Hooker Furnishings Corporation

and welcome to the Hooker Furnishings Corp First Quarter 2026 Earnings Webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Earl Armstrong, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you, Michelle, and good morning, everyone. Welcome to our quarterly conference call to review financial results for the fiscal 2026 first quarter, which ended May 4, 2025. Joining me this morning is our Chief Executive Officer, Jeremy Hoff. 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 2026 first quarter 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. Earlier today, we reported consolidated net sales of 85.3 million for the first quarter, a decrease of 8.3 million, or 8.8%, compared to the same period last year. Despite the decrease in net sales, we reduced our operating loss by 1.6 million, or 31%, to 3.6 million, reflecting the impact of cost reduction initiatives implemented in the second half of the prior fiscal year. Comparing to the prior year first quarter, we reduced operating expenses by 2.2 million. This reduction occurred despite first quarter results, which included 523,000 in restructuring costs, primarily severance. Hooker Brand did achieve break even for the quarter, while Domestic Upholstery and Home Meridian significantly reduced their operating losses by 55% and 17% respectively. Inclusive of this work, we improved gross margins by 190 basis points driven by improved margins of home rating and domestic upholstery. We recorded a net loss of 3.1 million, or 29 cents per diluted share, and improvement from the prior year's first quarter's net loss of 4.1 million, or 39 cents per diluted share. Hooker's legacy brand sales were stable during the quarter, with Hooker branded net sales increasing slightly, driven by higher unit volume, while the domestic upholstery segment saw a slight sales decrease compared to the prior year first quarter. The overall decrease in consolidated sales was driven primarily by a double-digit sales decrease at HMI, which is positioned in the mid-price segment where import tariffs have more sharply curtailed demand. In a key development during this quarter, we expanded our multi-pronged cost reduction strategy aimed at achieving approximately $25 million in annualized savings by our next fiscal year. As part of our logistics and operations consolidation, we opened a new Vietnam warehouse facility last month, which we expect will enhance supply chain efficiency and reduce lead times from about six months to four to six weeks. Initial customer feedback has been very favorable, and we believe this initiative has the potential to improve sales. We'll have more details on our overall cost reduction strategy later in the call. Now I'll turn the call over to Jeremy for his comments on our fiscal 2026 first quarter results.

Thank you, Earl, and good morning, everyone. We continue to take significant and deliberate actions to stabilize the company, drive improved sales, and deliver strong gross margins as we execute on our accelerated cost savings program. At the same time, we are determined not to lose focus on developing quality and innovative products, servicing our customers, enacting our strategic vision and increasing shareholder value. This was our eighth consecutive quarter of consistent market share gains within Hooker's legacy brands, which includes Hooker branded and domestic upholstery. The spring high point market was exceptional for the company, especially with two new case good collections in our collected living format. In addition, We had significant placements on the debut of our Living Your Way modular upholstery program offered from our Hooker branded upholstery segment brand in both stationary and motion seating and multiple scale and cover options. We are continuing to achieve significant cost savings through our ongoing programs. Our year-over-year operating and gross margin improvements during the first quarter were driven by the $2.2 million in cost savings from our initial round of cost reductions we announced a year ago. Since the initial announcement, we have expanded our cost reduction initiatives through the exit of the Savannah warehouse and opening of a leased Vietnam warehouse. These moves, particularly our strategic shift to the Vietnam warehouse, will result in accelerated savings and improvements as the current fiscal year progresses. By enhancing supply chain efficiency, enabling our retail customers to mix a variety of collections on containers and reducing lead time from about six months to four to six weeks, we see the Vietnam Warehouse as a game changer and win-win for us and our customers. In total, from the June 2024 start of our initiative, we anticipate reducing our total annual spend rate by approximately 25%. These savings alone will substantially improve profitability. And as conditions improve, our position for growth strengthens accordingly, as will our ability to drive value for shareholders through disciplined execution and capital stewardship. Our progress is steady, and we are executing within all aspects of the business that we're able to control. Notwithstanding our progress, the home furnishings industry continues to navigate a challenging environment driven by persistent softness in the housing market, higher mortgage rates, and declining consumer sentiment. Existing home sales remain well below pre-pandemic levels, and the sharp rise in borrowing cost has dampened housing mobility, which traditionally fuels furniture demand. At the same time, tariff uncertainties are negatively impacting consumer confidence, which has dropped to near-historic lows, with many households pulling back on discretionary spending. These macroeconomic headwinds are weighing heavily on our industry, and we remain focused on adapting to the realities of today's market. I'd like to take a minute to specifically address the import tariff increases and uncertainties that impact the entire furniture industry. We believe we've successfully mitigated the across-the-board 10% tariff through participation by our source factories and through a 5% price increase effective last month. Like everyone else, we are waiting to hear in July what the final tariff may be for Vietnam, where we source over 80% of our products. We will act responsibly, not reactively, in our position with a solid financial foundation and balance sheet that are built to navigate challenging times. Now I want to turn the discussion back over to Earl, who will outline the details of our multi-phase cost reduction strategy, as well as discuss highlights in each of our segments.