DALLAS, TX -- December 22nd, 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 $70.7M, ($16.3)M, and ($1.99), respectively. This compares to our/consensus estimates of $85.2M/$85.5M, ($2.2)M/($2.2)M, and ($0.15)/($0.14). Revenues came in below expectations, declining 32.2% y/y, driven primarily by the Company selling the majority of it’s HMI business segment. In contrast, Hooker Branded net sales grew 4.4% y/y and Domestic Upholstery increased 3.0%, underscoring continued resilience in the Legacy brands. Following the sale of its lower margin HMI business consolidated gross margins grew to 25.6% showing sequential growth. Overall profitability was challenged by one time trade name impairment charges related to the HMI transaction, which we expect to be mostly one time in nature. 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.
Growth Strategy: HOFT executed a transformative sale of two HMI brands in the quarter following the ahead of schedule completion of the Company’s multi-phase cost reduction program, which reduced ~$25M of annualized fixed-cost. The sale closed at an aggregate price of ~$6.1M. On the cost reduction front we expect HOFT to continue taking out marginal cost following the sale of the HMI segment. We note that the remaining segment, Samuel Lawrence Hospitality, has moved to the Other segment with the cumulative effect being a strong growth in consolidated gross profit margin. In addition to this strategic reorganization of HOFT’s business segments there is also impressive buzz around the upcoming Margaritaville launch. We expect this Margaritaville launch to show strong organic growth in 2H26. The combination of the HMI sale, realized cost reduction, and upcoming Margaritaville launch puts HOFT in a strategically advantageous position.
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 $17.9M of debt YTD, ending the quarter with $1.4M in cash and $63.8M in borrowing capacity (net of standby letters of credit). Inventory declined to $52.8M from $70.8M at year-end, reflecting improved throughput, tighter alignment to demand, and benefits of the Vietnam warehouse transition. The new facility has shortened lead times from six months to six-to-ten weeks, enabling HOFT to carry less safety stock while maintaining service levels.
Outlook: HOFT reported an order backlog of $32.7M, down from $52.6M in 4Q25 following an unusually large order last year. Hooker Branded backlog rose to $15.4M from $13.1M at FY25 year-end, while Domestic Upholstery backlog decreased to $16.1M from $18.1M. Notably, the Company has reduced its dividend by 50%, which we view as a positive as HOFT has indicated it will increase share buybacks which gives the Company more room to be tactical when returning funds to shareholders.
Valuation: We use a Dividend Discount Model and EV/EBIT comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $14.41 to $16.67 with a mid-point of $15.44. Our EV/EBIT valuation results in a range of $13.93 to $14.98 with a mid-point of $14.46. Lastly, HOFT pays one of the highest dividend yield of the comp set.
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