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
the availability 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 toobtain 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
and furniture components manufactured in
with the 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;
? 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
warehouse when occupied), our
facilities or our representative offices or warehouses in
? risks associated with our newly leased warehouse space in
delays in construction and occupancy and risks associated with our move to
the facility, including information systems, access to warehouse labor and
the inability to realize anticipated cost savings;
? 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;
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? 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,
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 particularlysensitive 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 on Form 10-K (the "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," "second quarter"
or "quarterly period") that began May 3, 2021 , and the twenty-six week period
(also referred to as "six-months", "six-month period" or "first half") that
began February 1, 2021 , which both ended August 1, 2021 . This report discusses
our results of operations for these periods compared to the 2021 fiscal year
thirteen-week period that began May 4, 2020 and the twenty-six week period that
began February 3, 2020 , which both ended August 2, 2020 ; and our financial
condition as of August 1, 2021 compared to January 31, 2021 .
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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 August 1, 2021 January 31, 2021 August 2, 2020
Hooker Branded $ 54,041 $ 34,776 $ 18,065
Home Meridian 201,060 180,188 123,849
Domestic Upholstery 60,570 30,271 17,594
All Other 4,701 2,845 2,994
Consolidated $ 320,372 $ 248,080 $ 162,502
At the end of fiscal 2022 first half, order backlog increased $72.3 million or
29% as compared to the end of fiscal 2021 and increased $157.9 million or 97% as
compared to the prior-year six 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 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 through the
second half of fiscal 2022. The current logistics challenges are slowing order
fulfillment, particularly for Home Meridian whose average order sizes tend to be
larger and more episodic 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
Securities and Exchange Commission ("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 our other public filings made with the
OverviewHooker Furniture 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 second quarter increased by
million to
increases over 20%. For the fiscal 2022 first half, consolidated net sales
increased by
due to 53.5% net sales increase in the Hooker Branded segment and over 30%
sales increases in both
Other net sales decreased by over 10% in the fiscal 2022 second quarter and
first half as compared to the prior year periods, as the senior living
industry which comprises the majority of H Contract's business, has not yet
recovered from certain impacts of the COVID-19 pandemic.
? Consolidated gross profit for the fiscal 2022 second quarter increased due
to increased gross profit and margin at Hooker Branded and Domestic
Upholstery segments, while margin decreased due to decreased gross profit
and margin at Home Meridian as this segment was heavily impacted by higher
freight costs which largely offset the gross profit gains from its sales
increase. For the fiscal 2022 first half, consolidated gross profit and
margin increased as compared to the prior year period, due to increased
gross profit in all three reportable segments, partially offset by
decreased gross margin in the Home Meridian segment due to higher freight
costs. All Other's gross profit and margin decreased in the fiscal 2022
second quarter and first half as compared to the respective prior year
periods due to decreased net sales.
? Consolidated operating income for the fiscal 2022 second quarter was $9.7
million as compared to
margin was essentially flat due to the adverse impact of higher freight
costs. Consolidated net income for the quarter was $7.5 million or $0.62
per diluted share, as compared to $5.8 million or $0.48 per diluted sharein the prior year quarter. For the fiscal 2022 first half, consolidated
operating income was
loss in the prior year period, which was largely attributable to
million in non-cash impairment charges on certain of our intangible assets
due to the impact of the Covid crisis on the Company's share price in the
prior year. Consolidated net income for the fiscal 2022 first half was
million or $(2.46) per diluted share in the prior year period.
Our fiscal 2022 second quarter and first-half performance are discussed in greater detail below under "Review" and "Results of Operations."
