HOOKER FURNISHINGS CORPORATION All references to the "Company," "we," "us" and "our" in this document refer to
Forward-Looking Statements Certain statements made in this report, including statements under Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the notes to the consolidated financial statements included in this report, are not based on historical facts, but are forward-looking statements. These statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as "believes," "expects," "projects," "intends," "plans," "may," "will," "should," "would," "could" or "anticipates," or the negatives thereof, or other variations thereof, or comparable terminology, or by discussions of strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to:
? disruptions involving our vendors or the transportation and handling
industries, particularly those affecting imported products from
slowdowns and the availability and cost of shipping containers and cargo
ships;
? the effect and consequences of the coronavirus (COVID-19) pandemic or future
pandemics on a wide range of matters including but not limited to
local economies; our business operations and continuity; the health and
productivity of our employees; and the impact on our global supply chain,
inflation, the retail environment and our customer base;
? general economic or business conditions, both domestically and
internationally, and instability in the financial and credit markets,including their potential impact on our (i) sales and operating costs and
access to financing or (ii) customers and suppliers and their ability to
obtain financing or generate the cash necessary to conduct their respective
businesses;
? adverse political acts or developments in, or affecting, the international
markets from which we import products, including duties or tariffs imposed on
those products by foreign governments or the
prior
imported into
furniture components manufactured in
potential for additional or increased tariffs in the future;
? risks associated with our reliance on offshore sourcing and the cost ofimported goods, including fluctuation in the prices of purchased finished
goods, ocean freight costs, including the price and availability of shipping
containers, vessels and domestic trucking, and warehousing costs and the risk
that a disruption in our offshore suppliers could adversely affect our ability
to timely fill customer orders;
? risks associated with domestic manufacturing operations, includingfluctuations in capacity utilization and the prices and availability of key
raw materials, as well as changes in transportation, warehousing and domestic
labor costs, availability of skilled labor, and environmental compliance and
remediation costs;
? changes in
social and economic climates of the countries from which we source our
products;
? difficulties in forecasting demand for our imported products;
? risks associated with product defects, including higher than expected costs
associated with product quality and safety, and regulatory compliance costs
related to the sale of consumer products and costs related to defective or
non-compliant products, including product liability claims and costs to recall
defective products and the adverse effects of negative media coverage;
? disruptions and damage (including those due to weather) affecting our
representative offices or warehouses in Vietnam and China ;
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? risks associated with our newly leased warehouse space in
risks associated with our move to and occupation of the facility, including
information systems, access to warehouse labor and the inability to realize
anticipated cost savings;
? the risks specifically related to the concentrations of a material part of our
sales and accounts receivable in only a few customers, including the loss of
several large customers through business consolidations, failures or other
reasons, or the loss of significant sales programs with major customers;
? our inability to collect amounts owed to us or significant delays in
collecting such amounts;
? the interruption, inadequacy, security breaches or integration failure of our
information systems or information technology infrastructure, related service
providers or the internet or other related issues including unauthorized
disclosures of confidential information or inadequate levels of
cyber-insurance or risks not covered by cyber insurance;
? the direct and indirect costs and time spent by our associates associated with
the implementation of our Enterprise Resource Planning system ("ERP"),
including costs resulting from unanticipated disruptions to our business;
? achieving and managing growth and change, and the risks associated with new
business lines, acquisitions, including the selection of suitable acquisition
targets, restructurings, strategic alliances and international operations;
? the impairment of our long-lived assets, which can result in reduced earnings
and net worth;
? capital requirements and costs;
? risks associated with distribution through third-party retailers, such as
non-binding dealership arrangements;
? the cost and difficulty of marketing and selling our products in foreign
markets;
? changes in domestic and international monetary policies and fluctuations in
foreign currency exchange rates affecting the price of our imported products
and raw materials;
? the cyclical nature of the furniture industry, which is particularly sensitive
to changes in consumer confidence, the amount of consumers' income available
for discretionary purchases, and the availability and terms of consumer
credit;
? price competition in the furniture industry;
? competition from non-traditional outlets, such as internet and catalog
retailers; and
? changes in consumer preferences, including increased demand for lower-quality,
lower-priced furniture.
