DALLAS, TX -- September 15th, 2026 --Hooker Furniture Corporation (NASDAQ: HOFT): Stonegate Capital Partners updates their coverage on Hooker Furniture Corporation (NASDAQ: HOFT). HOFT reported revenue, operating income, and EPS of $63.3M, $1.3M, and $0.16, respectively. This compares to our/consensus estimates of $65.2M/$62.3M, $0.1M/($0.7)M, and $0.01/($0.02). Consolidated gross margin expanded 690 bps y/y to 31.8%, with tariff recoveries accounting for most of the increase. Excluding $4.3M of COGS recoveries and $0.5M of customer credits, we calculate gross margin still improved roughly 70 bps y/y to ~25.6%. More importantly, the core businesses showed better underlying core margin performance, with tariff-adjusted gross margin improving approximately 340 bps y/y at Hooker Branded and 150 bps at Domestic Upholstery. With material additional tariff recoveries not expected, 2H27 should provide investors with a cleaner read on normalized profitability.
Growth Strategy: HOFT’s near-term setup is shifting from cost reduction toward volume conversion. Hooker Branded sales declined 4.5% y/y on lower unit volumes, promotions, and SKU out-of-stocks, but backlog increased 34.7% y/y and Asia-related inventory constraints largely eased by quarter-end. Combined Hooker Branded and Domestic Upholstery backlog reached $41.4M, up roughly 18% y/y by our calculation, well ahead of the 6.2% consolidated increase as hospitality backlog declined on project timing. Margaritaville has moved from retailer commitments to shipment conversion; shipments began late in 2Q and are expected to build through 2H27 and into FY28, while commitments remain approximately 100 in-store galleries and 10 freestanding stores. Domestic Upholstery generated $0.8M of operating income versus a $(0.4)M loss last year, supported by private-label and outdoor growth, lower input costs, improved absorption, and tariff recoveries.
Outlook/Catalyst: We and Management do not expect meaningful near term improvement in furniture demand but remain confident in improved y/y results in 2H27 even if current conditions persist. July results improved significantly y/y absent tariff recoveries, promotional activity should normalize during the second half, and the post-Labor Day retail read was fairly positive. Key variables are backlog conversion, Margaritaville’s ramp, and whether underlying margin gains hold without tariff support. We continue to view HOFT as a self-help recovery story, with 2H27 increasingly dependent on converting improved order visibility into sustainable profitability rather than additional restructuring benefits.
Balance Sheet & Liquidity: HOFT ended 2Q27 with $18.7M of cash, no outstanding debt, and $51.8M of available borrowing capacity. First-half operating cash flow was $24.0M, though roughly $16.0M came from receivables collections and inventory reduction, indicating material working capital support. Inventory declined to $43.4M from $48.7M at year-end. The Company repurchased $1.3M of stock through 2Q, leaving approximately $3.7M under its $5M authorization, while maintaining a $0.115 quarterly dividend. The balance sheet remains supportive of Margaritaville and measured capital returns while preserving flexibility through weak demand.
Valuation: We use a DCF and a EV/EBIT comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $15.67 to $17.44 with a mid-point of $16.48. Our EV/EBIT valuation results in a range of $14.88 to $16.17 with a mid-point of $15.52. When we combine these two methodologies using a simple average it returns a range of $15.27 to $16.80 with a price target of $16.00.