Review The economic recovery continued in our fiscal 2022 second quarter as furniture and home furnishings sales outperformed many other retail categories. We are pleased to report over 20% net sales increases in all three reportable segments and solid consolidated operating margins as compared to the prior year quarter despite the continued adverse impact of high ocean freight costs and industry-wide logistics challenges. The Hooker Branded segment's net sales increased by$11.1 million , or 28.6%, as compared to the prior year quarter due to higher sales volume and lower discounting driven by increased demand. The majority of Hooker Branded sales are shipped out ofU.S. warehouses and because we source product on a consistent weekly basis, we are better able to flow imports fromAsia . These factors helped reduce some of the unfavorable impacts of shortages of vessel space and shipping containers and domestic trucking availability. Thanks to our strategy of focusing on keeping our best sellers in stock, we were able to limit order cancellation rates in this segment. Additionally, the Hooker Branded segment was able to increase prices to mitigate increased product costs from higher ocean freight and inflation on goods sourced fromAsia . As a result, the segment remained highly profitable and contributed over 90% of our consolidated operating profit during the quarter. Incoming orders increased by 38% as compared to the prior year second quarter and 10% as compared to fiscal 2022 first quarter and the segment finished the quarter with a backlog tripled versus the prior year second quarter end. 19
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The Home Meridian segment's net sales increased by$16.2 million or 22.7% in the fiscal 2022 second quarter as compared to the prior year period due to increased sales with major furniture chains and retail stores, partially offset by decreased sales in the e-commerce, hospitality, and clubs channels.The Pulaski Furniture ,Samuel Lawrence Furniture andPrime Resources International divisions reported significantly increased net sales driven by increased sales volume. However, profits on these increased sales were largely offset by higher freight costs as the result of continued global supply chain challenges. The Accentrics Home division, which focuses on the e-commerce channel, reported a 20% net sales decrease due to lack of inventory brought on by current logistics challenges. Higher freight costs adversely impacted the profitability in this division and resulted in an operating loss in the second quarter. The HMidea division also reported a 20% sales decline due to decreased sales with club accounts. On a positive note for that division, product chargebacks decreased by 400 bps in the second quarter largely as a result of favorable product mix and better quality experience in the clubs channel; however, sales volumes were not sufficient to fully cover fixed costs at the relatively lower margins in this channel. The Samuel Lawrence Hospitality division was also unprofitable during the quarter due to very low sales volume as the hospitality industry has not yet recovered from the COVID crisis. The Home Meridian segment recorded$43,000 in operating income in the fiscal 2022 second quarter due to the factors discussed above. Freight surcharges and price increases were imposed during the quarter; however, they did not fully mitigate increased costs as larger customers required advanced notice ahead of price increases. Incoming orders increased by about 4% as compared to the fiscal 2022 first quarter but decreased by 35% as compared to prior year second quarter when business rebounded dramatically after the height of the initial COVID crisis. Backlog was 62% higher than prior year second quarter end and we built inventory about$20 million higher than fiscal 2021 year- end.The Domestic Upholstery segment's net sales increased by$5.0 million or 28.7% in the fiscal 2022 second quarter as compared to the prior year period due to significant sales increases atBradington-Young andShenandoah and to a lesser extent at Sam Moore. In the prior year period, bothBradington-Young andShenandoah temporarily closed their factories due to COVID and thus operated at reduced capacities. Although foam allocation and certain other raw materials shortages impacted production levels inMay 2021 ,Bradington-Young andShenandoah returned to normal levels inJuly 2021 , whileSam Moore recovered at a slower pace as this division experienced labor retention and productivity issues, which adversely impacted sales volume during the second quarter of fiscal 2022. Other manufacturing constraints adversely impacted our profitability, including the inflation