Our forward-looking statements could be wrong in light of these and other risks,
uncertainties and assumptions. The future events, developments or results
described in this report could turn out to be materially different. Any
forward-looking statement we make speaks only as of the date of that statement,
and we undertake no obligation, except as required by law, to update any
forward-looking statements whether as a result of new information, future events
or otherwise and you should not expect us to do so.
Also, our business is subject to a number of significant risks and uncertainties
any of which can adversely affect our business, results of operations, financial
condition or future prospects. For a discussion of risks and uncertainties that
we face, see the Forward-Looking Statements detailed above and Item 1A, "Risk
Factors" in our 2021 Annual Report.
Investors should also be aware that while we occasionally communicate with
securities analysts and others, it is against our policy to selectively disclose
to them any material nonpublic information or other confidential commercial
information. Accordingly, investors should not assume that we agree with any
projection, forecast or report issued by any analyst regardless of the content
of the statement or report, as we have a policy against confirming information
issued by others.
This quarterly report on Form 10-Q includes our unaudited condensed consolidated
financial statements for the 2022 fiscal year thirteen-week period (also
referred to as "three months," "three-month period," "quarter," "third quarter"
or "quarterly period") that began August 2, 2021 , and the thirty-nine week
period (also referred to as "nine-months", "nine-month period" or "year-to-date
period") that began February 1, 2021 , which both ended October 31, 2021 . This
report discusses our results of operations for these periods compared to the
2021 fiscal year thirteen-week period that began August 3, 2020 and the
thirty-nine week period that began February 3, 2020 , which both ended November
1, 2020 ; and our financial condition as of October 31, 2021 compared to January
31, 2021 .
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Table of Contents References in this report to:
? the 2022 fiscal year and comparable terminology mean the fiscal year that
began February 1, 2021 and will end January 30, 2022 ; and
? the 2021 fiscal year and comparable terminology mean the fiscal year that
began February 3, 2020 and ended January 31, 2021 .
Dollar amounts presented in the tables below are in thousands except for per share data.
In the discussion below and herein we reference changes in sales orders, or "orders," and sales order backlog (unshipped orders at a point in time), or "backlog," over and compared to certain periods of time and changes discussed are in sales dollars and not units of inventory, unless stated otherwise. We believe orders are generally good current indicators of sales momentum and business conditions. However, except for custom or proprietary products, orders may be cancelled before shipment. If the items ordered are in stock and the customer has requested immediate delivery, we generally ship products in about seven days or less from receipt of order; however, orders may be shipped later if they are out of stock or there are production or shipping delays or the customer has requested the order to be shipped at a later date. For theHooker Branded and Domestic Upholstery segments and All Other, we generally consider unshipped order backlogs to be one helpful indicator of sales for the upcoming 30-day period, but because of our relatively quick delivery and our cancellation policies, we do not consider order backlogs to be a reliable indicator of expected long-term sales. We generally consider the Home Meridian segment's backlog to be one helpful indicator of that segment's sales for the upcoming 90-day period. Due to (i) Home Meridian's sales volume, (ii) the average sales order sizes of its mass, club and mega account channels of distribution, (iii) the proprietary nature of many of its products and (iv) the project nature of its hospitality business, for which average order sizes tend to be larger and consequently, its order backlog tends to be larger. There are exceptions to the general predictive nature of our orders and backlogs noted in this paragraph due to current demand and supply chain challenges related to the COVID-19 pandemic. They are discussed in greater detail below and are essential to understanding our prospects.
