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What changed in HOOKER FURNISHINGS Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HOOKER FURNISHINGS Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+244 added−262 removedSource: 10-K (2024-04-12) vs 10-K (2023-04-14)

Top changes in HOOKER FURNISHINGS Corp's 2024 10-K

244 paragraphs added · 262 removed · 159 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

37 edited+16 added−15 removed28 unchanged
Biggest changeDue to low profitability, management decided to exit this channel at the end of fiscal 2023. ■ The Domestic Upholstery segment which includes the following operations: □ Bradington-Young, a seating specialist in upscale motion and stationary leather furniture; □ HF Custom (formerly Sam Moore Furniture), a specialist in fashion forward custom upholstery offering a selection of chairs , sofas, sectionals, recliners and a variety of accent upholstery pieces; □ Shenandoah Furniture, an upscale upholstered furniture business specializing in private label sectionals, modulars, sofas, chairs, ottomans, benches, beds and dining chairs in the upper-medium price points for lifestyle specialty retailers; and □ Sunset West, a designer and manufacturer of comfortable, stylish and high-quality outdoor furniture. 7 Table of Contents ■ All Other consisting of: □ The H Contract product line which supplies upholstered seating and casegoods to upscale senior living and assisted living facilities through designers, design firms, industry dealers and distributors that service that market; and □ Lifestyle Brands, a business started in fiscal 2019 targeted at the interior designer channel.
Biggest changeHooker Furnishings Corporation consists of the following three operating segments and “All Other”: ■ The Hooker Branded segment which includes two businesses: □ Hooker Casegoods, which covers a wide range of design categories and includes home entertainment, home office, accent, dining and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand; and □ Hooker Upholstery, imported upholstered furniture targeted at the upper-medium price-range. ■ The Home Meridian segment which includes the following brands/marketing units: □ Pulaski Furniture, casegoods covering the complete design spectrum in a wide range of bedroom, dining room, accent and display cabinets at medium price points; □ Samuel Lawrence Furniture, value-conscious offerings in bedroom, dining room, home office and youth furnishings; □ Prime Resources International, value-conscious imported leather motion upholstery; and □ Samuel Lawrence Hospitality, a designer and supplier of hotel furnishings targeted toward four and five-star hotels. ■ The Domestic Upholstery segment which includes the following operations: □ Bradington-Young, a seating specialist in upscale motion and stationary leather furniture; □ HF Custom (formerly Sam Moore Furniture), a specialist in fashion forward custom upholstery offering a selection of chairs, sofas, sectionals, recliners and a variety of accent upholstery pieces; □ Shenandoah Furniture, an upscale upholstered furniture business specializing in private label sectionals, modulars, sofas, chairs, ottomans, benches, beds and dining chairs in the upper-medium price points for lifestyle specialty retailers; and □ Sunset West, a designer and manufacturer of comfortable, stylish and high-quality outdoor furniture. ■ All Other consisting of: □ The H Contract product line which supplies upholstered seating and casegoods to upscale senior living and assisted living facilities through designers, design firms, industry dealers and distributors that service that market; □ BOBO Intriguing Objects, a lighting, accessories and home décor source acquired in fiscal 2024 that offers a variety of one-of-a-kind designs; and □ Lifestyle Brands, a business started in fiscal 2019 targeted at the interior designer channel. 7 Table of Contents Sourcing Imported Products We have sourced products from foreign manufacturers for over thirty years, predominantly from Asia.
We are actively working to refine and align our environmental stewardship based on current best practices, shareholder expectations and regulatory developments through our ESG-focused committee called CARE (Community Action & Responsibility for our Environment). It regularly updates management and updates the Board at least quarterly on these initiatives.
We are actively working to refine and align our environmental stewardship based on current best practices, shareholder expectations and regulatory developments through our ESG-focused employee committee called CARE (Community Action & Responsibility for our Environment). It regularly updates management and updates the Board at least quarterly on these initiatives.
However, a disruption in our supply chain from a major supplier or from Vietnam or China in general, could significantly compromise our ability to fill customer orders for products manufactured at that factory or in that country. Supply disruptions and delays on selected items could occur for six months or longer.
However, a disruption in our supply chain from a major supplier or from Vietnam in general, could significantly compromise our ability to fill customer orders for products manufactured at that factory or in that country. Supply disruptions and delays on selected items could occur for six months or longer.
For example, due to the Russian invasion of Ukraine, there is a shortage of Russian Birch which was the third largest source of US hardwood plywood imports in calendar 2021. Prior to the invasion, a large portion of the plywood used at one division of our Domestic Upholstery segment was Russian Birch.
For example, due to the Russian invasion of Ukraine, there was a shortage of Russian Birch which was the third largest source of US hardwood plywood imports in calendar 2021. Prior to the invasion, a large portion of the plywood used at one division of our Domestic Upholstery segment was Russian Birch.
Due to low profitability, low rates of sales and a general slowing of furniture sales in the e-commerce space, we decided to exit this division and recorded $24.4 million write-downs of ACH inventories and other excess inventories during the fourth quarter of fiscal 2023.
