Hooker Furnishings Corporation

Good day, and thank you for standing by. Welcome to the second quarter 2023 earnings webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be an answer session. To ask a question during the session, you will need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Huckfeldt. Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you, Shannon. Good morning and welcome to our quarterly call to review financial results for our fiscal 2023 second quarter, which began May 2, 2022 and ended on July 31, 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. Discussion of factors that could cause our actual results to differ materially from management's expectations is contained in our press release and the SEC filing announcing our fiscal 2023 second quarter results. Any forward-looking statement speaks only as of today, and we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after today's call. This morning, we reported consolidated net sales of $153 million, a decrease of $9.6 million, or 5.9%. compared to last year's second quarter, driven by lower sales in our home meridian segment and partially offset by sales increases in the hooker-branded and domestic upholstery segment, the addition of Sunset West results, and the recovery in the H contract. The company reported net income of $5.5 million, or $0.46 per diluted share, compared to $7.5 million, or $0.62 per diluted share, a year ago. For the fiscal 2023 first half, consolidated net sales were $300 million, down 25 million, or 7.7%, compared to last year's first half, a period in which home furnishings and other industries benefited from a post-COVID demand surge. We reported net income of $8.7 million, or $0.73 per diluted share this year, compared to $16.9 million, or $1.40 per diluted share last year. Now I'll turn the call over to Jeremy to comment on our fiscal 2023 second quarter results.

Thank you, Paul, and good morning, everyone. At mid-year, momentum at Hooker Furnishings is positive. Strong backlogs, full production capacity at our domestic factories and our Asian suppliers, and optimum inventory levels position us to grow sales across all three segments during the second half. Compared to the second half of last year, which was significantly disrupted when virtually all of our Asian capacity was shut down due to the COVID-19 pandemic. As we assess the second quarter, There were five main drivers, highlights, and initiatives that stand out. First, factory production at our Asian suppliers ramped up to near full capacity, recovering from the COVID-related factory shutdowns beginning late last summer that significantly reduced inventories through the first quarter. Inventory receipts at our U.S. warehouses increased each month. Looking ahead, without the production constraints we faced last year, the runway for accelerating product flow and shipments is clear. Currently, we have $34 million of inventory in transit, with a high percentage of that inventory already sold and expected to be shipped soon after receipt. Secondly, as a result of improved inventory flows, we fulfilled orders and reduced backlogs, enabling us to exceed our internal expectations for the quarter. We were pleased to report sales gains in the hooker branded and domestic upholstery segments in the second quarter. us to grow all three segments as the second half progresses. Third, the domestic upholstery segment achieved the sixth consecutive quarter of double-digit sales gains with an organic increase of 33% before the addition of Sunset West. Although we experienced some disruptions in the delivery of raw materials, all four upholstery divisions were operating near full capacity with shipments exceeding prior year periods and our internal goals. Additionally, the domestic upholstery backlog is five times the pre-pandemic levels in calendar 2019. Fourth, the $28.3 million sales decrease at Home Meridian was driven by large retailers and its customer base who are rationalizing their inventory levels, along with some softening of e-commerce sales industry-wide. Approximately 40% of the sales decline can be attributed to HMI's exit from the unprofitable clubs channel. Finally, during the quarter, the home reading segment executed a full high point showroom remodel, secured additional space at our Savannah, Georgia distribution center, and positioned new inventory in Savannah to support the introduction of the portfolio program, which will serve additional channels of distribution through a warehouse stocking program. Set for launch next month at the High Point Market, portfolio encompasses an assortment of over 1,000 ready-to-ship SKUs across four of HMI's brands with no order minimums. The rollout will enable us to further diversify our customer base and distribution channels at HMI, allowing us to reach a vast network of independent retailers. The fast-growing interior designer channel also will now be able to leverage these HMI brands and their products for the first time. The portfolio program does not require additional overall inventory, but rather a change in the mix. In addition to servicing HMI customers, the expanded distribution center will enable us to warehouse the Sunset West product line by year-end, giving Sunset West logistical support to East Coast distribution for the first time. Like the rest of the furniture industry, we have faced economic and supply-side challenges throughout the year. However, we are confident that our proactive responses and successful mitigation efforts, along with the many strategic initiatives underway, have poised us to finish this year in a strong position. Now I want to turn the discussion over to Paul, who will discuss highlights in each of our segments.