MARTINSVILLE, Va. – Hooker Furniture Corp. reported a drop in net sales but a rise in net income during its fiscal 2021 third quarter ended Nov. 1.

The company had consolidated net sales of $149.7 million during the quarter, down 5.4% from the $158.17 million reported during the same period in 2019.

Meanwhile, consolidated net income rose 157.5%, to $10.1 million from $3.9 million in the third fiscal quarter of last year. Earnings were 84 cents per diluted share, up from 33 cents last year, a 154.5% gain.

Consolidated operating income totaled $13 million during the quarter, up 161% from the $5 million reported in last year’s third quarter.

“Our third quarter financial performance is encouraging on many fronts, as the business rebound that began in mid-May continues to gain momentum,” said Paul B. Toms Jr., chairman and CEO. “Consolidated incoming orders were up 33.8% during the quarter, and our consolidated backlog is up 87.5%, both compared to a year ago.

“While we had a small consolidated sales dip driven by ongoing disruptions in the supply chain from the COVID-19 pandemic, two of our four segments achieved sales increases compared to the prior year. Sequentially, we grew weekly sales throughout the third quarter and reported a $19 million, or 15% consolidated revenue increase in the third quarter compared to the second quarter.”

Net sales in the Hooker branded segment rose 8.2% to $47.3 million, from $43.7 million, while operating income in the segment rose 24.2% to $7.7 million from $6.2 million last year. Order backlogs were up 159% at the end of the quarter compared to the same period last year.

Domestic upholstery net sales rose 1.3% during the quarter, to $25.35 million from $25 million last year. Operating income totaled $2.4 million in the segment, compared to $2.3 million the same period last year.

Following temporary shutdowns during the pandemic, the company said, domestic production facilities gradually resumed operations during the second quarter. By the end of the third quarter, all three divisions – Bradington-Young, Shenandoah and Sam Moore – were operating at current full capacity.

Incoming upholstery orders rose by more than 30% compared with the prior year period. This led to an order backlog that was 100% higher than the prior year period.

“Both Hooker Casegoods and Hooker Upholstery had steady sales growth, driven by increased overall demand from most residential distribution channels, with incoming orders surging 36% compared to the prior year,” said Jeremy Hoff, president of Hooker Legacy Brands. “We are very pleased that Domestic Upholstery achieved $2.4 million in operating income, or a 9.6% operating margin for the quarter.”

Net sales in the Home Meridian segment that includes Pulaski Furniture, SLF and SLF Hospitality, Accentrics Home and Prime Resources International, were down 14%, to $73.7 million, from $85.8 million in the year earlier period. The company said this was due primarily to lower sales at both Pulaski and Accentrics Home, which were adversely impacted by inventory challenges.

In addition, sales were down in the Samuel Lawrence hospitality division, a result of challenges with the hospitality market, which also has been negatively affected by the pandemic. These decreases, the company said, were partially offset by increased sales to mass merchants and Club customers.

Operating income in the segment however rose to $2.5 million, compared to a loss of nearly $4 million last year.

“Our Q3 revenue decline was primarily the result of on-going disruptions in our third-party factories and supply chain,” said Lee Boone, president of Home Meridian.  “Disrupted supply of raw materials, components, labor and limited availability of shipping containers have all negatively impacted our ability to produce and ship products. Each of these areas are sources of potential cost increases, which we are negotiating with suppliers to minimize.

“Incoming orders remained very strong in Q3, exceeding prior year orders by 36%,” Boone added. “These orders were primarily driven by conventional retailers placing large orders programmed to ship well into next year. As a result of significant customer order programming and factory shipping delays, order backlogs were up 80% over prior year and 53% above the Q2 ending backlog. We are working closely with the factory owners and logistics suppliers to increase production and shipping capacity. We expect Q4 shipments to be significantly challenged by these issues, with steady improvement beginning in the fiscal 2022 first quarter after the Chinese New Year holiday and the Tet New Year holiday in Vietnam.”

Boone noted that the company is making “meaningful progress” developing new designs and marketing plans for the spring 2021 launch of its Scott Brothers licensed collection.

“Retail acceptance has been very enthusiastic for the new ‘Scott Living’ and ‘Drew and Jonathan Home’ brands,” Boone said. “We expect our partnership with Scott Brothers to drive incremental sales and profits across multiple HMI divisions beginning in Q2 of next year.”

Toms added that, while the overall company is still navigating anticipated short-term disruptions in supply  chain due to the pandemic, “we believe furniture will be an advantaged sector of the economy, benefiting from a renewed consumer focus on the home, a strong housing market and less discretionary spending competition from travel, dining out and entertainment. We are adding employees at most locations in order to service the robust demand for our products.”

“Supply chain bottlenecks in an environment of surging demand are the greatest business challenge,” Toms said. “Limitations on supply include scarcity of some raw materials and components, limited availability of shipping containers and ocean vessel space, production delays from some import suppliers and the process of getting our domestic upholstery production ramped back up after the factories were temporarily closed during the economic shutdown earlier this year. In addition, we’ve had to work around some COVID-related employee absences, all while keeping employee safety a top priority.”

Regarding the pandemic-related challenges, Toms added, “We are addressing and working through all the supply chain disruptions and making slow, but steady progress. Our overseas vendors are increasing capacity and production each month, and all three of our domestic upholstery divisions were operating at current full capacity at the end of the third quarter. We are in the process of expanding capacity with additional personnel hires.”

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