Due to low profitability, low rates of sales and a general slowing of furniture sales in the e-commerce space, we decided to exit this division and recorded $24 million write-downs of ACH inventories and other excess inventories during the fourth quarter of fiscal 2023.
If we were to be unsuccessful in obtaining those products from other sources or at a comparable cost, a disruption in our supply chain from a major furniture supplier, or from Vietnam or China in general, could decrease our sales, earnings and liquidity.
If we were to be unsuccessful in obtaining those products from other sources or at a comparable cost, a disruption in our supply chain from a major furniture supplier, or from Vietnam in general, could decrease our sales, earnings and liquidity.
U.S. imports of furniture produced overseas, such as from Vietnam and China, have stabilized in recent years. The primary competitive factors for home furnishings in our price points include price, style, availability, service, quality and durability.
U.S. imports of furniture produced overseas, such as from Vietnam, have stabilized in recent years. The primary competitive factors for home furnishings in our price points include price, style, availability, service, quality and durability.
Reportable Segments Furniture sales account for all of our net sales. For financial reporting purposes and as described further below, we are organized into three reportable segments, Hooker Branded, Home Meridian and Domestic Upholstery. Our other businesses are aggregated into “All Other”. See Note 18 -Segment Information to our Consolidated Financial Statements for additional financial information regarding our operating segments.
Reportable Segments Furnishings sales account for all of our net sales. For financial reporting purposes and as described further below, we are organized into three reportable segments, Hooker Branded, Home Meridian and Domestic Upholstery. Our other businesses are aggregated into “All Other”. See Note 18 -Segment Information to our Consolidated Financial Statements for additional financial information regarding our operating segments.
No single customer accounted for more than 6% of our consolidated sales in fiscal 2023. Our top five customers accounted for approximately 22% of our fiscal 2023 consolidated sales. The loss of any one or more of these customers would have a material adverse impact on our business.
No single customer accounted for more than 6% of our consolidated sales in fiscal 2024. Our top five customers accounted for approximately 22% of our fiscal 2024 consolidated sales. The loss of any one or more of these customers would have a material adverse impact on our business.
We were able to find an alternative plywood source at a higher price during fiscal 2023 and this issue was mitigated as of early calendar 2023. Customers Our home furnishings products are sold through a variety of retailers including independent furniture stores, department stores, mass merchants, national chains, catalog merchants, interior designers, and e-commerce retailers.
We were able to find an alternative plywood source at a higher price during fiscal 2023 and this issue was mitigated as of early calendar 2023. 8 Table of Contents Customers Our home furnishings products are sold through a variety of retailers including independent furniture stores, department stores, mass merchants, national chains, catalog merchants, interior designers, and e-commerce retailers.
Less than 2% of our sales in fiscal 2023 were to international customers. We define sales to international customers as sales to customers outside of the United States and Canada since our independent domestic sales force services both countries.
Less than 2% of our sales in fiscal 2024 were to international customers. We define sales to international customers as sales to customers outside of the United States and Canada since our independent domestic sales force services both countries.
Products Our product lines cover the design spectrum of residential furniture: traditional, contemporary and transitional. Further, our product lines are in the “good”, “better” and “best” product categories, which carry medium and upper price points.
Products Our product lines cover the design spectrum of residential furnishings: traditional, contemporary and transitional. Further, our product lines are in the “good”, “better” and “best” product categories, which carry medium and upper price points.
Our five largest domestic upholstery suppliers accounted for 33% of our raw materials purchases for domestic upholstered furniture manufacturing operations in fiscal 2023. Should disruptions with these suppliers occur, other than macro disruptions affecting all such suppliers, we believe we could successfully source these products from other suppliers without significant disruption to our operations.
Our five largest domestic upholstery suppliers accounted for 35% of our raw materials purchases for domestic upholstered furniture manufacturing operations in fiscal 2024. Should disruptions with these suppliers occur, other than macro disruptions affecting all such suppliers, we believe we could successfully source these products from other suppliers without significant disruption to our operations.
ITEM 1. BUSINESS Hooker Furnishings Corporation, incorporated in Virginia in 1924, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture, fabric-upholstered furniture and outdoor furniture for the residential, hospitality and contract markets. We also domestically manufacture premium residential custom leather, custom fabric-upholstered furniture and outdoor furniture.
ITEM 1. BUSINESS Hooker Furnishings Corporation, incorporated in Virginia in 1924, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture, fabric-upholstered furniture, lighting, accessories, and home decor for the residential, hospitality and contract markets. We also domestically manufacture premium residential custom leather, custom fabric-upholstered furniture and outdoor furniture.
A free copy of our annual report on Form 10-K may also be obtained by contacting Earl Armstrong, Corporate Controller and Secretary at earmstrong@hookerfurnishings.com or by calling 276-632-2133.
A free copy of our annual report on Form 10-K may also be obtained by contacting Earl Armstrong, Senior Vice-President Finance and Corporate Secretary at CorpSec@hookerfurnishings.com or by calling 276-632-2133.
We believe these trade names are well-recognized and associated with quality and service in the furnishings industry. We also own a number of patents and trademarks, both domestically and internationally, none of which is considered to be material.
