Hooker's Q2 2026 Earnings Call Contradictions: Tariffs, Cost Savings, Order Momentum, Election Impact, and Profitability Outlook Clash

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 11, 2025

Financials Results

• Revenue: $82.1M, down 13.6% YOY
• EPS: -$0.31 per share (net loss); prior-year EPS not disclosed

Guidance:

• HMI fixed cost structure aligned by end of fiscal '26 Q3; scalable when demand returns.
• Barring new tariffs, HMI performance expected to be significantly enhanced by year-end.
• On track to reduce fixed costs ~25% vs FY25 by end of Q3; supports profitability at current revenues.
• Targeting ~$25M annualized cost savings beginning FY27.
• Expect ~ $2M additional restructuring charges in 2H FY26, mostly tied to Savannah warehouse closure in 4Q.
• Vietnam warehouse shortens lead times to 4–6 weeks and should lower inventory.
• Margaritaville launch at October market expected to benefit 2H FY27.

Business Commentary:

• Mixed Segment Performance:
• Hooker Branded net sales were up 1.3% year-over-year in the fiscal 2026 second quarter, while Home Meridian net sales were down 44.5%.

• The mixed performance can be attributed to weak demand and tariff-related buying hesitancy affecting Home Meridian, while Hooker Branded's growth reflects cost-reduction efforts and restructuring initiatives.

• Cost-Reduction and Restructuring Efforts:

• Hooker Furnishings is on track to achieve $25 million in annualized cost savings beginning in fiscal 2027, aligning with a multiphase cost-reduction plan.

• These efforts aim to eliminate roughly 25% of fixed costs, focusing on warehousing and distribution expenses as well as selling and administrative expenses.

• Domestic Upholstery Improvement:

• Domestic Upholstery reduced its operating loss by 68% in the second quarter compared to the prior year, despite restructuring costs.

• This improvement is due to operational efficiencies, higher sales, and reduced labor costs, contributing to stronger factory performance metrics.

• Tariff Impacts and Mitigation Strategies:

• The U.S. government announced a 20% tariff on imports from Vietnam, impacting domestic and imported products.

• The company is implementing tariff mitigation strategies including new fabric sourcing for Domestic Upholstery, product remerchandising for Hooker Branded, and near-term mitigation efforts for Home Meridian to balance the value equation.

• Upcoming Margaritaville Launch:

• The upcoming Margaritaville collection launch at the October High Point market is expected to position the company well for the second half of fiscal 2027.
• The new Vietnam fulfillment warehouse has already begun delivering efficiencies, reducing container lead times and creating new opportunities for customers.

Sentiment Analysis:

• Consolidated net sales were $82.1M, down 13.6% YOY; consolidated operating loss widened to $4.4M from $3.1M. HMI sales fell 44.5% amid tariff-related hesitancy and macro pressures. Offsetting this, Hooker Branded reached breakeven vs a $329K loss despite $655K restructuring, and Domestic Upholstery cut operating loss 68% with margin expansion. Management is on track to reduce fixed costs ~25% by end of Q3 and expects HMI performance to be significantly enhanced by year-end.

Q&A:

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): What's driving increased orders/momentum at Hooker Branded and Domestic Upholstery?
  Response: Early retail improvements with strong Labor Day results; momentum is encouraging but uncertain.

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): Was the Labor Day strength broad-based or regional?
  Response: Strength appeared consistent across regions based on broad customer feedback.

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): What’s needed to get HMI back to profitability—any revenue threshold?
  Response: Near-term profitability hinges on cost reductions; ~25% spending cut by end of Q3, largely from HMI overhead, then focus on growth.

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): How did the $2M restructuring charges split between COGS and SG&A?
  Response: Roughly two-thirds in COGS and one-third in SG&A; same mix for the 6-month period.

• Question from David Storms (Stonegate Capital Partners, Inc., Research Division): Update on Margaritaville launch logistics and early interest?
  Response: Large SKU set and major showroom presence; 18-month development; strong early partner interest and brand pull.

• Question from David Storms (Stonegate Capital Partners, Inc., Research Division): Timing/status of SKU-by-SKU price adjustments for the 20% Vietnam tariff?
  Response: Pricing work is complete; executed detailed SKU-by-SKU remerchandising prioritizing accuracy over speed.

• Question from David Storms (Stonegate Capital Partners, Inc., Research Division): Any pushback on price increases?
  Response: Minimal; backlog honored, and domestic warehouse shipments help faster price realization.

• Question from David Storms (Stonegate Capital Partners, Inc., Research Division): Will the additional ~$2M charges in 2H be concentrated in 4Q with the Savannah warehouse exit?
  Response: Yes; most charges will be related to that warehouse closure.