Hooker Furnishings Corporation

Good day. Thank you for standing by. Welcome to the Hookah Furnishings Corporation's second quarter 2026 earnings webcast. At this time, all participants are on 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference may be recorded. I will now hand the conference over to your speaker host. Earl Armstrong with the company CFO. Please go ahead, sir.

Thank you, Livia, and good morning, everyone. Welcome to our quarterly conference call to review financial results for the fiscal 2026 second quarter, which began May 5th and ended August 3rd, 2025. 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 2026 second 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. The results across segments were mixed in the fiscal 2026 second quarter. On the Hooker Legacy side, Hooker-branded net sales were up 1.3% year-over-year, and domestic upholstery net sales were consistent with the prior year's second quarter. Hooker-branded reached break-even compared to a $329,000 loss in the same quarter last year, despite absorbing $655,000 in restructuring costs, primarily related to severance. Domestic upholstery, which recorded 152,000 restructuring costs this quarter, reduced its operating loss from 1.3 million to 408,000. These improvements reflect the progress of our cost reduction and restructuring initiatives. In contrast, Home Meridian net sales were down 44.5% compared to the prior year second quarter, as this segment was heavily impacted by tariff-related buying hesitancy and persistent macroeconomic pressures among its value-focused customer base. Additionally, shipments in its hospitality business declined compared to the prior year's second quarter due to the timing associated with the project-based nature of this business. The loss of a major customer due to its bankruptcy last year accounted for about 25% of Home Meridian's sales decrease. As a result, consolidated net sales for the second quarter were $82.1 million, down $13 million, or 13.6% from the same period last year. driven primarily by sales declines at Home Meridian. Consolidated operating loss was 4.4 million compared to 3.1 million in the prior year quarter, reflecting lower sales volume and unfavorable customer mix at Home Meridian, as well as $2 million in total restructuring costs. The consolidated net loss was 3.3 million, or 31 cents per share. During the first six months of fiscal 26, consolidated net sales declined by 21 million, or 11.2% compared to the same period last year. The decrease was also driven primarily by lower sales at home meridian due to the factors just discussed, along with a modest 1.7% decline in domestic upholstery, reflecting soft demand. Including 2.5 million restructuring costs recorded during the period and significant sales volume decline, the consolidated operating loss of 8 million remained consistent with the prior year period, reflecting improvements on the legacy Hooker side. Net loss for the six-month period was $6.3 million, or $0.60 per diluted share. Now I'll turn the call over to Jeremy for his comments on our fiscal 2026 second quarter results.

Thank you, Earl, and good morning, everyone. Hooker Furnishings is taking decisive steps to return the business to profitability. Our cost reduction efforts and focus on growth initiatives will position a company to maintain resilience in today's challenging environment and to strategically capture growth when demand returns. As Earl mentioned, Hooker Branded broke even in the quarter, despite weak demand and $655,000 in restructuring charges, and domestic upholstery reduced its operating loss nearly 70%, even including $152,000 of restructuring costs. At HMI, we have de-risked it significantly over the last several years and continue to further that effort. These actions have been obscured by weak demand in the home furnishings industry due to an extremely weak housing environment and tariff buying hesitancy in the market segment in which HMI competes. By the end of our fiscal 26 third quarter, we believe HMI's fixed cost structure will be aligned to support what we believe to be a sustainable business and one in which sales can be significantly scaled from current levels when demand returns. Barring additional tariffs or other significant disruptive events, we expect HMI's performance to be significantly enhanced by the end of the current fiscal year. We are confident that the actions we've taken—scaling fixed costs, reducing debt, and launching compelling new product lines—provide the foundation for long-term value creation. Importantly, we are on track to have our new expense structure largely in place by the end of the third quarter, supporting a path to profitability even at current revenue levels. Our multi-phase plan to scale our fixed cost structure for sustained profitability and a downturn is on track and beginning to yield significant results. While HMI results were challenged by tariff concerns and unfavorable customer and product mix, We had a $1.2 million improvement in operational results at Hooker Branded and Domestic Upholstery during the second quarter, despite the inclusion of about $800,000 in restructuring costs in the results. We are becoming leaner and more efficient, underscored by efforts within Domestic Upholstery, where our focus on improving labor-to-revenue ratios is showing early progress and already reflected in stronger factory performance metrics. We are on target for our new expense structure, which reduces our fixed cost from fiscal 25 by 25%, mostly in place by the end of the fiscal 26 third quarter. We believe our enhanced operating discipline will support a path back to profitability in future periods, even as macroeconomic challenges and uncertainties persist. Critically, the thoughtful and deliberate way in which we are implementing this restructuring will not limit our ability to grow or fulfill orders and serve customers as market conditions improve. While our comprehensive restructuring efforts continue across all three segments, we continue to adapt to the changing industry and invest in the highest growth opportunities. Our upcoming Margaritaville launch at the October high point market positions us well for the second half of fiscal 27, Ahead of the launch and expected benefit, our new Vietnam fulfillment warehouse is already delivering on its promise of shortening container lead times from six months to roughly four to six weeks and creating new opportunities for customers to mix product collections on containers. Additionally, we believe these efficiencies will lower our overall global inventory. Finally, I'd like to comment on our adjustments to tariffs on imported furniture and components. In late July, the U.S. government announced a 20% tariff rate on imports from Vietnam, the main source country for Hooker and the home furnishings industry, effective August 1, 2025. Each of our segments is taking a different approach to mitigating the Vietnam tariffs. For domestic upholstery, the impact is on component parts and fabrics, and we're able to mitigate through incremental measures such as new fabric sourcing. For Hooker Branded, we re-merchandised the line to manage the impact of the 20% tariff evaluating pricing on a skew-by-skew basis rather than a blanket price increase. At HMI, we believe we have implemented near-term mitigation efforts to balance the value equation in the more price-sensitive and competitive segment. Now I want to turn the discussion back over to Earl, who will outline the details of our cost reduction strategy as well as discuss highlights in each of our segments.