We believe these trade names, in addition to the recently obtained “M” brand, HF Custom and BOBO, are well-recognized and associated with quality and service in the furnishings industry. We also own a number of patents and trademarks, both domestically and internationally, none of which is considered to be material.
Our leadership team is committed to fostering an environment where everyone is welcomed, respected, listened to and valued for their unique contributions to the organization, and to providing a work environment that is free from all forms of harassment, discrimination and inequality.
The core values of our Company include integrity, caring and inclusivity that affirms every individual. Our leadership team is committed to fostering an environment where everyone is welcomed, respected, listened to and valued for their unique contributions to the organization, and to providing a work environment that is free from all forms of harassment, discrimination and inequality.
Additional Information You may visit us online at hookerfurnishings.com, hookerfurniture.com, bradington-young.com, sammoore.com, homemeridian.com, pulaskifurniture.com, slh-co.com, hcontractfurniture.com and sunsetwestusa.com.
Additional Information You may visit us online at hookerfurnishings.com, hookerfurniture.com, bradington-young.com, hfcustomfurniture.com, shenandoahfurniture.com, mfurnishings.com, sunsetwestusa.com, homemeridian.com, pulaskifurniture.com, slf-co.com, slh-co.com, hcontractfurniture.com, and bobointriguingobjects.com.
However, Home Meridian’s warehoused inventory increased significantly during fiscal 2023 due primarily to increased inventory in the ACH division, which is focused on the e-commerce channel.
Inventory availability began to improve in mid-to-late fiscal 2023, finally stabilizing in fiscal 2024. Home Meridian’s warehoused inventory increased significantly during fiscal 2023 due primarily to increased inventory in the ACH division, which is focused on the e-commerce channel.
Because of the large number and diverse nature of the foreign suppliers from which we source our imported products, we have flexibility in the sourcing of products among any particular supplier or country.
These laws, policies and actions may include regulations affecting trade or the application of tariffs. Because of the large number and diverse nature of the foreign suppliers from which we source our imported products, we have flexibility in the sourcing of products among any particular supplier or country.
Due to our exit from the ACH business unit which demanded significant amounts of inventory to meet the quick shipping requirements of its e-commerce model, we anticipate a reduction in the physical footprint of the Georgia warehouse over the course of fiscal 2024.
Due to our exit from the Accentrics Home (“ACH”) business unit which demanded significant amounts of inventory to meet the quick shipping requirements of its e-commerce model, we reduced the physical footprint of the Georgia warehouse by 400,000 square feet over the course of fiscal 2024.
Accounts receivable: Substantially all of our trade accounts receivable are due from retailers and dealers that sell residential home furnishings or commercial purchasers of our hospitality and senior living products, which consist of a large number of entities with a broad geographic dispersion. We perform credit evaluations of our customers and generally do not require collateral.
During fiscal 2024, we liquidated substantially all of these inventories. 9 Table of Contents Accounts receivable Substantially all of our trade accounts receivable are due from retailers and dealers that sell residential home furnishings or commercial purchasers of our hospitality and senior living products, which consist of a large number of entities with a broad geographic dispersion.
For our outdoor furnishings, most orders require a 50% deposit upon order and the balance when production is started. Accounts payable: Payment for our imported products warehoused first in Asia is due 10 to 14 days after our quality audit inspections are complete and the vendor invoice is presented.
Accounts payable Payment for our imported products warehoused first in Asia is due 10 to 14 days after our quality audit inspections are complete and the vendor invoice is presented.
Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar compared to the currencies from which we obtain our imported products could increase the price we pay for imported products beyond the negotiated periods.
Dollars, a relative decline in the value of the U.S. Dollar compared to the currencies from which we obtain our imported products could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effects of any price increases from suppliers in the prices we charge for imported products.
Order Backlog At January 29, 2023, our backlog of unshipped orders was as follows: Order Backlog (Dollars in 000s) January 29, 2023 January 30, 2022 Reporting Segment Dollars Weeks Dollars Weeks Hooker Branded $ 19,276 5.0 $ 68,925 17.9 Home Meridian 43,052 10.3 167,968 31.3 Domestic Upholstery 28,404 9.4 67,068 32.6 All Other 4,654 23.2 6,148 44.5 Consolidated $ 95,386 8.5 $ 310,109 27.2 In the discussion below and herein, we reference changes in sales orders or “orders” and sales order backlog (unshipped orders at a point in time) or “backlog” over and compared to certain periods of time and changes discussed are in sales dollars and not units of inventory, unless stated otherwise.
Order Backlog At January 28, 2024, our backlog of unshipped orders was as follows: Order Backlog (Dollars in 000s) January 28, 2024 January 29, 2023 Reporting Segment Dollars Weeks Dollars Weeks Hooker Branded $ 15,416 5.1 $ 20,567 5.2 Home Meridian 36,013 13.0 43,052 10.3 Domestic Upholstery 18,920 7.8 29,696 9.9 All Other 1,475 12.2 2,071 26.2 Consolidated $ 71,824 8.6 $ 95,386 8.5 In the discussion below and herein, we reference changes in sales orders or “orders” and sales order backlog (unshipped orders at a point in time) or “backlog” over and compared to certain periods of time and changes discussed are in sales dollars and not units of inventory, unless stated otherwise.
