Hooker Furniture Sales Increase 6%; Earnings Up Almost 21% in 2006 First Quarter

Furniture World Magazine

Hooker Furniture Corporation reported first quarter net sales of $85.3 million for the period ended February 28, 2006, a $4.8 million or 6.0% increase compared to net sales of $80.5 million in the 2005 first quarter. Net income for the quarter of $3.6 million or $0.30 per share exceeded 2005 first quarter net income of $2.9 million or $0.25 per share. "We are pleased to have turned the corner and be back on track with positive sales growth," said Paul B. Toms, Jr., chairman and chief executive officer. After posting 13 consecutive quarters of sales increases over prior year periods, Hooker reported sales decreases in the low single digits for the last three quarters of 2005, compared with the same 2004 periods. Toms attributed the 6% top line improvement to an increase in incoming orders for imported wood and metal furniture throughout the quarter, coupled with better import product availability. "We are beginning to see results from our initiatives in supply chain management, and we expect that our ability to flow product to our customers in a timely manner will continue to improve," he said. "Earnings also rebounded, surpassing 2005's first quarter net income by $0.7 million or almost 21%." However, Toms sees additional upside potential to further improve earnings. "We're disappointed that we couldn't convert our sales increase into an even greater profit increase," he said. "This was largely due to higher warehousing and distribution costs associated with the growth in imported wood and metal furniture shipments. We expect to lower inventory and warehousing costs going forward by editing our product offerings and through improved demand forecasting." Net sales of Hooker's wood and metal furniture during the 2006 first quarter increased 7.6% or $4.9 million, to $69.5 million from $64.6 million in the 2005 first quarter due principally to increased unit volume. These sales gains were the result of a 25.4% or $11.0 million increase in imported furniture shipments, to $54.4 million from $43.4 million in the 2005 first quarter, partially offset by a decline in shipments of domestically produced wood furniture of 28.9% or $6.1 million, to $15.1 million in the 2006 first quarter compared to $21.2 million in the prior year period. Net sales of Bradington-Young's upholstered leather furniture declined slightly to $15.8 million in the 2006 first quarter from $15.9 million during the 2005 first quarter. "We've experienced a modest softening in demand for domestically produced upholstered furniture but growing sales in the imported Seven Seas Seating category. We have initiatives underway that we believe will have a positive overall impact on Bradington-Young's business for both domestically produced and imported upholstered products," Toms said. The Company anticipates a strong Spring International Home Furnishings Market for its upholstery subsidiary. "Bradington-Young is moving into a new showroom with greater visibility and is offering a new program for the design trade, along with strong product introductions, some of which we plan to ship by the end of the second quarter," he said. As a percentage of net sales, operating income increased to 6.8% in the 2006 quarterly period compared to 6.3% for the prior year period, principally driven by improving gross profit margin resulting from product mix and lower restructuring costs. The improvement in operating income was partially offset by higher selling and administrative expenses, which increased by 9.9% or $1.5 million, to $17.0 million in the 2006 first quarter from $15.5 million in the same 2005 period. As a percentage of net sales, selling and administrative expenses increased by 0.7%, to 19.9% in the current quarter from 19.2% in the prior year period. "This increase in expenses reflects higher warehousing and distribution costs associated with the growth in imported wood and metal furniture shipments, coupled with our increased spending for supply chain initiatives. As the supply chain initiatives are implemented, we expect improved inventory availability, product delivery and service for our customers at lower cost to Hooker," Toms said. Hooker Furniture continues to maintain a strong balance sheet and cash flow. During the first quarter of fiscal 2006, the Company increased its working capital by $3.0 million or 2.7%, to $112.7 million from $109.7 million at November 30, 2005. Over the past twelve months, long-term debt has declined by 37.6% or $7.7 million, and shareholders' equity has increased by 8.8% or $12.2 million. "Based on continuing improvement in product availability and a good backlog of orders spurred by strong introductions at the October 2005 market, the Company forecasts an increase in net sales of 3% to 7% for the 2006 second quarter compared to the same period a year ago," Toms said. Ranked as the nation's sixth largest publicly traded furniture producer based on 2004 shipments to U.S. retailers, Hooker Furniture is an 82-year old importer and manufacturer of residential wood, metal and upholstered furniture. With approximately 1,400 employees, the Company operates five manufacturing facilities, one supply plant, six distribution centers and warehouses, three showrooms and a corporate office in Virginia and North Carolina. The Company also utilizes a distribution center and warehouse in China. The Company's stock is listed on the NASDAQ Capital Market under the symbol HOFT, and closed at $18.11 per share on March 29, 2006. Please visit our websites at www.hookerfurniture.com and www.bradington-young.com.