DALLAS, TX -- September 12th, 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 $82.1M, ($4.4)M, and ($0.31), respectively. This compares to our/consensus estimates of $93.7M/$91.2M, ($0.8)M/($1.5)M, and ($0.08)/($0.16). Revenues came in below expectations, declining 13.6% y/y, driven primarily by a 44.5% y/y decline at HMI from weak demand, tariff-driven buying hesitancy, and the impact of a major customer bankruptcy. In contrast, Hooker Branded net sales grew 1.3% y/y and Domestic Upholstery was flat, underscoring continued resilience in the Legacy brands. Despite soft sales, consolidated gross margin of 20.5% showed sequential stability supported by cost savings and improved labor efficiency. However, mix headwinds and restructuring costs pressured overall profitability. Management reaffirmed its focus on navigating macro headwinds such as housing market weakness, high mortgage rates, and subdued consumer demand, while positioning the company to return to profitability.
Company Update:
Cost Reduction Initiatives: HOFT is executing a multi-phase cost reduction program targeting ~$25M of annualized fixed-cost savings by FY27. Having achieved $3.7M in expense reductions in 1H26, the Company expects additional benefits in 2H26, with the new expense structure largely in place by the end of FY26. Key actions include exiting the Savannah warehouse, transitioning inventory to a new Vietnam warehouse, and streamlining operations at Domestic Upholstery to improve labor-to-revenue ratios. Management emphasized that these efforts are designed to preserve growth investments, including the Margaritaville launch and the Collected Living merchandising platform.
Balance Sheet and Liquidity: HOFT continues to bolster its balance sheet and preserve liquidity while navigating macro uncertainty. The Company used strong operating cash flows to repay $16.5M of debt YTD, ending the quarter with $821K in cash and $57.7M in borrowing capacity (net of standby letters of credit). Inventory declined to $58.5M from $70.8M at year-end, reflecting improved throughput, tighter alignment to demand, and the initial benefits of the Vietnam warehouse transition. The new facility has shortened lead times from six months to four-to-six weeks, enabling HOFT to carry less safety stock while maintaining service levels.
Outlook: HOFT reported an order backlog of $51.2M, down slightly from $52.6M in 4Q25 but showing strength in its Legacy segments. Hooker Branded backlog rose to $15.7M from $13.1M at FY25 year-end, while Domestic Upholstery backlog increased to $19.3M from $18.1M, supported by quarterly order growth of ~11% and ~2%, respectively. Notably, July orders accelerated 24% y/y at both segments and order momentum continued through the Labor Day holiday. We believe the improved throughput from Vietnam and the exit of the Savannah warehouse will give HOFT a lead time advantage once demand normalizes.
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 $14.73 to $16.98 with a mid-point of $15.76. Our EV/EBIT valuation results in a range of $15.29 to $16.55 with a mid-point of $15.92. Lastly, HOFT pays one of the highest dividend yield of the comp set.
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking services for public and private companies.