None of our employees are represented by a labor union. We consider our relations with our employees to be good. We are committed to creating a diverse, equitable and inclusive space for all our employees, customers and retail partners. The core values of our Company include integrity, caring and inclusivity that affirms every individual.
By geographical area, 1,030 employees were located in the United States and 173 were located in Asia. None of our employees are represented by a labor union. We consider our relations with our employees to be good. We are committed to creating a diverse, equitable and inclusive space for all our employees, customers and retail partners.
For qualified customers, we offer payment terms, generally requiring payment 30 days from shipment. However, we may offer extended payment terms in certain circumstances, including to promote sales of our product. We purchase accounts receivable insurance on certain customers if their risk profile warrants it and the insurance is available.
We perform credit evaluations of our customers and generally do not require collateral. For qualified customers, we offer payment terms, generally requiring payment 30 days from shipment. However, we may offer extended payment terms in certain circumstances, including to promote sales of our product.
We generally expect to reflect substantially all of the effects of any price increases from suppliers in the prices we charge for imported products. However, these price changes could adversely impact sales volume and profit margin during the affected periods. Conversely, a relative increase in the value of the U.S.
However, these price changes could adversely impact sales volume and profit margin during the affected periods. Conversely, a relative increase in the value of the U.S. Dollar compared to the currencies from which we obtain our imported products could decrease the cost of imported products and favorably impact net sales and profit margins during the affected period.
They are discussed in greater detail below and in Item 7 and are essential to understanding our prospects. In the prior fiscal year, orders were not being converted to shipments as quickly as would be expected compared to the pre-pandemic environment due to the lack and cost of shipping containers and vessel space as well as limited overseas vendor capacity.
Orders were not being converted to shipments as quickly as would be expected compared to the pre-pandemic environment due to the lack and cost of shipping containers and vessel space as well as limited overseas vendor capacity. As a result, backlogs were significantly elevated and reached historical levels at the end of fiscal 2021 and 2022.
Due to the global supply chain crisis and inflation pressure in Asia and the U.S., we were forced to re-negotiate prices multiple times during fiscal 2023 and 2022. We accept the exposure to exchange rate movements during these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future.
We largely did not have to re-negotiate prices during fiscal 2024 as these pressures stabilized. We accept the exposure to exchange rate movements during these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. Since we transact our imported product purchases in U.S.
Sourcing Imported Products We have sourced products from foreign manufacturers for over thirty years, predominantly from Asia. Imported casegoods and upholstered furniture together accounted for approximately 72% of our net sales in fiscal 2023, 82% of our net sales in fiscal 2022 and 83% of our net sales in fiscal 2021.
Imported casegoods and upholstered furniture together accounted for approximately 70% of our net sales in fiscal 2024, 72% of our net sales in fiscal 2023, and 82% of our net sales in fiscal 2022.
Therefore, lower exchange rates may only have a tempering effect on future price increases by merely delaying cost increases on imported products. See also Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” 8 Table of Contents Raw Materials Significant materials used in manufacturing our domestic upholstered furniture products include leather, fabric, foam, wooden and metal frames and electronic mechanisms.
“Quantitative and Qualitative Disclosures About Market Risk.” Raw Materials Significant materials used in manufacturing our domestic upholstered furniture products include leather, fabric, foam, wooden and metal frames and electronic mechanisms.
See Item 1A, “Risk Factors” for additional information on our risks related to imported products. For imported products, we generally negotiate firm pricing with foreign suppliers in U.S. Dollars, typically for a term of at least one year. However, under certain circumstances, we may re-negotiate pricing during the year.
However, our insight into the probability of a wide scale global or regional disruption or pandemic, like the recent COVID-19 pandemic, remains limited. See Item 1A, “Risk Factors” for additional information on our risks related to imported products. For imported products, we generally negotiate firm pricing with foreign suppliers in U.S.
These conditions improved throughout fiscal 2023, and inventory levels are now higher than usual, with plans to work them down over the course of the fiscal 2024 first half. 9 Table of Contents A large percentage of products sold at our Home Meridian segment are not warehoused by us but ship directly to our customers and thus are not included in our inventory.
The majority of products in the Hooker Branded segment are shipped from our U.S. warehouses, while a large percentage of products sold at our Home Meridian segment are not warehoused by us but ship directly to our customers and thus are not included in our inventory.
The decrease was largely attributable to more normalized levels of shipping, especially in the Hooker legacy divisions, lower incoming orders in the Home Meridian segment, and to a lesser degree at Hooker Branded and Domestic Upholstery segments, driven by a decrease in overall demand when compared to the prior year’s surge in demand after the initial COVID crisis, absence of Clubs channel orders and decreased orders from retailer customers with high inventory levels delaying shipments.
At the end of fiscal 2024, order backlog decreased by $23.6 million or 25%, as compared to the prior year end. The decrease was largely attributable to normalized levels of shipping, soft incoming orders driven by a decrease in overall demand, and absence of ACH orders and backlog in the Home Meridian segment.
