Hooker Furniture Corporation reported third-quarter financial results that reflect both the immediate impact of strategic divestitures and underlying strength in core business segments. The company's revenue of $70.7 million fell substantially below both Stonegate Capital Partners' estimate of $85.2 million and consensus estimates of $85.5 million, representing a 32.2% year-over-year decline. This revenue shortfall was primarily driven by the company's sale of the majority of its HMI business segment, a transformative move that has reshaped the company's operational focus.
While overall revenue declined, the company's core business segments demonstrated notable resilience. Hooker Branded net sales grew 4.4% year-over-year, and Domestic Upholstery increased 3.0%, indicating continued consumer demand for the company's legacy brands. This performance underscores the strategic rationale behind the HMI divestiture, which allowed the company to focus resources on higher-margin, more stable business segments. The full announcement detailing these strategic shifts is available at https://www.stonegateinc.com.
The company's consolidated gross margins improved to 25.6%, showing sequential growth following the sale of its lower-margin HMI business. This margin expansion represents a significant positive development in the company's financial profile, suggesting that the strategic restructuring is beginning to yield operational benefits. However, overall profitability was challenged by one-time trade name impairment charges related to the HMI transaction, which contributed to operating income of ($16.3) million and adjusted earnings per share of ($1.99). These figures compare unfavorably to Stonegate's estimates of ($2.2) million operating income and ($0.15) EPS, as well as consensus estimates of ($2.2) million and ($0.14).
Management has reaffirmed its focus on navigating persistent macroeconomic headwinds, including housing market weakness, elevated mortgage rates, and subdued consumer demand. The company's strategic repositioning appears designed to create a more resilient operational structure capable of weathering these challenges while positioning the organization for eventual return to profitability. The upcoming Margaritaville launch has generated significant market interest, potentially representing a future growth catalyst for the company's branded segment.
The implications of these results extend beyond Hooker Furniture's immediate financial performance. The company's experience illustrates how furniture manufacturers are adapting to challenging market conditions through strategic portfolio management. By divesting lower-margin segments and focusing on core brands with demonstrated resilience, Hooker Furniture is attempting to create a more sustainable business model. This approach could serve as a template for other companies in the industry facing similar macroeconomic pressures. The complete financial analysis and strategic assessment can be accessed through Stonegate Capital Partners' research portal at https://www.stonegateinc.com/research.
For investors and industry observers, these results highlight the complex balancing act facing consumer discretionary companies in the current economic environment. While short-term financial metrics may appear challenging due to restructuring charges and divestiture impacts, the underlying improvements in gross margins and core brand performance suggest potential for long-term value creation. The company's ability to execute its strategic vision while managing macroeconomic headwinds will likely determine its trajectory in coming quarters, with the Margaritaville launch representing a key milestone in this ongoing transformation.