in raw materials such as foam, lumber, plywood, fabric and mechanisms, and supply chain disruptions such as domestic truck availability. We are increasing prices to our customers where possible to offset increased raw material inflation. Incoming orders continued to grow as compared to the fiscal 2022 first quarter and the prior year second quarter. At the end of fiscal 2022 second quarter, backlog was at historic levels for all three divisions and managements' priorities continue to focus on servicing the backlog, with quality and speed of delivery. All Other's net sales decreased by$307,000 or 10.1% in the fiscal 2022 second quarter as compared to the prior year period due to an 11.3% 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. Although we are encouraged by a 6.4% increase in incoming orders during the quarter and nearly 50% higher backlog than the prior year quarter, ourDomestic Upholstery production capacity limited H Contract's shipments as it sold more domestically manufactured products. Despite the sale decline, All Other still reported an 8.5% operating margin for the quarter. Cash and cash equivalents stood at$37.4 million at fiscal 2022 second quarter-end, a decrease of$28.4 million compared to the balance at fiscal 2021 year-end due primarily to a$33.4 million increase in inventory as we continue to build inventories to meet increased customer demand and prepare for the holiday selling season. Accounts receivable balances increased by$15 million as the result of increased net sales. During the first six months of fiscal 2022, we used existing cash on hand to pay$4.3 million in cash dividends to our shareholders and$3.5 million of capital expenditures to enhance our business systems and facilities including$2.1 million in our newGeorgia distribution center. In addition to our cash balance, we have an aggregate of$28.7 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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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 Twenty-Six Weeks Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
Net sales 100 % 100 % 100 % 100 %
Cost of sales 80.5 79.3 79.9 80.6
Gross profit 19.5 20.7 20.1 19.4
Selling and administrative expenses 13.2 14.5 13.0 16.2
Goodwill impairment charges - - - 16.8
Trade name impairment charges - - - 2.0
Intangible asset amortization 0.4 0.5 0.4 0.5
Operating income/(loss) 5.9 5.8 6.7 (16.1 )
Interest expense, net - 0.1 - 0.1
Income/(Loss) before income taxes 5.9 5.7 6.7 (16.3 )
Income tax expense 1.3 1.2 1.5 (3.9 )
Net income/(loss) 4.6 4.4 5.2 (12.4 )
Fiscal 2022 Second Quarter and First-Half Compared to Fiscal 2021 Second Quarter
and First-Half
Net Sales
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
% Net % Net % Net % Net
Sales Sales $ Change % Change Sales Sales
$ Change % Change
Hooker Branded
35,286 53.5 % Home Meridian 87,323 53.7 % 71,168 54.6 %
16,155 22.7 % 171,732 52.8 % 128,833 54.7 %
42,899 33.3 % Domestic Upholstery 22,532 13.9 % 17,507 13.4 % 5,025 28.7 % 47,025 14.5 % 34,290 14.6 % 12,735 37.1 % All Other 2,735 1.7 % 3,042 2.3 % (307 ) -10.1 % 5,354 1.6 % 6,029 2.6 % (675 ) -11.2 % Consolidated$ 162,519 100 %$ 130,537 100 %$ 31,982 24.5 %$ 325,379 100 %$ 235,134 100 %$ 90,245 38.4 % FY22 Q2 % FY22 YTD % FY22 Q2 % FY22 YTD % Increase vs. Increase vs. Average Selling Increase vs. Increase vs. Unit Volume FY21 Q2 FY21 YTD Price (ASP) FY21 Q2 FY21 YTD Hooker Branded 9.3 % 34.6 % Hooker Branded 17.3 % 13.2 % Home Meridian 3.2 % 22.7 % Home Meridian 7.2 % 1.0 % Domestic Domestic Upholstery 14.0 % 28.2 % Upholstery 11.9 % 6.2 % All Other -11.3 % -16.0 % All Other 0.9 % 3.5 % Consolidated 4.4 % 24.2 % Consolidated 12.2 % 6.6 % Consolidated net sales increased significantly in the fiscal 2022 second quarter and first half due to strong sales in all three reportable segments as compared to the prior year periods.
? The Hooker Branded segment's net sales increased in the fiscal 2022 second
quarter and first half, as compared to the prior year periods respectively,
due to both increased unit volume and ASP, driven by increased demand, lower
discounting, and price increases in response to higher freight costs and
product inflation.
? The Home Meridian segment's net sales increased in the fiscal 2022 second
quarter and first half due to increased sales volume with major furniture
chains and retail stores as the result of strong demand, partially offset by
decreased net sales and unit volume in e-commerce channel, Samuel Lawrence
Hospitality, and the clubs business. The ASP increase was attributable to
price increases to mitigate higher freight costs; however, the increases
were not sufficient to cover increased product costs driven by higher
freight.