Given the sourcing capacity available in Vietnam, China and other low-cost producing countries, we currently believe the risks from these potential supply disruptions are manageable in the long-term; however, we have limited insight into the extent to which our business could be further impacted by COVID-19 or other possible pandemics, and there are many unknowns including, how long we will be impacted, the severity of the impacts and the probability of a recurrence of COVID-19 or similar regional or global pandemics.
Given the sourcing capacity available in Vietnam and other low-cost producing countries such as Mexico, Malaysia, and India, as well as our supply chain diversification efforts, we believe the risks from these potential supply disruptions are manageable in the long-term.
In addition, we offer affordable and competitive benefits to support the well-being of all employees including health insurance, disability and life insurance, worker’s compensation, wellness credits, paid time off, a 401(k) savings plan with company-match, an employee assistance program, and training and educational opportunities for all employees, including educational stipends or renewable college scholarships to children and spouses of all employees, excluding family members of current and former officers and board directors of the Company. 12 Table of Contents Patents and Trademarks The Hooker Furnishings, Hooker Furniture, Bradington-Young, Sam Moore, Pulaski Furniture, Samuel Lawrence Furniture, Samuel Lawrence Hospitality, Room Gear, Right2Home, Home Meridian International, Prime Resources International, Accentrics Home, HMidea, Shenandoah, H Contract, Homeware, MARQ and Sunset West trade names represent many years of continued business.
The Company has also started periodic audits of its international vendors to ensure compliance and produce a scorecard that can be used in future purchasing decisions based upon their performance. 12 Table of Contents Patents and Trademarks The Hooker Furnishings, Hooker Furniture, Bradington-Young, Sam Moore, Pulaski Furniture, Samuel Lawrence Furniture, Samuel Lawrence Hospitality, Room Gear, Home Meridian International, Prime Resources International, Accentrics Home, Shenandoah, H Contract, Homeware, and Sunset West trade names represent many years of continued business.
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We believe that consumer tastes and channels in which they shop for furniture are evolving at a rapid pace, and we continue to change to meet these demands.
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Dollars, typically for a term of at least one year. However, under certain circumstances, we may re-negotiate pricing during the year. Due to the global supply chain crisis and inflation pressure in Asia and the U.S., we were forced to re-negotiate prices multiple times during fiscal 2022 and 2023.
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On January 31, 2022, the first day of our 2023 fiscal year, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Sunset HWM, LLC (“Sunset West”) and its three members (the “Sunset West Members”) to acquire substantially all of the assets of Sunset West (the “Sunset Acquisition”).
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However, due to other factors, such as inflationary pressure, we may not fully realize savings when exchange rates fall. Therefore, lower exchange rates may only have a tempering effect on future price increases by merely delaying cost increases on imported products. See also Item 7A.
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Sunset West is a leading West Coast-based manufacturer of outdoor furniture with its headquarters in Vista, California. The acquisition enables us to immediately gain market share in the growing outdoor furniture segment of the industry. For more information regarding the Sunset Acquisition, please see Item 7 and Note 4 to our Consolidated Financial Statements on page F-15.
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We purchase accounts receivable insurance on certain customers if their risk profile warrants it and the insurance is available.
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Hooker Furnishings Corporation consists of the following three operating segments and “All Other”: ■ The Hooker Branded segment which includes two businesses: □ Hooker Casegoods, which covers a wide range of design categories and includes home entertainment, home office, accent, dining and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand; and □ Hooker Upholstery, imported upholstered furniture targeted at the upper-medium price-range. ■ The Home Meridian segment which includes the following brands/marketing units: □ Pulaski Furniture, casegoods covering the complete design spectrum in a wide range of bedroom, dining room, accent and display cabinets at medium price points; □ Samuel Lawrence Furniture, value-conscious offerings in bedroom, dining room, home office and youth furnishings; □ Prime Resources International, value-conscious imported leather motion upholstery; □ Samuel Lawrence Hospitality, a designer and supplier of hotel furnishings targeted toward four and five-star hotels; and □ Accentrics Home (“ACH”), home furnishings centered around an eclectic mix of unique pieces and materials that focused on e-commerce customers.
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For our outdoor furnishings, smaller orders require full prepayment and most larger orders require a 50% deposit upon order and the balance when production is started. Additionally, some customers request and qualify for payment terms.
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These laws, policies and actions may include regulations affecting trade or the application of tariffs, much like the 25% tariff on certain goods imported into the United States from China, including almost all furniture and furniture components manufactured in China since fiscal 2019.
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We note the following recent and ongoing activities and new developments: ■ We have put in place several initiatives focused on promoting sustainability and preserving natural resources. We have completed a corporate-wide inventory of 2022 to 2023 Greenhouse Gas Emissions (GHG). Third-party verification of GHG data is in process and on target to be completed in calendar 2024.
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In response to these tariffs, we began re-sourcing products from non-tariff countries, primarily Vietnam and reduced our Chinese imports to less than 10% of total imports by the end of fiscal 2023. Additionally, we are beginning to further diversify our sourcing footprint to include other countries, including Malaysia, Mexico and India.
