DALLAS, TX -- June 13th, 2025 --Hooker Furniture Corporation (NASDAQ: HOFT): Stonegate Capital Partners updates their coverage on Hooker Furniture Corporation (NASDAQ: HOFT). HOFT reported revenue, operating income, and adj EPS of $85.3M, ($3.6)M, and ($0.29), respectively. This compares to our/consensus estimates of $92.6M/$88.9M, ($2.5)M/($2.5)M, and ($0.16)/($0.15). It is noted that revenues were slightly below consensus estimates and posted a 8.8% y/y decrease. The decrease was primarily attributed to the decreased volumes and impacts of tariffs on the HMI segment. Despite the macro headwinds, HOFT reported consolidated GPM of 22.3%, an increase of 173bps q/q. The macroeconomic and furniture retail environment remains challenging, with varying interest rates, maintained housing shortage, and elevated home prices contributing to a prolonged downturn. Despite this, the Company is focusing on controllable factors to position itself for future growth. As HOFT looks through the current market turbulence it has reached the goal of reducing fixed costs by 25%, or approximately $25.0M, with full realization expected by FY27.
Company Update:
Capital Allocation: HOFT maintains its commitment to being a consistent dividend payer by distributing $0.23 per share for an annualized rate of $0.92 per share, equivalent to a 8.1% dividend yield. To fund capital allocation priorities HOFT ended the quarter with $18.0M in cash. After the quarter end HOFT used cash to pay down all outstanding borrowings on the revolving credit facility, leaving the Company with ~$3.0M in cash and $63.3M in borrowing capacity as of this report. The quarter end cash increased both sequentially and year over year as HOFT capitalized on accounts receivable.
Inventory: Despite macro headwinds, the Company has taken impressive steps to strengthen its balance sheet and inventory position over the last year. This is highlighted by a strategic increase in the Company’s inventory levels to start the year. We note that inventory levels decreased sequentially, which is to be expected as macro uncertainties persist. We believe the Company has sufficient inventory levels to weather these uncertainties. We are additionally encouraged by the capabilities of the new Vietnam warehouse, bringing lead times down to weeks from months. This further allows the Company to hold less security stock, giving further runway before significant restocking is needed.
Backlog: HOFT reported a backlog of ~$51.2M, a slight decrease from $52.6M in 4Q25. Despite this sequential decrease in order backlog which can largely be attributed to strong throughput, backlogs are still elevated from pre-pandemic levels. While the macro environment is hard to predict, we are encouraged by the rightsizing of the Company’s operations, leading to a more streamlined supply chain. The combination of improved warehousing in Vietnam and exiting the Savannah warehouse allows HOFT to decrease lead times from months to weeks, helping to control the backlog. We believe this increased throughput and decreased lead times will give HOFT a speed advantage once the macro environment settles.
Valuation: We use a Dividend Discount Model, DCF Model and EV/EBIT comp analysis to guide our valuation. Our Dividend Discount Model arrives at a valuation range of $13.54 to $19.32 with a mid-point of $15.95. Our DCF analysis produces a valuation range of $14.68 to $17.53 with a mid-point of $15.98. Our EV/EBIT valuation results in a range of $12.22 to $14.85 with a mid-point of $13.53. Lastly, HOFT pays one of the highest dividend yield of the comp set.
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