At
Order Backlog
(Dollars in 000s)
Reporting Segment October 31, 2021 January 31, 2021 November 1, 2020
Hooker Branded $ 55,599 $ 34,776 $ 28,627
Home Meridian 208,364 180,188 186,487
Domestic Upholstery 61,516 30,271 24,582
All Other 5,432 2,845 2,210
Consolidated $ 330,911 $ 248,080 $ 241,906
At the end of the fiscal 2022 third quarter, order backlog increased $82.8
million , or 33.3%, as compared to the end of fiscal 2021 and increased $89
million , or 36.8%, as compared to the prior-year nine months end, due to
increased incoming orders in all three reportable segments as well as longer
delivery times resulting from the supply chain disruptions in the Home Meridian
and, to a lesser degree, Hooker Branded segments and production delays in the
Domestic Upholstery segment. We are very encouraged by the current historic
levels of orders and backlogs; however, due to the current supply chain issues
including the lack and cost of shipping containers and vessel space and limited
overseas vendor capacity, orders are not converting to shipments as quickly as
could be expected compared to the pre-pandemic environment and we expect that to
continue at some level through the fiscal 2023 second quarter. The current
logistics challenges are slowing order fulfillment, particularly for Home
Meridian whose average order sizes tend to be larger and more project-based
versus orders for the traditional Hooker businesses, which tend to be smaller
and more predictable. Additionally, Home Meridian orders are programmed out and
scheduled for delivery to its larger accounts further into the future than
usual, which is also contributing to the increased backlog.
The following discussion should be read in conjunction with the condensed
consolidated financial statements, including the related notes, contained
elsewhere in this quarterly report. We also encourage users of this report to
familiarize themselves with all of our recent public filings made with the SEC ,
especially our 2021 Annual Report. Our 2021 Annual Report contains critical
information regarding known risks and uncertainties that we face, critical
accounting policies and information on commitments and contractual obligations
that are not reflected in our condensed consolidated financial statements, as
well as a more thorough and detailed discussion of our corporate strategy and
new business initiatives.
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Our 2021 Annual Report and other public filings made with the
OverviewHooker Furnishings Corporation , incorporated inVirginia in 1924, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture and fabric-upholstered furniture for the residential, hospitality and contract markets. We also domestically manufacture premium residential custom leather and custom fabric-upholstered furniture. We are ranked among the nation's top five largest publicly traded furniture sources, based on 2020 shipments toU.S. retailers, according to a 2021 survey by a leading trade publication. We believe that consumer tastes and channels in which they shop for furniture are evolving at a rapid pace and we continue to change to meet these demands.
Executive Summary-Results of Operations
? Consolidated net sales for the fiscal 2022 third quarter decreased as compared
to the prior year period due to significantly reduced shipments in the Home
Meridian segment as the result of temporary COVID-related factory closures in
fiscal 2022 third quarter as compared to the prior year period due primarily
to the sales volume decline and to a lesser extent higher freight costs,
inventory cancellation costs and higher than expected customer chargebacks in
the Home Meridian segment. Consolidated operating loss for the fiscal 2022
third quarter was
in the prior year period. Consolidated net loss for the quarter was
million or (
million or $0.84 per diluted share in the prior year quarter.
? For the fiscal 2022 nine-month period, consolidated net sales increased by
reportable segments had sales increases. Consolidated gross profit increased
due to increases in the
segments, partially offset by decreased gross profit and margin in the Home
Meridian segment. Consolidated operating income was
fiscal 2022 nine-month period compared to a
the prior year period. Consolidated net income was
diluted share for the fiscal 2022 nine-month period, as compared to net loss
of $19.0 million or ($1.61 ) per diluted share in the prior year period.
Our fiscal 2022 third quarter and nine months performance are discussed in greater detail below under "Review" and "Results of Operations."
Review
Despite favorable demand for home furnishings and our strong order backlog, we
were challenged by ongoing supply chain disruptions, the COVID lockdown and
slower than expected reopenings in
The Hooker Branded segment's net sales increased by$8.7 million , or 18.5%, as compared to the prior year quarter, which was attributable to increased sales volume and lower discounting driven by higher demand, as well as inventory availability. All the net sales increases were in our Casegoods non-container business, which comprised 80% of revenue in this segment. Because we source product on a consistent weekly basis and ship product to ourU.S. warehouses, Hooker Branded is better able to mitigate supply chain constraints and keep its best sellers in stock. However, higher ocean freight and product cost inflation significantly impacted this segment's gross margin and offset the gains from sales increases in the third quarter. Despite these adverse factors, this segment reported$6.7 million operating income or an 11.9% operating margin. Incoming orders decreased slightly by 1.9% as compared to prior year period when business dramatically rebounded. Backlog remained historically high and nearly doubled as compared to the prior year third quarter end when backlog was already at a high level. 19
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Home Meridian segment's net sales decreased by
? During the quarter, container direct sales, which typically comprise the
majority of revenue in this segment, decreased by over 50% compared to the
prior year third quarter, driven by sales volume loss due to the temporary
COVID lockdowns in
furniture chains and large independent accounts decreased by over 50% compared
to the prior year quarter, which counted for two thirds of total sales
decrease in this segment. Additionally, e-commerce sales decreased by 25% due
to inventory unavailability and price increases due primarily to increased
freight costs. Clubs sales decreased due to lower volume and higher than
expected chargebacks which negatively impacted net sales and operating income
by
quarter as this business has not yet recovered from the COVID crisis.
