Hooker Furniture Reports Q2 Loss Amid Market Challenges, Maintains Cost Reduction Focus

Stonegate Capital Partners has updated its coverage on Hooker Furniture Corporation (NASDAQ: HOFT) following the company's second quarter fiscal 2026 results. HOFT reported revenue of $82.1 million, operating income of ($4.4) million, and adjusted EPS of ($0.31), falling below both Stonegate and consensus estimates. The 13.6% year-over-year revenue decline was primarily driven by a 44.5% decrease at HMI due to weak demand, tariff-related buying hesitancy, and the impact of a major customer bankruptcy.

Despite the challenging environment, Hooker Branded net sales grew 1.3% year-over-year while Domestic Upholstery remained flat, demonstrating resilience in the company's Legacy brands. Consolidated gross margin of 20.5% showed sequential stability, supported by cost savings and improved labor efficiency, though mix headwinds and restructuring costs continued to pressure overall profitability. Management reaffirmed its focus on navigating macroeconomic challenges including housing market weakness, high mortgage rates, and subdued consumer demand while positioning the company for a return to profitability.

The company is executing a multi-phase cost reduction program targeting approximately $25 million in annualized fixed-cost savings by fiscal year 2027. Having achieved $3.7 million in expense reductions during the first half of fiscal 2026, HOFT expects additional benefits in the second half, with the new expense structure largely in place by fiscal year-end. Key initiatives include exiting the Savannah warehouse, transitioning inventory to a new Vietnam warehouse, and streamlining operations at Domestic Upholstery to improve labor-to-revenue ratios.

HOFT continues to strengthen its balance sheet and preserve liquidity amid market uncertainty. The company used strong operating cash flows to repay $16.5 million of debt year-to-date, ending the quarter with $821,000 in cash and $57.7 million in borrowing capacity. Inventory 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 facility has significantly shortened lead times from six months to four-to-six weeks, enabling reduced safety stock while maintaining service levels.

The company reported an order backlog of $51.2 million, showing strength in Legacy segments with Hooker Branded backlog increasing to $15.7 million and Domestic Upholstery backlog rising to $19.3 million. July orders accelerated 24% year-over-year at both segments, with order momentum continuing through the Labor Day holiday. Stonegate's valuation analysis using Dividend Discount, DCF, and EV/EBIT models suggests a target price range of $13.54 to $19.32, with HOFT maintaining one of the highest dividend yields in its comparable set.