Hooker Furniture Corporation reported third-quarter financial results that fell short of analyst expectations, with revenue declining 32.2% year-over-year to $70.7 million. The decline was primarily attributed to the company's sale of the majority of its HMI business segment, a transformative move that removed lower-margin operations from its portfolio. Stonegate Capital Partners, which updated its coverage on the furniture manufacturer, noted that consensus estimates had projected revenue of $85.5 million for the quarter. The full announcement with additional details is available at https://www.stonegateinc.com.
Despite the overall revenue shortfall, the company's legacy business segments demonstrated resilience. Hooker Branded net sales grew 4.4% year-over-year, while Domestic Upholstery increased 3.0%, indicating continued strength in the company's core operations. The sale of the HMI business contributed to a significant improvement in consolidated gross margins, which grew to 25.6% and showed sequential improvement from previous quarters. Profitability metrics were challenged by one-time trade name impairment charges related to the HMI transaction, resulting in operating income of negative $16.3 million and adjusted earnings per share of negative $1.99. Stonegate analysts characterized these charges as "mostly one time in nature" and noted they compared to consensus estimates of negative $2.2 million in operating income and negative $0.14 in adjusted EPS.
Management reaffirmed its focus on navigating ongoing macroeconomic challenges, including housing market weakness, high mortgage rates, and subdued consumer demand. The company is positioning itself to return to profitability by concentrating on its higher-margin legacy brands while managing through the current economic environment. Stonegate's coverage update highlighted the impressive buzz surrounding Hooker Furniture's upcoming Margaritaville launch, suggesting potential growth opportunities in branded partnerships. The strategic shift away from the HMI business represents a significant transformation for Hooker Furniture as it streamlines operations toward more profitable segments.
While the immediate financial impact shows revenue contraction, the improved gross margin profile and growth in core brands indicate the company may be building a foundation for more sustainable profitability. Investors and analysts will be watching how the company executes its strategy amid persistent market headwinds that continue to affect the broader home furnishings industry. The company's ability to leverage its stronger brand portfolio while navigating economic uncertainties will be critical for its recovery trajectory and long-term financial health.