? Higher freight costs adversely impacted gross margin by 800 bps in the quarter
and were the primary driver of increased product costs. We imposed freight
surcharges and price increases during the second and third quarters to
mitigate these excess costs; however significant volume was shipped at
pre-surcharge selling prices.
? To help drive improved future profitability, eliminate low-margin categories
and avoid unnecessary costs, we exited the Ready-To-Assemble ("RTA) furniture
category and incurred cancellation costs of
related to this exit. Although these costs increased segment cost of goods
sold by 580 bps and resulted in a gross loss in the quarter, we estimate we
avoided roughly
these orders by taking this action. Furthermore, this action allows us to
focus resources on more profitable business opportunities to drive long-term
growth.
The Home Meridian segment finished the quarter with a backlog 12% higher than the prior year third quarter end, and more than doubled as compared to pre-pandemic levels.
The Domestic Upholstery segment's net sales increased by$2.6 million , or 10.3%, in the fiscal 2022 third quarter compared to the prior year period as all three divisions of the segment reported over or close to 10% sales increases. However, material cost inflation for nearly all the raw materials and higher freight surcharges on the materials increased product costs by 340 bps and offset the gains from increased sales. Other manufacturing constraints adversely impacted our profitability, including wage inflation and the domestic driver and truck shortage which adversely impacted the delivery of finished products. Despite increased material costs, this segment reported operating income of$1.4 million , or 5.2% operating margin for the third quarter. Although we are encouraged by historically high backlog at the end of the fiscal 2022 third quarter at all three divisions, production levels were adversely impacted by manufacturing capacities, inconsistent deliveries of materials due to supply disruption with our suppliers, and labor inefficiencies at the Sam Moore division. We have implemented price increases and surcharges with major accounts to improve margin and filled key positions to improve labor productivity. Since this segment has current order backlog levels of 5-6 months and prices were not increased on backlog orders, we anticipate seeing the benefits of the price increases beginning in the second quarter of fiscal 2023. All Other's net sales decreased by$134,000 , or 4.0%, in the fiscal 2022 third quarter as compared to the prior year period, due to a 5.6% sales decrease at H Contract. The senior living industry, which comprises the majority of H Contract's business, has been severely impacted by the pandemic and has reduced capital spending due to increased costs and uncertain revenues. However, as vaccination rates have increased, especially among the senior population, H Contract's incoming orders have increased for three consecutive quarters in fiscal 2022 and finished the quarter with backlog 150% higher than prior year third quarter end. Despite the sales decrease, All Other still reported a 10.7% operating margin for the quarter. Cash and cash equivalents stood at$57.2 million at fiscal 2022 third quarter-end, down$8.6 million compared to the balance at the fiscal 2021 year-end due primarily to$7.7 million increase in inventory. During the first nine months of fiscal 2022, we used cash on hand and$5 million generated from operations to pay$6.6 million of capital expenditures including$4.4 million in our newly openedGeorgia distribution center,$6.4 million in cash dividends to our shareholders, and$2.6 million on our new common, cloud-based ERP platform. In addition to our cash balance, we have an aggregate of$27.9 million available under our existing revolver to fund working capital needs. We believe we have the financial resources to fund our business operations for the foreseeable future, including weathering an extended impact of COVID-19 pandemic as well as the logistics issues, cost increases and production capacity constraints which are currently impacting our industry. 20
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Results of Operations
The following table sets forth the percentage relationship to net sales of
certain items included in the condensed consolidated statements of income
included in this report.
