Hooker Furnishings (NASDAQ:HOFT) reported a return to profitability in its fiscal 2027 first quarter, as cost reductions and improved margins helped offset continued weakness in furniture demand tied to a soft housing market and cautious consumers.
Senior Vice President and Chief Financial Officer Earl Armstrong said the company generated net income of $1.1 million, or $0.10 per diluted share, for the quarter ended May 3, 2026. That compared with a loss in the prior-year period, with Chief Executive Officer Jeremy Hoff describing the result as a $4.1 million improvement from the first quarter of the previous year.
Despite lower sales, Hooker Furnishings reported a $2.7 million increase in consolidated gross profit, while gross margin improved by 440 basis points from the prior-year period. Operating income totaled $1.6 million, compared with an operating loss of $498,000 a year earlier.
Cost Cuts Support Profitability Amid Weak Demand
Hoff said the first-quarter improvement reflected the benefits of a $17.5 million reduction in fixed costs related to continuing operations achieved in the prior year, along with progress toward a more efficient operating model.
“These results were achieved despite a challenging demand environment characterized by depressed housing activity and low consumer confidence,” Hoff said.
Armstrong said the company’s improved profitability was primarily driven by stronger results in Hooker Branded, as well as prior cost reduction initiatives and an ongoing focus on building a leaner, higher-margin business model.
During the question-and-answer portion of the call, analyst Anthony Lebiedzinski of Sidoti asked whether the company saw significant monthly revenue variation during the quarter. Hoff said that as the company moved further away from the “turmoil” of the prior year, including efforts to sell two companies and reposition the business, it became more focused as the quarter progressed.
Hooker Branded Margins Improve Sharply
In the Hooker Branded segment, net sales decreased $1.8 million, or 4.8%, in the quarter. Armstrong said about 70% of the decrease was due to lower volume in imported upholstery. The decline was partly offset by higher average selling prices from price increases implemented to address higher product costs.
Hooker Branded gross profit increased $2.9 million, and gross margin improved by 960 basis points. The segment contributed $1.2 million to the company’s consolidated operating income of $1.6 million.
Armstrong said Hooker Branded backlog increased nearly 30% from the prior-year first quarter, reflecting retailer commitments to new products, including Margaritaville. The company expects meaningful shipments of Margaritaville products to begin in the second half of fiscal 2027.
When asked about the sustainability of the gross margin improvement, Hoff said product mix and the company’s use of LIFO accounting were key factors that can affect reported margins.
Domestic Upholstery Remains Pressured
Domestic Upholstery net sales decreased $558,000, or 1.9%, primarily due to continued soft demand. Gross profit fell $315,000, and gross margin declined by 80 basis points, which Armstrong attributed mainly to lower revenue and higher overhead.
The segment posted an operating loss of $689,000, driven primarily by its indoor residential furnishings businesses. Armstrong said Domestic Upholstery backlog increased modestly compared with both the prior-year first quarter and fiscal 2026 year-end.
Hoff also discussed the company’s launch of Hooker Custom Upholstery at the April High Point Market, bringing the Sam Moore and Bradington-Young brands together under a unified platform. He said the new approach combines the upscale product lines under a premium Hooker Custom Upholstery identity, supported by a refreshed showroom presentation, enhanced marketing and a mix of new and existing products.
Hoff said the company believes the strategy can help drive higher sales when market conditions improve by creating a more cohesive brand story under the Hooker name.
Margaritaville Orders Drive Backlog Momentum
Hoff said early second-quarter indicators were encouraging, with consolidated incoming orders up 8% in May from the prior-year period and backlog up more than 14% year over year. He said the improvement was primarily driven by Margaritaville orders, which had initial shipments in May.
The company now has commitments for 100 in-store galleries and 10 freestanding retail stores for Margaritaville products, compared with about half those numbers when it reported in December. Hoff said retailer commitments to Margaritaville products, galleries and freestanding stores continue to exceed expectations.
Asked by Dave Storms of Stonegate whether commitments could continue to rise as shipments begin, Hoff said he was taking a “glass-half-full” view and was optimistic that participation and gallery counts could keep increasing if the program is executed well.
Hoff also said contacts with retail partners indicated a generally positive Memorial Day holiday period. He described the feedback on sales and traffic as “pretty good” given the broader environment.
Debt-Free Balance Sheet and Capital Returns
Armstrong said Hooker Furnishings ended the quarter with $10.6 million in cash and cash equivalents, up $9.5 million from fiscal 2026 year-end, and no debt. The company used operating cash flow to repay $3.6 million in outstanding loan principal, distribute $1.3 million in cash dividends and fund $403,000 in capital expenditures.
Inventory decreased to $45 million from $48.7 million at the end of fiscal 2026. Armstrong said the company had $54.2 million of available borrowing capacity under its amended and restated loan agreement at quarter-end, net of standby letters of credit, with no outstanding balance on the credit facility. He added that, as of the day before the call, the company had more than $15 million in cash on hand.
Armstrong also reviewed the company’s capital allocation plans. Hooker Furnishings previously authorized a share repurchase program of up to $5 million beginning in fiscal 2027 and recalibrated its annual dividend to $0.46 per share starting with the Dec. 31, 2025, dividend payment. During the quarter, the company repurchased about 7,600 shares for approximately $96,000 at an average price of $12.53 per share.
Looking ahead, Hoff said the company remains cautious on the fiscal second quarter because of continued pressure on housing activity and weak consumer confidence. He cited Department of Commerce April advance estimates showing retail sales for furniture and home furnishing stores declined 2% from March and 3.6% from a year earlier.
“While we do not expect meaningful near-term improvement in market conditions, our more efficient cost structure and streamlined portfolio should help position us to deliver improved results versus the prior year period, even if current conditions persist,” Hoff said.
About Hooker Furnishings (NASDAQ:HOFT)
Hooker Furnishings, formerly known as Hooker Furniture Corporation, is a designer, marketer and distributor of high-quality home furnishings. Headquartered in Martinsville, Virginia, the company offers a broad range of wood and upholstered furniture products across bedroom, dining, home office and accent categories. Its portfolio includes solid wood and engineered wood case goods, upholstered seating, accent tables and decorative accessories, reflecting styles that range from traditional to contemporary.
The company’s operations are organized into three reportable segments: Domestic Wholesale, Retail and Logistics, and International.