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Table of Contents ?The Domestic Upholstery segment's net sales increased in the fiscal 2022 second quarter and first half due to significant sales increases atBradington-Young andShenandoah as compared to the prior year periods when
these two divisions experienced temporary factory shutdowns. ASP increased
at all three divisions in this segment in response to the inflation of
material costs.
second quarter due to increased ASP, partially offset by its decreased unit
volume due to production constraints. Foam allocation and certain material
shortages impacted all three divisions early in the fiscal 2022 second
quarter.
late in the quarter while
retention and productivity issues.
? All Other's net sales decreased in the fiscal 2022 second quarter and first
half as compared to the prior year periods due principally 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 in response to
increased costs and uncertain revenues as a result of COVID.
Gross Profit and Margin
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
% Net % Net % Net % Net
Sales Sales $ Change % Change Sales Sales $ Change % Change
Hooker Branded $ 17,060 34.2 % $ 12,443 32.1 % $
4,617 37.1 %
$ 13,825 67.6 % Home Meridian 9,607 11.0 % 10,510 14.8 % (903 ) -8.6 % 19,742 11.5 % 17,320 13.4 % 2,422 14.0 % Domestic Upholstery 4,171 18.5 % 3,021 17.3 % 1,150 38.1 % 9,526 20.3 % 5,804 16.9 % 3,722 64.1 % All Other 879 32.1 % 1,026 33.7 % (147 ) -14.3 % 1,758 32.8 % 2,082 34.5 % (324 ) -15.6 % Consolidated$ 31,717 19.5 %$ 27,000 20.7 %$ 4,717 17.5 %$ 65,299 20.1 %$ 45,654 19.4 %$ 19,645 43.0 %
For the fiscal 2022 second quarter, consolidated gross profit increased and margin decreased as compared to the prior year quarter. For the fiscal 2022 first half, consolidated gross profit and margin both increased as compared to the prior year period.
? The Hooker Branded segment's gross profit and margin both increased in the
fiscal 2022 second quarter and first half, due primarily to the net sales
increase as well as lower discounting due to higher demand. However, product
costs have begun to be negatively impacted by inflation and higher freight
costs in this segment.
? The Home Meridian segment's gross profit and margin decreased in the fiscal
2022 second quarter as compared to the prior year period despite a net sales
increase, due primarily to significantly increased freight costs which
negatively impacted gross margin by 550 bps. For the fiscal 2022 first half,
Home Meridian gross profit increased due to net sales growth while margin
decreased as compared to the prior year period. Freight costs increased
about 400 bps, which was the primary driver of product cost increase in
fiscal 2022 first half. On a more positive note, chargebacks which adversely
impacted Home Meridian profits in prior years were at much lower levels due
to favorable product mix and better-quality experience in the clubs channel.
?
fiscal 2022 second quarter and first half due to net sales increases and
production efficiencies from operating near full capacity due to historic
levels of backlog. In the prior year first and early second quarters, this
segment experienced reduced sales volumes and operating inefficiencies due
to temporary factory shutdowns, which led to lower gross profit and margin
for both the fiscal 2021 second quarter and first half. Foam allocations and
certain other raw material shortages which impacted
production in the fiscal 2022 first quarter improved significantly by late
in the second quarter. However, inflation of raw material costs drove
increased product costs in this segment and adversely impacted gross margin
by about 200 bps in fiscal 2022 second quarter.
? All Other's gross profit and margin decreased in the fiscal 2022 second
quarter and first half due principally to net sales declines and to a lesser
extent unfavorable product mix as more product sold was manufactured
domestically.