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We are in the process of establishing a functional baseline to be able to measure whether future improvement initiatives reduce our carbon footprint. Going forward, each material facility will have its carbon footprint measured annually. ■ Since 2021, we have started projects to reduce our carbon footprint by investment in renewable energy and in projects to reduce energy consumption.
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For example, in calendar 2021, the COVID-19 related lockdown at our suppliers in Vietnam and Malaysia, along with constrained container and steamship availability as well as congestion at U.S. ports, negatively impacted our shipments and inventory levels in early calendar 2022.
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We have purchased renewable energy from solar farms for several domestic manufacturing facilities since 2022. Sunset West is operating on 100% renewable resources; HF Custom (formerly Sam Moore) is operating on 50% renewable energy with a plan expected to achieve 100% in calendar 2024; and the Savannah distribution center is operating on 30% renewable energy.
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Dollar compared to the currencies from which we obtain our imported products could decrease the cost of imported products and favorably impact net sales and profit margins during the affected period. However, due to other factors, such as inflationary pressure in China and other countries, we may not fully realize savings when exchange rates fall.
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All remaining facilities are expected to participate in renewable energy programs by the end of calendar 2024. The multi-year project of switching to LED lighting in the manufacturing facilities and distribution centers resulted in an electrical usage reduction of 20% to 30% in the year 2021 and 2022.
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We expect the exit of the ACH business and the inventory write down will lead to improvements in working capital, inventory turns and obsolescence reserves.
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We are recognized as Appalachian Power 2023 Top Performer for energy efficiency in the Martinsville area.
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As a result, backlogs were significantly elevated and reached historical levels. At the end of fiscal 2023, order backlog decreased by $214.7 million or 69%, as compared to the prior year end.
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The project is expected to be completed by 2025. ■ We continue to partner with the Arbor Day Foundation, the Sustainable Furnishings Council, and the Eco Ambassador Council for their commitment to environmental responsibility and sustainability, including financial assistance, educating employees on the necessity of preserving and replenishing resources, and supporting various projects within the Dan River Basin area. 11 Table of Contents Human Capital Resources As of January 28, 2024, we had 1,203 full-time employees, of which 312 were employed in our Hooker Branded segment, 202 were employed in our Home Meridian segment, 671 were employed in our Domestic Upholstery segment and 18 were employed in All Other.
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We note the following recent and ongoing activities and new developments: ■ we have put in place several initiatives focused on preserving natural resources and reducing our energy usage to lower our carbon footprint through optimizing our facilities including a multi-year project with the goal of switching to LED lighting and cleaner-operating electric forklifts in many locations including our new distribution center in Georgia, which is outfitted with energy-efficient lighting and electric vehicle charging stations; ■ by the end of fiscal 2023, all divisions were EFEC (“Enhancing Furniture’s Environmental Culture”) certified, except for the recently acquired Sunset West division; ■ we use FSC (“Forest Stewardship Council”) compliant paper products and replaced Styrofoam packing with recyclable material for repacking in all distribution centers; ■ we recycle, reuse or repurpose substantially all pallets; repurpose wood chips and sawdust from our Bradington-Young and the Shenandoah’s Valdese and Mount Airy facilities for use in the farming industry; repurpose leather for use in belts and boots, and in all divisions dispose of substantially all eWaste using an Environmental Protection Agency compliant eWaste recycling firm; ■ we provided monetary support by the Company and volunteer hours via employees to the Sustainable Furnishings Council, the Arbor Day Foundation, the Eco-Council of the Dan River basin, and Foothills Conservancy to support various projects including the cultivation of the Mayo River State Park in Henry County, Virginia, which opened for public use in 2022; and 11 Table of Contents ■ reached the following certifications for all wood products used within our Shenandoah production facilities: AHMI (Appalachian Hardwood Manufacturers, Inc.), CPA Certified (Composite Panel Association), ECO-Certified (Sustainable Use of Wood Fiber), FSC (Forest Stewardship Council), Rainforest Alliance Certified, and SFI (Sustainable Forestry Initiative).
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Some of the action steps we have taken recently or are working on currently include: ■ We carefully evaluate the overall compensation and benefits packages regularly to ensure the economic security, health, and safety of our employees, including; o compensating employees competitively relative to the industry and local labor markets, and in accordance with all applicable federal, state, and local wage, work hour, overtime, and benefits laws; and o providing affordable and comprehensive health benefits to employees focused on financial, emotional, and physical health and well-being, including a standardized process of reporting worker’s compensation claims which we believe promotes health and safety of our employees. ■ We maintain standardized safety procedures at all locations and established safety committees that consist of management and employee representatives, with tasks of identifying and reporting hazards and unsafe work practices, removing obstacles to accident prevention, and minimizing the risks of accidents, injury and impacts on health.
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Human Capital Resources As of January 29, 2023, we had 1,259 full-time employees, of which 292 were employed in our Hooker Branded segment, 246 were employed in our Home Meridian segment, 715 were employed in our Domestic Upholstery segment and 6 were employed in All Other. 1,070 employees were located in the United States and 189 were located in Asia.
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We are committed to implementing and improving safety measures to achieve a safe, healthy, secure, and productive workplace; ■ We are committed to employees’ professional success and growth by providing an average of 28 hours of training per employee per year including on-the-job coaching, formal training sessions, and online learning resources.
