Hooker profits up sharply
By Jay McIntosh -- Furniture Today, September 10, 2007
Martinsville, Va. — Hooker Furniture said an improved gross profit margin and lower costs led to a four-fold increase in net income in its second quarter ended July 29.
Earnings were $4.9 million, or 39 cents per share, up from $1.2 million, or 10 cents per share, in the comparable period last year. Hooker's profit gain came despite an 11.5% decline in sales to $73.4 million.
"Our increased profitability confirms the opportunity we've seen for some time to improve financial and operational performance, even in a difficult retail environment, by realizing the efficiencies of our new business model," said Chairman, CEO and President Paul Toms Jr. "Our improved operating margin for the current quarter reflects the cost-cutting initiatives we've had under way and the absence of significant restructuring charges."
A higher proportion of imported wood and metal products sold, and some lower costs, lifted the gross profit margin to 31.3% of sales from 28.3% a year earlier, the company said.
Hooker closed its last domestic wood furniture plant in March, although it still sells U.S.-made product from its Bradington-Young and Sam Moore upholstery operations.
Selling, general and administrative costs were down by 18.9%, or $3.5 million. One factor was the company's termination of its employee stock ownership plan in January.
Pretax restructuring costs also fell sharply to $473,000 in the latest period from $2.8 million a year earlier.
"While sales this quarter were negatively impacted by the industry-wide sales slump, much of the shortfall is the result of our exit from domestic wood furniture manufacturing, which will have a smaller negative impact on both our top and bottom lines moving forward," Toms said.
Sales fell across all product lines, partly offset by the $6.7 million in sales from Sam Moore, which Hooker acquired on April 28 of this year.
For the first half, earnings of $9.1 million, or 71 cents per share, were up 29.8% from a year earlier, and sales of $150.7 million were down 13.2%.
Looking ahead, Toms said retail remains challenging, but the company expects to see the usual seasonal gain in furniture sales this fall.
"If we see a flat to moderately reduced sales environment, financial performance for the remainder of this fiscal year should continue to compare favorably year-over-year as a result of our ongoing cost-cutting measures, continued progress in managing our supply chain, and the elimination of major restructuring and ESOP costs," he said.
Toms noted, for example, that Hooker has eliminated over 500,000 square feet of warehouse space, and now leases about one-third the amount of such space than it did a year ago.
Hooker recently changed its fiscal year so that it will end in late January or early February. The results of its most recent quarter were compared with the quarter ended Aug. 31, 2006.
| Hooker Furniture | |||
|---|---|---|---|
| Owns Bradington-Young and Sam Moore | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 7/29 (a) | 2007 | 2006 | Change |
| (a) Because of a change in fiscal year, comparisons are with quarter and six months ended Aug. 31, 2006. (b) Includes pretax charges for restructuring and asset impairment of $473,000 in the 2007 quarter, $2.8 million in the 2006 quarter, $344,000 in the 2007 six months and $3 million in the 2006 six months. (c) Based on average shares outstanding of 12.6 million in the 2007 quarter, 12.9 million in the 2007 six months and 12 million in the 2006 quarter and six months. | |||
| Sales | $73,441,000 | $83,006,000 | (11.5%) |
| Operating income | 7,929,000 | 4,872,000 | 62.7% |
| Net income (b) | 4,858,000 | 1,210,000 | 301.5% |
| Earnings per share (c) | 0.39 | 0.10 | 290.0% |
| 6 months ended 7/29 (a) | 2007 | 2006 | Change |
| Sales | $150,735,000 | $173,700,000 | (13.2%) |
| Operating income | 14,006,000 | 14,352,000 | (2.4%) |
| Net income (b) | 9,144,000 | 7,042,000 | 29.8% |
| Earnings per share (c) | 0.71 | 0.59 | 20.3% |
| Acknowledgements | ||
| Business Editor Larry Thomas contributed to this story. | ||
