; Operating income: -$3.564 million (margin -4.18%); EBITDA: -$1.235 million; Net income: -$3.052 million (net margin -3.58%); EPS: -$0.29; Weighted average shares: 10.563 million; Cash from operations: $14.663 million; Free cash flow: $13.812 million; Capital expenditures: $0.851 million; Dividends paid: $2.497 million; Net debt: $51.007 million; Total debt: $69.018 million; Cash and cash equivalents: $18.011 million; Current assets: $128.068 million; Current liabilities: $32.508 million; Quick ratio (approx.): 1.77; Current ratio (approx.): 3.94; Inventory: $64.316 million; Accounts receivable: $39.597 million; Backlog: Hooker Branded backlog down 21.3% YoY; May 2025 orders: Hooker Legacy +33% YoY, Hooker Branded +40% YoY, Domestic Upholstery +25% YoY; Segment highlights: Hooker Branded breakeven; Home Meridian and Domestic Upholstery losses reduced by 55% and 17% respectively; HMI net sales down ~29% YoY driven by major customer bankruptcy and reduced unit volumes; Domestic Upholstery net sales down ~3.7% YoY, Outdoor Sunset West up 12.7%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
85.32M |
-10.27% |
-18.33% |
| Gross Profit |
19.00M |
-4.98% |
-21.90% |
| Operating Income |
-3.56M |
-13.18% |
-34.24% |
| Net Income |
-3.05M |
-56.43% |
-30.82% |
| EPS |
-0.29 |
-52.63% |
-31.82% |
Management Commentary
Key management themes from the earnings call and Q&A:
- Cost reduction trajectory and profitability framework: “Phase two actions… Vietnam warehouse opened in May 2025… lead times reduced from about six months to four to six weeks” and “reduce total annual spend rate by approximately 25%” (Jeremy Hoff). This reflects management’s emphasis on structural cost savings to offset near-term revenue softness.
- Margin and efficiency improvements from cost actions: “year-over-year operating and gross margin improvements… driven by the $2.2 million in cost savings from our initial round of cost reductions” and “gross margins improved by 190 basis points driven by improved margins in Home Meridian and domestic upholstery.”
- Segment dynamics and channel mix: Hooker Branded reaching breakeven; HMI down ~29% in net sales with a large customer bankruptcy, partially offset by hospitality growth; Domestic Upholstery benefited from cost reductions as margins expanded and losses narrowed by 55% YoY.
- Strategic growth initiatives: Margaritaville licensing program; Collect Living whole-home merchandising approach; Live Your Way customization; Redesign of corporate website to support omnichannel and lead generation; Vietnam-led supply chain enhancements to support container optimization and improved lead times.
- Market backdrop and tariff risk: Ongoing tariff uncertainty (July tariff clarifications for Vietnam) and broader housing market softness; “tariff uncertainties are negatively impacting consumer confidence,” per Jeremy Hoff. Management expects volatility until tariff resolutions are clearer.
- Cash flow and balance sheet actions: Cash position strengthened to $18.0 million; debt reduction and dividends underpin capital deployment; “net cash provided by operating activities” of $14.663 million with free cash flow of $13.812 million; revolving credit facility with ~$40 million available and post-quarter-end debt paydown completed.
- Q&A color on cadence and seasonality: May orders showed improvement across Hooker Legacy, Hooker Branded, and Domestic Upholstery, but management cautioned the second half historically stronger, aligning with a pattern of typical seasonality.
We anticipate reducing our total annual spend rate by approximately $25 million in annualized savings by next year.
— Jeremy Hoff
Vietnam warehouse… lead times from about six months to four to six weeks, which we believe will have a significant positive impact on cash utilization overall.
— Earl Armstrong
Forward Guidance
Management’s near-to-medium-term guidance centers on a multi-phase cost-reduction program and growth initiatives designed to restore profitability and expand margins. Key elements include:
- Cost savings: Phase 2 targets net savings of $3.4 million in fiscal 2026, with total program aiming to eliminate roughly $25 million of fixed costs annually by fiscal 2027 (phase-in over 2025–2027). The plan anticipates about $14 million in net annualized savings in fiscal 2026 and $25 million by fiscal 2027 after offsets. Net charges for Phase 2 are estimated at $2–$3 million in fiscal 2026.
- Margin uplift: The company attributes gross margin expansion to better product margins and lower allowances, plus benefits from warehousing and distribution savings. The Vietnam warehouse is a central program enabler, reducing lead times and enabling better container utilization, which should support topline opportunities and improved margins as volume scales.
- Revenue trajectory: May 2025 orders were up meaningfully across Hooker Legacy, Hooker Branded, and Domestic Upholstery, indicating early momentum from merchandising and new lifestyle concepts (Collected Living, Live Your Way). However, the management cautions that overall housing-market softness and tariff-related uncertainty could curb near-term revenue growth.
- Growth initiatives: Margaritaville licensing, the international warehouse, and the Collect Living merchandising approach provide potential top-line catalysts and brand elevation, with the Vietnam advantage expected to reduce working capital and lead times, potentially supporting a higher contribution margin over time.
- Key factors investors should monitor: tariff developments (especially Vietnam tariff naming and scope), execution risk of Phase 2 cost actions (including warehouse closures and staffing adjustments), progress of Margaritaville licensing earnings contribution, demand stabilization in HMI, and the evolution of housing market indicators (existing home sales, mortgage rates, consumer sentiment).
Overall, the outlook is cautiously constructive: a path to sustained margin restoration and stronger cash generation is in place if tariff headwinds ease and the revenue mix shifts toward higher-margin, lifestyle-driven products. Investors should watch the rate and rhythm of cost reductions, the durability of May order momentum, and the speed at which the Vietnam warehouse translates into real-cost savings and working-capital benefits.