Hooker Furniture Corporation reported second-quarter fiscal 2026 revenue of $82.1 million, representing a 13.6% year-over-year decline, with operating income of negative $4.4 million and adjusted earnings per share of negative $0.31. The results fell below both Stonegate Capital Partners' estimates of $93.7 million revenue and negative $0.8 million operating income, as well as consensus expectations of $91.2 million revenue and negative $1.5 million operating income.
The revenue shortfall was primarily driven by a 44.5% year-over-year decline at HMI, attributed to weak consumer demand, tariff-related purchasing hesitancy, and the impact of a major customer bankruptcy. In contrast, Hooker Branded net sales grew 1.3% year-over-year while Domestic Upholstery remained flat, demonstrating continued resilience in the company's legacy brands. Despite soft sales performance, consolidated gross margin of 20.5% showed sequential stability, supported by cost savings initiatives and improved labor efficiency.
Hooker Furniture is executing a multi-phase cost reduction program targeting approximately $25 million in annualized fixed-cost savings by fiscal year 2027. The company achieved $3.7 million in expense reductions during the first half of fiscal 2026, with additional benefits expected in the second half. Key initiatives include exiting the Savannah warehouse facility, transitioning inventory to a new Vietnam warehouse, and streamlining operations at Domestic Upholstery to improve labor-to-revenue ratios. Management emphasized that these cost-saving measures are designed to preserve growth investments, including the Margaritaville launch and the Collected Living merchandising platform.
The company maintained strong balance sheet discipline, using operating cash flows to repay $16.5 million of debt year-to-date. Hooker Furniture ended the quarter with $821,000 in cash and $57.7 million in borrowing capacity, net of standby letters of credit. Inventory levels declined to $58.5 million from $70.8 million at year-end, reflecting improved throughput, tighter demand alignment, and initial benefits from the Vietnam warehouse transition. The new Vietnam facility has significantly shortened lead times from six months to four-to-six weeks, enabling reduced safety stock requirements while maintaining service levels.
Order backlog stood at $51.2 million, showing slight improvement in legacy segments with Hooker Branded backlog increasing to $15.7 million from $13.1 million at fiscal 2025 year-end and Domestic Upholstery backlog rising to $19.3 million from $18.1 million. Both segments demonstrated quarterly order growth of approximately 11% and 2% respectively, with July orders accelerating 24% year-over-year. The improved throughput capabilities from the Vietnam warehouse and Savannah facility exit are expected to provide Hooker Furniture with a competitive lead time advantage once market demand normalizes.
Management reaffirmed its focus on navigating macroeconomic challenges including housing market weakness, elevated mortgage rates, and subdued consumer demand while positioning the company for a return to profitability. The company's valuation analysis, utilizing dividend discount, discounted cash flow, and enterprise value to earnings before interest and taxes methodologies, indicates potential valuation ranges between $13.54 and $19.32 per share, with Hooker Furniture maintaining one of the highest dividend yields among its peer group.
