Hooker Furnishings Corporation

Good day, and thank you for standing by. Welcome to the Hooker Furnishings Corporation's fourth quarter 2023 earnings webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To remove yourself from the queue, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Huckfeld, Chief Financial Officer. Please go ahead, sir.

Thank you, Norman. Good morning, and welcome to our quarterly conference call to review financial results for the fiscal 2023 fourth quarter and full year, both of which ended on January 29, 2023. 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 2023 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. Before we get started, I'd like to take a moment to discuss the reason we delayed our earnings release and call from last week. As you know, part of our decision to exit or restructure parts of the Home Meridian business involved a significant inventory write-down so that we could liquidate that inventory in a reasonably timely manner, which would enable us to reduce overhead related to that inventory. Pricing has been somewhat better than initially indicated, and the liquidation progressed quickly, so the new information coming in throughout our year-end audit, it took us longer than expected to conclude on a final reserve requirement. We know the delay in an earnings announcement can create concerns. However, we felt that in the long run, it was more important to take the time necessary to be comfortable with the numbers. We certainly appreciate your patience. On Friday, we reported consolidated net sales for the fiscal year of $583 million, a decrease of $10.5 million, or 1.8% compared to the prior year. The sales dip was driven by a 22% sales decrease in the Home Meridian segment, due to the absence of clubs' channel revenue, lower order rates, and delayed shipments from major retail customers with excess inventory, as well as decreased sales in the e-commerce channel. These decreases were partially offset by a 47% sales increase in the domestic upholstery segment due to the addition of Sunset West Results and double-digit sales growth at Brandington Young, Sam Moore, and Shenandoah for the second consecutive year. Hooker-branded net sales were essentially flat, decreasing by $1 million or 0.5% as compared to the peak sales this segment achieved last year. The sales volume decline at the Home Meridian segment and a $24 million charge related to the exit of the ACH brand and repositioning of PRI, which we announced last month, drove a consolidated operating loss of $6 million. and a consolidated net loss of 4.3 million, or 37 cents per diluted share for the fiscal 2023 year, compared to operating income of 14.8 million and net income of 11.7 million in the prior year. The charge was initially expected to be 34 million, but estimates were refined during the company's year-end close and ultimately were considerably less than originally estimated. Without the ACH-related write-down, Consolidated operating income would have been $18.5 million compared to the $14.8 million of the prior year. For the fiscal 2023 fourth quarter, consolidated net sales decreased $3.5 million, or 2.6%, due to a $16 million sales decrease in the home meridian segment, partially offset by a $6.5 million and $5.3 million sales increases in hooker-branded and domestic upholstery segments, respectively. For the fiscal 2023 fourth quarter, we reported a net loss of $17.9 million, or $1.60 per diluted share, which is attributed to the inventory write-down we recorded in the fourth quarter. Excluding that charge, operating income for the quarter would have been around $720,000 compared to a $5.3 million loss in the same quarter last year. Now I'll turn the call over to Jeremy to comment on our fiscal 2023 results.

Thank you, Paul, and good morning, everyone. During this call we'll share how we've adjusted our strategy to a changing home furnishings landscape. As our economy and industry returned to more normal conditions after the multi year impacts of COVID-19 and global supply chain disruptions, we have many initiatives underway at every level of our company. During this year of transition, we made some difficult decisions in the Home Meridian segment for the long term benefit of the company and its stakeholders. While painful in the short term, we made the decision to exit the low margin, high cost ACH brand rather than dragging out corrective actions for years. It is an intentional effort to resolve this more quickly and get HMI on the path to profitability sooner. Also, as part of reorganizing the HMI segment, we are repositioning the PRI business unit as a direct container only business model. Changing the PRI model minimizes both cash and inventory risk and eliminates unnecessary margin erosion from costs related to maintaining domestic inventory. We believe in our strategic direction and the potential for home renting to recover from the challenges of the last few years and contribute to our profitability going forward. This transition will continue into fiscal 24 as we move away from higher risk businesses, lower our operating costs, and focus on our core strengths. We believe Hooker Furnishings enters the year well-positioned to navigate a new landscape that's shifting from historically high demand to a reliance on market share gains. Our marketing, merchandising, and operations initiatives are focused on broadening our share of the total addressable market, brand positioning, and visibility. One of the key initiatives to heighten our visibility and brand positioning debuts at the Spring High Point Market this week, with our nearly 120,000 square foot new Hoker Legacy showroom in a prime location at the center of the market and encompassing the entire third floor of the Showplace building. Featuring abundant natural lighting, high ceilings, a modern presentation, and an outdoor patio, this showroom will help us attract new customers, become a more important brand offering to all sales segments, and accelerate our multiple strategic growth initiatives through an engaging shopping experience. Also at the High Point Market, we are launching M, a domestically produced upholstery and imported occasional furniture brand. The M brand, produced by Sam Moore, Bradet & Young, and Shenandoah, in addition to imported hooker case goods, represents a significant opportunity by allowing us to address a casual, comfortable, modern lifestyle, a look distinct from anything we currently offer. Additionally, we are showing the first comprehensive display of the Sunset West outdoor furniture product line in the Southeast U.S. The prominent and comprehensive display of the Sunset West line in High Point, along with positioning a line to have an East Coast shipping point, will help accelerate our distribution expansion of the California-based product line throughout the U.S. as the outdoor furniture market continues to have vibrant growth potential. In order to leverage the brand equity of Hooker Furnishings and create a more seamless shopping experience for consumers and retailers, we have renamed Sam Moore HF Custom. While the Sam Moore name will remain internally and at the Virginia factory and headquarters, this customer-facing change helps us elevate the perceived value of the upholstery line to the upper-middle fashion perception of Hooker Furnishings. It also presents Hooker Furnishings as a single source for home furnishings under a United Hooker brand, cementing us as a whole home source for high-style, high-quality furnishings. And another encouraging development has been the reception to the much-anticipated and delayed rollout of the Drew & Jonathan Home License Collection at Retail, which is exceeding expectations with sales and enthusiasm from consumers and retailers. In February, Scott Brothers Global and national retail giant, Rooms to Go, announced a multi-year partnership under which HMI will provide RTG with exclusive bedroom and dining room collections to round out their whole home offering. We're pleased to have achieved double-digit sales gains in domestic upholstery for the second consecutive year and to have a strong finish at Hooker Branded with a 15% sales increase in the fourth quarter. Adding to the positive momentum, H Contract and SLH, our contract and hospitality furnishings businesses, continue to recover from the pandemic's negative impact on these categories in the past two years. Now I want to turn the discussion over to Paul, who will discuss highlights in each of our segments. Thanks, Jeremy.