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Oct 31, Nov 1, Oct 31, Nov 1,
2021 2020 2021 2020
Net sales 100 % 100 % 100 % 100 %
Cost of sales 85.0 77.6 81.4 79.4
Gross profit 15.0 22.4 18.6 20.6
Selling and administrative expenses 15.8 13.3 13.8 15.1
Goodwill impairment charges - - - 10.3
Trade name impairment charges - - - 1.2
Intangible asset amortization 0.4 0.4 0.4 0.5
Operating income/(loss) (1.3 ) 8.7 4.4 (6.5 )
Interest expense, net - 0.1 - 0.1
Income/(Loss) before income taxes (1.2 ) 8.7 4.4 (6.6 )
Income tax expense (0.3 ) 2.0 1.0 (1.6 )
Net income/(loss) (0.9 ) 6.7 3.4 (4.9 )
Fiscal 2022 Third Quarter and Nine Months Compared to Fiscal 2021 Third Quarter
and Nine Months
Net Sales
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Oct 31, Nov 1, Oct 31, Nov 1,
2021 2020 2021 2020
% Net Sales % Net Sales $ Change % Change % Net Sales % Net Sales $ Change % Change
Hooker Branded $ 56,037 42.0 % $ 47,287 31.6 % $ 8,750 18.5 % $ 157,304 34.3 % $ 113,268 29.4 % $ 44,036 38.9 %
Home Meridian 46,230 34.6 % 73,727 49.3 % (27,497 ) -37.3 % 217,964 47.5 % 202,560 52.6 % 15,404 7.6 %
Domestic Upholstery 27,972 21.0 % 25,350 16.9 % 2,622 10.3 % 74,996 16.3 % 59,640 15.6 % 15,356 25.7 %
All Other 3,189 2.4 % 3,323 2.2 % (134 ) -4.0 % 8,543 1.9 % 9,353 2.4 % (810 ) -8.7 %
Consolidated $ 133,428 100 % $ 149,687 100 % $ (16,259 ) -10.9 % $ 458,807 100 % $ 384,821 100 % $ 73,986 19.2 %
FY22 Q3 % FY22 YTD % FY22 Q3 % FY22 YTD %
Increase Increase Average Selling Increase Increase
Unit Volume vs. FY21 Q3 vs. FY21 YTD Price ("ASP") vs. FY21 Q3 vs. FY21 YTD
Hooker Branded 0.9 % 20.6 % Hooker Branded 17.1 % 14.5 %
Home Meridian -46.1 % -1.8 % Home Meridian 4.9 % 1.6 %
Domestic Upholstery 0.3 % 17.1 % Domestic Upholstery 8.7 % 6.4 %
All Other -19.4 % -17.2 % All Other 14.6 % 7.4 %
Consolidated -35.6 % 2.2 % Consolidated 31.7 % 11.5 %
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Consolidated net sales decreased in the fiscal 2022 third quarter due to the sales decline in Home Meridian segment but increased in the first nine months as compared to the prior year periods.
? The Hooker Branded segment's net sales increased significantly in the fiscal
2022 third quarter and nine months, as compared to the respective prior year
periods, due to both increased unit volume and ASP, driven by increased
demand.
to inventory unavailability issues.
? The Home Meridian segment's net sales decreased in the fiscal 2022 third
quarter driven by a 46% decrease in unit volume as the result of COVID
lockdown in
period, net sales increased with major furniture chains and retail stores as
the result of strong demand, partially offset by decreased net sales in
hospitality business, e-commerce and the club businesses, and higher than
expected chargebacks from a clubs channel customer. The ASP increase was
attributable to price increases to mitigate higher freight costs; however, the
increases were not sufficient to cover the excess freight costs.
?
quarter and nine months as all three divisions of the segment reported
increased net sales for both periods. ASP increased at all three divisions in
response to the inflation of material costs, with Sam Moore ASP increasing the
most in order to improve profitability in this division. However,
unit volume decreased during the third quarter due to labor inefficiencies.
? All Other's net sales decreased in the fiscal 2022 third quarter and
nine-month period due to reduced unit volume at H Contract, as this division
has not yet recovered from the impact of reduced capital spending by the
senior living industry as a result of COVID crisis. ASP increased in response
to increased product costs; however, it was not sufficient to offset the
volume loss.