Removed
The action steps we have taken recently or are working on currently include: ■ a Diversity, Equity, and Inclusion (“DEI”) leadership team with over 15 senior executives representing all divisions of the Company meeting on a regular basis to guide both short- and long-term goals in addition to creating the overall strategic direction of DEI at the Company; ■ an employee-led diversity council AIDE (Advancement of Inclusion, Diversity, and Equity) consisting of a diverse group of employees that meets monthly with the goal of increasing institutional awareness of issues relating to inclusivity and equality for a more diverse and welcoming workplace.
Added
The Company also provides continuing education opportunities, comprehensive leadership development programs, and a renewable tuition reimbursement program to children and spouses of all employees, excluding family members of current and former executive officers and board directors; ■ We are committed to creating a diverse, equitable, and inclusive space for all employees: o we have partnered with Centro Latino, Bedford Adult Education Center, Veteran Centric Organizations, and Historically Black Colleges and Universities (HBCU) Partnerships to improve recruitment and retention of a diverse workforce.
Removed
The AIDE Council initiatives include: o DEI training for managers, new employee on-boarding, and all employees; o monthly recruiting meetings between HR and AIDE liaison to work on attracting and sourcing more diverse candidates, assist in making the interview process welcoming to all, and create metrics to measure organizational progress; o addition of two company-wide floating holidays allowing employees to have time-off for holidays of their choosing; o campaigns to educate employees on diverse holidays and heritage months; and o DEI-focused section added to annual performance review for all employees and the Company’s Corporate Social Responsibility report; ■ has a formal Vendor Code of Conduct that requires vendors to conduct business in a fair and ethical manner; and ■ formalized our Occupational Health and Safety Policy.
Added
In 2023, the Company’s demographic composition of U.S.-based employees included 65% White, 16% Black or African American, 15% Hispanic or Latino, and other racial groups; o in 2023, more than 40% of executive and senior level employees were female, demonstrating the Company's commitment to gender diversity.
Removed
We compensate employees competitively relative to the industry and local labor market, and in accordance with all applicable federal, state and local wage, work hour, overtime and benefit laws.
Added
Earlier in 2023, the Company was selected by Furniture Today, a leading information source of the furniture industry, as one of the advocates for women’s empowerment in the home furnishings industry and presented with the Furniture Today “Empowering Women Award.” ■ We maintain a Code of Business Conduct and Ethics.
Added
All employees are required to sign off on the Code at hiring and reaffirm their understanding and compliance with the Code, as well as anti-corruption and anti-bribery training on an annual basis. In addition, the Company has launched the effort to have domestic suppliers to sign a Vendor Code of Conduct.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+1 added−28 removed45 unchanged
Biggest changeAcquisitions may disrupt or distract management from our ongoing business. We may pay for future acquisitions using cash, stock, the assumption of debt or a combination of these. Future acquisitions could result in dilution to existing shareholders and to earnings per share and decrease the value of our common stock.
Biggest changeWe may also have difficulty assimilating and integrating the operations and personnel of an acquired business into our current operations. Acquisitions or strategic alliances may disrupt or distract management from our ongoing business. We may pay for future acquisitions using cash, stock, the assumption of debt or a combination of these.
Were the COVID-19 or a similar pandemic or another major, unexpected event with negative economic effects occur, we may not be able to collect amounts owed to us or such payment may only occur after significant delay. While we perform credit evaluations of our customers, those evaluations may not prevent uncollectible trade accounts receivable.
Were the economic downturn, COVID-19 or a similar pandemic or another major, unexpected event with negative economic effects occur, we may not be able to collect amounts owed to us or such payment may only occur after significant delay. While we perform credit evaluations of our customers, those evaluations may not prevent uncollectible trade accounts receivable.
A disruption in our supply chain, or from Vietnam or China in general, such as the COVID-19 related lockdown in certain parts of Asia in the Summer of calendar 2021, could significantly impact our ability to fill customer orders for products manufactured in those countries.
A disruption in our supply chain, or from Vietnam in general, such as the COVID-19 related lockdown in certain parts of Asia in the Summer of calendar 2021, could significantly impact our ability to fill customer orders for products manufactured in those countries.
These costs and risks could include, but are not limited to: ● Significant capital and operating expenditures; ● Disruptions to our domestic and international supply chains; 16 Table of Contents ● Inability to fill customer orders accurately and on a timely basis, or at all; ● Inability to process payments to suppliers, vendors and associates accurately and in a timely manner; ● Disruption to our system of internal controls; ● Inability to fulfill our SEC or other governmental reporting requirements in a timely or accurate manner; ● Inability to fulfill international, federal, state or local tax filing requirements in a timely or accurate manner; and ● Increased demands on management and staff time to the detriment of other corporate initiatives.
These costs and risks could include, but are not limited to: ● Significant capital and operating expenditures; ● Disruptions to our domestic and international supply chains; ● Inability to fill customer orders accurately and on a timely basis, or at all; ● Inability to process payments to suppliers, vendors and associates accurately and in a timely manner; ● Disruption to our system of internal controls; ● Inability to fulfill our SEC or other governmental reporting requirements in a timely or accurate manner; ● Inability to fulfill international, federal, state or local tax filing requirements in a timely or accurate manner; and ● Increased demands on management and staff time to the detriment of other corporate initiatives.