Selling and Administrative Expenses (S&A)
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
% Net % Net % Net % Net
Sales Sales $ Change % Change Sales Sales $ Change % Change
Hooker Branded $ 8,132 16.3 % $ 6,353 16.4 % $
1,779 28.0 %
$ 2,877 22.1 % Home Meridian 9,230 10.6 % 9,094 12.8 % 136 1.5 % 18,167 10.6 % 17,981 14.0 % 186 1.0 % Domestic Upholstery 3,451 15.3 % 2,769 15.8 % 682 24.6 % 6,856 14.6 % 5,718 16.7 % 1,138 19.9 % All Other 647 23.7 % 676 22.2 % (29 ) -4.3 % 1,279 23.9 % 1,346 22.3 % (67 ) -5.0 % Consolidated$ 21,460 13.2 %$ 18,892 14.5 %$ 2,568 13.6 %$ 42,204 13.0 %$ 38,070 16.2 %$ 4,134 10.9 % Consolidated selling and administrative ("S&A") expenses increased in absolute terms while decreased as a percentage of net sales in the fiscal 2022 second quarter and first half versus the prior year periods. 22
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Table of Contents ? The Hooker Branded segment's S&A expenses increased in absolute terms and
stayed essentially flat as a percentage of net sales in fiscal 2022 second
quarter. The increases were driven by increased selling costs as the result
of higher net sales, increased salaries and wages due to the absence of
salary reductions and furloughs seen in the prior year period, increased
selling expenses due to Spring High Point Furniture Market which was held in
ERP upgrade project. For the fiscal 2022 first half, Hooker Branded segment
S&A increased in absolute terms due to the factors discussed above,
partially offset by lower bad debt expenses due to a customer write-off in
the prior year. S&A expenses decreased as a percentage of net sales in
fiscal 2022 first half due to increased net sales.
? The Home Meridian segment's S&A expenses increased slightly in absolute
terms but decreased as a percentage of net sales in the fiscal 2022 second
quarter and first half. The increases were attributable to severance
expenses due to personnel changes, the absence of employee furloughs in the
prior year period, and increased market expenses and other spending as
business returned to more normal levels, partially offset by lower
professional expenses, decreased compensation expense on lower profits, and
decreased advertising supply expense.
?
in fiscal 2022 second quarter and first half due to increased selling
expenses on higher net sales, increased salaries and wages due to the
absence of a number of employees furloughed due to factory shutdowns 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 decreased in absolute terms in the fiscal 2022 second
quarter and first half due to decreased selling expenses, partially offset
by increased advertising supply expenses in the current second quarter due
to the postponement of the High Point Furniture Market. S&A expenses
increased as a percentage of net sales due to lower net sales.
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 Twenty-Six Weeks Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
% Net % Net % Net % Net
Sales Sales $ Change % Change Sales Sales $ Change % Change
Intangible
asset
amortization $ 596 0.4 % $ 596 0.5 % $ - 0.0 % $ 1,192 0.4 % $ 1,192 0.5 % $ - 0.0 %
Intangible asset amortization expense stayed the same compared to the prior year
periods.
Operating Profit/(Loss) and Margin
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
% Net % Net % Net % Net
Sales Sales $ Change % Change Sales Sales $ Change % Change
Hooker Branded $ 8,929 17.9 % $ 6,090 15.7 % $ 2,839 46.6 % $ 18,371 18.1 % $ 7,423 11.2 % $ 10,948 147.5 %
Home Meridian 43 0.0 % 1,083 1.5 % (1,040 ) -96.0 % 908 0.5 % (29,265 ) -22.7 % 30,173 103.1 %
Domestic Upholstery 457 2.0 % (10 ) -0.1 % 467 4670.0 % 2,145 4.6 % (16,820 ) -49.1 % 18,965 112.8 %
All Other 232 8.5 % 349 11.5 % (117 ) -33.5 % 479 8.9 % 736 12.2 % (257 ) -34.9 %
Consolidated $ 9,661 5.9 % $ 7,512 5.8 % $ 2,149 28.6 % $ 21,903 6.7 % $ (37,926 ) -16.1 % $ 59,829 157.8 %
Operating profitability increased in absolute terms and as a percentage of net sales, due to the factors discussed above.
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Table of Contents
Interest Expense, net
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
% Net % Net % Net % Net
Sales Sales $ Change % Change Sales Sales $ Change % Change
Consolidated
interest
expense, net $ 23 0.0 % $ 118 0.1 % $ (95 ) -80.5 %$ 54 0.0 %$ 327 0.1 %$ (273 ) -83.5 % Consolidated interest expense decreased in both the second quarter and first half of fiscal 2022 due to the payoff of our term loans in fiscal 2021 fourth quarter.
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