Gross Profit/(Loss) and Margin
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Oct 31, Nov 1, Oct 31, Nov 1,
2021 2020 2021 2020
% Net Sales % Net Sales $ Change % Change % Net Sales % Net Sales $ Change % Change
Hooker Branded $ 15,366 27.4 % $ 15,446 32.7 % $ (80 ) -0.5 % $ 49,639 31.6 % $ 35,894 31.7 % $ 13,745 38.3 %
Home Meridian (1,807 ) -3.9 % 11,169 15.1 % (12,976 ) -116.2 % 17,935 8.2 % 28,489 14.1 % (10,554 ) -37.0 %
Domestic Upholstery 5,353 19.1 % 5,751 22.7 % (398 ) -6.9 % 14,879 19.8 % 11,555 19.4 % 3,324 28.8 %
All Other 1,095 34.3 % 1,117 33.6 % (22 ) -2.0 % 2,853 33.4 % 3,199 34.2 % (346 ) -10.8 %
Consolidated $ 20,007 15.0 % $ 33,483 22.4 % $ (13,476 ) -40.2 % $ 85,306 18.6 % $ 79,137 20.6 % $ 6,169 7.8 %
For the fiscal 2022 third quarter, consolidated gross profit and margin both
decreased as compared to the prior year quarter. For the fiscal 2022 nine-month
period, consolidated gross profit increased due to the sales increase while
margin decreased.
? The Hooker Branded segment's gross profit and margin both decreased in the
fiscal 2022 third quarter driven by higher freight costs, product cost
inflation, and higher demurrage and drayage expenses due to supply chain
interruptions. For the nine-month period, gross profit increased due primarily
to the net sales increase while gross margin decreased slightly.
? The Home Meridian segment's gross profit and margin decreased significantly in
the fiscal 2022 third quarter and nine-month period, due to sales volume loss,
excess ocean freight costs, higher than expected customer chargebacks and
order cancellation costs.
?
fiscal 2022 third quarter due primarily to raw material cost inflation, which
offset the effect of increased sales. Gross profit and margin increased in the
nine-month period due to net sales increases and production efficiencies from
operating near full capacity due to historic levels of backlog.
? All Other's gross profit decreased in the fiscal 2022 third quarter andnine-month period due principally to H Contract net sales declines, while
gross margin still maintained a high level.
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Selling and Administrative Expenses (S&A)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Oct 31, Nov 1, Oct 31, Nov 1,
2021 2020 2021 2020
% Net Sales % Net Sales $ Change % Change % Net Sales
%
15.5 % $ 7,762 16.4 % $ 935 12.0 % $ 24,599 15.6 % $ 20,788 18.4 % $ 3,811 18.3 %
Home Meridian 8,042 17.4 % 8,325 11.3 % (283 ) -3.4 % 26,208 12.0 % 26,305 13.0 % (97 ) -0.4 %
Domestic Upholstery 3,647 13.0 % 3,067 12.1 % 580 18.9 % 10,503 14.0 % 8,785 14.7 % 1,718 19.6 %
All Other 753 23.6 % 696 21.0 % 57 8.2 % 2,033 23.8 % 2,042 21.8 % (9 ) -0.4 %
Consolidated $ 21,139 15.8 % $ 19,850 13.3 %$ 1,289 6.5 %$ 63,343 13.8 %$ 57,920 15.1 %$ 5,423 9.4 % Consolidated selling and administrative ("S&A") expenses increased in absolute terms and as a percentage of net sales in the fiscal 2022 third quarter. For fiscal 2022 nine-month period, S&A expenses increased in absolute terms but decreased as a percentage of net sales.
? The Hooker Branded segment's S&A expenses increased in absolute terms in the
fiscal 2022 third quarter driven by increased selling costs as the result of
higher net sales, increased expenses incurred as part of our ERP project, and
increased salaries and wages, partially offset by decreased bonus accruals on
lower profits. For the fiscal 2022 nine-month period, S&A expenses increased
in absolute terms due to the factors discussed above, offset by lower bad debt
expenses due to the absence of a customer write-off in the current year. S&A
expenses decreased as a percentage of net sales in the fiscal 2022 third
quarter and nine-month period in the segment due to increased net sales.
