Hooker Furnishings Corporation

Greetings, ladies and gentlemen, and welcome to the Hooker Furniture Quarterly Investor Conference Call, reporting its operating results for the fourth quarter, 2022. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. To ask a question during this session, you'll need to press star, then one, on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paul Huckfelt. Vice President, Finance, and Chief Financial Officer for Herker Furniture Corporation.

Thank you, Liz. Good morning, and welcome to our quarterly conference call to review our financial results for the fiscal 2022 full year and fourth quarter, both of which ended on June 30, 2022. Joining me this morning is Jeremy Hoff, our Chief Executive Officer. We appreciate your participation today. During our call, we may make forward-looking statements which are subject to risks and uncertainties. A discussion of factors that could cause our actual results to differ materially from management's expectations is contained in our press release and SEC filing announcing our fiscal 2022 year-end results. Any forward-looking statement speaks only as of today, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after today's call. This morning, we reported consolidated net sales of $594 million. an increase of $53.5 million, or 10%, compared to last year, driven by year-over-year sales increases of more than 20% in both our hooker-branded and domestic upholstery segments. These sales gains were partially offset by a 1% sales decrease in the home rating segment. We reported net income of $11.7 million, or $0.97 per diluted share this year, compared to a net loss of $10 million, or 88% per diluted share last year. Last year's loss was due principally to a $44 million or $34 million net of tax non-cash intangible impairment charge. The fourth quarter, which began on November 1, 2021, and ended on January 30, 2022, was seriously impacted by COVID-related factory shutdowns in Vietnam and Malaysia, which resulted in a 13% consolidated sales decrease in the quarter. In the quarter, consolidated net sales were $135 million, with a decline driven by a 24% or $19 million revenue decrease at HMI and a 12% or $5.8 million sales decrease at Hooker Branded. These lower sales were slightly offset by a $3 million or 13.5% increase in the domestic upholstery sector. For the 2022 fourth quarter, the company reported a consolidated net loss of $4 million or $0.33 per diluted share as compared to net income of $8.5 million, or 71 cents per diluted share in the fourth quarter of fiscal 2021. The quarter operating loss was primarily a function of a $12 million operating loss at Home Meridian. Contributing factors in the fourth quarter loss included inventory unavailability due to COVID-related Asian factory shutdowns from August through late in the year, continued high freight costs, a decline in e-commerce and hospitality furniture sales, and costs of approximately $5 million for the company's planned exit from unprofitable businesses and channels. Now I'll turn the call over to Jeremy to comment on our fiscal 2022 and fourth quarter results.

Thank you, Paul, and good morning, everyone. For much of the year, we successfully mitigated a multitude of macroeconomic challenges while growing sales, remaining profitable, and undertaking transformative strategic initiatives for a long-term expansion of the business. This was particularly true on the hooker legacy side of our businesses. and during the first half of the year for all segments. During the first half, all segments achieved double-digit sales increases, and we were able to better meet historical levels of demand with the right product assortment and inventory readiness. Some of the macroeconomic challenges we faced included soaring ocean freight costs and shipping bottlenecks through the year, material and component parts inflation, staffing and foam shortages. During the course of the last 18 months, costs of imported goods sold. We were able to mitigate these dynamics until late summer when the unexpected COVID-related shutdown of Asian factories began in August and continued through late in the year. While incoming orders remained strong and backlogs were at historic highs, this loss of production capacity virtually halted much of our supply of imported products. This hit home reading immediately. and even began to cause out-of-stock issues and low inventory receipts at Hooker Branded in the fourth quarter, despite that segment's U.S. warehousing model. All of these factors contributed to the 13.2% consolidated sales decrease in the fourth quarter. Over the last few months, Asian factories have begun to ramp up production again and are currently operating at around 85% to 90% capacity and improving weekly. While we are confident that production of imported Our planned exit from unprofitable businesses and channels at HMI, including inventory write-downs, chargebacks from the club's channel, and order cancellation costs as we wind down our RTA furniture business, resulted in one-time cost of over $5 million in the fourth quarter, which was a major driver of our consolidated net loss during the final quarter of the year. However, we believe these strategic exits will help boost profitability going forward, as they allow us to focus on more profitable businesses and stable channels to drive long-term growth. Even as economic factors beyond our control buffeted our financial performance beginning last summer, we continue to create long-term momentum and pursue new opportunities to expand the businesses. reduce cost and delivery times to our customers. Other ambitious initiatives in the second half included entering the Las Vegas furniture market with an 8,500 square foot showroom to serve interior designers in the western U.S. On January 31, 2022, we entered the fast-growing outdoor furniture arena with the acquisition of upscale resource Sunset West, creating an opportunity for incremental sales outlook for sustained growth. Finally, we are extremely excited about our plans to have all Hooker Legacy divisions move showrooms at High Point Market beginning next April as our companies occupy the entire 113,000 square foot third floor of the Showplace building. Our Hooker Legacy companies will have immediate increases in exposure necessary in each of our segments.