HOFT - Hooker Furniture stock falls to over 2-year low despite largely in-line results

Hooker Furniture ( NASDAQ: HOFT ) stock fell to an over 2-year low on Thursday despite the company reporting Q2 results that were largely in-line with expectations .

HOFT reported Q2 EPS of $0.46 vs. $0.62 in Q2 2022, hurt by significantly higher raw material costs, which led to lower gross margins.

Revenue fell 5.9% Y/Y to $152.91M, hurt by retailers right-sizing their overstocked inventories.

Net sales from the Hooker branded segment rose 5.8%, with both Hooker Casegoods and Hooker Upholstery seeing an uptick in sales.

Incoming orders in the branded segment decreased vs. year-ago period, when home furnishings benefitted from strong post-COVID demand.

Net sales from the Home Meridian segment declined 32.4% due to lower sales at mass merchants and furniture chains from retailers rationalizing inventory levels.

~40% of the sales drop is due to Home Meridian's exit from the unprofitable Clubs channel, while lower e-commerce sales also weighed on the segment's results.

Net sales from the domestic upholstery segment rose 62%, driven by organic sales growth at Bradington Young, Sam Moore and Shenandoah.

"... overstocked retailer inventories contributed heavily to reduction in orders throughout the industry. We believe retail business will remain solid as retailers rebalance inventories and prepare for the fall and holiday seasons," said CEO Jeremy Hoff.

At Q2-end, inventories stood at $131.1M, including $34M in transit to HOFT's domestic warehouses.

"With near-record amounts of in-transit inventory, our cash levels dropped temporarily. Because a high percentage of the in-transit inventory is sold, we expect to quickly convert the inventory to shipments and for cash balances to improve later in the year," said CFO Paul Huckfeldt.

HOFT expects the fall and holiday seasons to align more closely with pre-pandemic ordering environment.

Shares of HOFT declined 37.4% YTD.

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