? The Home Meridian segment's S&A expenses decreased in absolute terms in the
fiscal 2022 third quarter due to lower selling costs on decreased sales,
partially offset by increased severance expenses due to personnel changes and
increased professional service expenses. S&A expense increased as a percentage
of net sales in the fiscal 2022 third quarter due to decreased sales. For the
fiscal 2022 nine-month period, S&A expenses decreased slightly in absolute
terms, with lower selling costs, professional service expenses and advertising
supply expenses, nearly offset by increased severance expenses, the absence of
employee furloughs in the current year period, and increased market expenses
and other spending as business returned to more normal levels. S&A expenses
decreased as a percentage of net sales in the nine-month period in the segment
due to higher net sales.
?
the fiscal 2022 third quarter and nine-month period due to increased selling
expenses on higher net sales, increased salaries and wages due to the absence
of a number of employees furloughed when factories were temporarily shut down
in the prior year period, and increased depreciation expenses due to the
accelerated depreciation of our existing ERP system due to the expected
implementation of an upgraded cloud-based ERP solution in fiscal 2023.
? All Other S&A expenses increased in absolute terms in the fiscal 2022 third
quarter and stayed essentially flat in the nine-month period due to increased
market expenses, advertising supply expenses and other spending, offset by
decreased selling expenses. S&A expenses increased as a percentage of net
sales due to lower net sales in the segment.
In the prior year first quarter, we recorded $23.2 million and $16.4 million in
non-cash impairment charges to write down goodwill in Home Meridian segment and
the Shenandoah division under Domestic Upholstery segment, respectively. We also
recorded $4.8 million non-cash impairment charges to write down tradenames in
the Home Meridian segment.
Intangible Asset Amortization
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Oct 31, Nov 1, Oct 31, Nov 1,
2021 2020 2021 2020
% Net Sales % Net Sales $ Change % Change % Net Sales % Net Sales $ Change % Change
Intangible asset
amortization $ 596 0.4 % $ 596 0.4 % $ - 0.0 % $ 1,788 0.4 % $ 1,788 0.5 % $ - 0.0 %
Intangible asset amortization expense stayed the same compared to the prior year periods.
23
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Operating (Loss)/Profit and Margin
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Oct 31, Nov 1, Oct 31, Nov 1,
2021 2020 2021 2020
% Net Sales % Net Sales $ Change % Change % Net Sales % Net Sales $ Change % Change
Hooker Branded $ 6,669 11.9 % $ 7,686 16.3 % $ (1,017 ) -13.2 % $ 25,040 15.9 % $ 15,108 13.3 % $ 9,932 65.7 %
Home Meridian (10,181 ) -22.0 % 2,510 3.4 % (12,691 ) -505.6 % (9,274 ) -4.3 % (26,754 ) -13.2 % 17,480 65.3 %
Domestic Upholstery 1,443 5.2 % 2,421 9.6 % (978 ) -40.4 % 3,589 4.8 % (14,399 ) -24.1 % 17,988 124.9 %
All Other 341 10.7 % 420 12.6 % (79 ) -18.8 % 820 9.6 % 1,156 12.4 % (336 ) -29.1 %
Consolidated $ (1,728 ) -1.3 % $ 13,037 8.7 % $ (14,765 ) -113.3 % $ 20,175 4.4 % $ (24,889 ) -6.5 % $ 45,064 181.1 %
We recognized an operating loss in the fiscal 2022 third quarter due to the
factors discussed above.
Interest Expense, net
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Oct 31, Nov 1, Oct 31, Nov 1,
2021 2020 2021 2020
% Net % Net % Net % Net
Sales Sales $ Change % Change Sales Sales $ Change % Change
Consolidated
interest
expense, net $ 27 0.0 % $ 106 0.1 % $ (79 ) -74.5 % $ 81 0.0 % $ 433 0.1 % $ (352 ) -81.3 %
Consolidated interest expense decreased in both the third quarter and nine months of fiscal 2022 due to the payoff of our term loans in fiscal 2021 fourth quarter.
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