Lack of qualified workers and high turnover in a variety of positions caused increased training costs and adversely affected our production schedules and the ability to ship our furniture products. Furthermore, we experienced higher labor costs and ongoing inflationary pressure.
Lack of qualified workers and high turnover in a variety of positions caused increased training costs and adversely affected our production schedules and the ability to ship our furniture products. Furthermore, we experienced higher labor costs and persistent inflationary pressure.
If we purchase too little or the wrong mix of inventory, we may not be able to fill customer orders and may lose market share and weaken or damage customer relationships, which also could adversely affect our sales, earnings, financial condition and liquidity. ■ Increased transportation costs, including freight costs on imported products could decrease earnings and liquidity.
If we purchase too little or the wrong mix of inventory, we may not be able to fill customer orders and may lose market share and weaken or damage customer relationships, which also could adversely affect our sales, earnings, financial condition and liquidity. 14 Table of Contents ■ Increased transportation costs, including freight costs on imported products could decrease earnings and liquidity.
Furniture manufacturing creates large amounts of highly flammable wood dust and utilizes other highly flammable materials such as varnishes and solvents in its manufacturing processes and is therefore subject to the risk of losses arising from explosions and fires. Additionally, our domestic operations could be negatively affected by public health events, such as the COVID-19 pandemic.
Furniture manufacturing creates large amounts of highly flammable wood dust and may utilize other highly flammable materials such as varnishes and solvents in its manufacturing processes and is therefore subject to the risk of losses arising from explosions and fires. Additionally, our domestic operations could be negatively affected by public health events, such as the COVID-19 pandemic.
New tariffs could be imposed on manufactured goods from other countries from which we source, including Vietnam. Inability to reduce product costs, pass through price increases or find other suitable manufacturing sources outside of China may have a material adverse impact on sales volume, earnings and liquidity.
New tariffs could be imposed on manufactured goods from other countries from which we source, including Vietnam. Inability to reduce product costs, pass through price increases or find other suitable manufacturing sources may have a material adverse impact on sales volume, earnings and liquidity.
If we are unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain from our largest import furniture suppliers, or from Vietnam or China in general, could adversely affect our sales, earnings, financial condition and liquidity. 13 Table of Contents ■ Our inability to accurately forecast demand for our imported products could cause us to purchase too much, too little or the wrong mix of inventory.
If we are unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain from our largest import furniture suppliers, or from Vietnam in general, could adversely affect our sales, earnings, financial condition and liquidity. ■ Our inability to accurately forecast demand for our imported products could cause us to purchase too much, too little or the wrong mix of inventory.
Our failure to timely fill customer orders due to an extended business interruption for a major supplier, or due to transportation issues, could negatively impact existing customer relationships and adversely affect our sales, earnings, financial condition and liquidity. ■ Potential future increases in tariffs on manufactured goods imported from China or new tariffs imposed on other countries from which we source, including Vietnam, could adversely affect our business.
Our failure to timely fill customer orders due to an extended business interruption for a major supplier, or due to transportation issues, could negatively impact existing customer relationships and adversely affect our sales, earnings, financial condition and liquidity. ■ Potential future increases in tariffs or new tariffs imposed on other countries from which we source, including Vietnam, could adversely affect our business.
A write-down of our assets would, in turn, reduce our earnings and net worth. See Note 10 to our Consolidated Financial Statements for additional information. Our sales and operating results could be adversely affected by product safety concerns.
A write-down of our assets would, in turn, reduce our earnings and net worth. See Notes 8 and 10 to our Consolidated Financial Statements for additional information. Our sales and operating results could be adversely affected by product safety concerns.
The loss of several large customers through business consolidations or otherwise, the loss of a major customer or significant sales programs with major customers, failures or other reasons, including economic downturn and the adverse economic effects of the COVID-19 pandemic or similar events, could adversely affect our business.
The loss of several large customers through business consolidations or otherwise, the loss of a major customer or significant sales programs with major customers, failures or other reasons, including economic downturn and the adverse economic effects of a future pandemic or similar events, could adversely affect our business.
Our corporate and divisional headquarters, which house our administration, sourcing, sales, finance, merchandising, customer service and logistics functions for our imported and domestic products are located in Virginia, North Carolina and California. Our domestic upholstery manufacturing facilities are located in Virginia, North Carolina and California.
Our corporate and divisional headquarters, which house our administration, sourcing, sales, finance, merchandising, customer service and logistics functions for our imported and domestic products are located in Virginia, North Carolina and California. Additionally, our primary showrooms are located in North Carolina. Our domestic upholstery manufacturing facilities are located in Virginia, North Carolina and California.
International trade regulations and policies of the United States and the countries from which we source finished products could adversely affect us. Imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports affecting our products could increase our costs and decrease our earnings. For example, the U.S.
International trade regulations and policies of the United States and the countries from which we source finished products could adversely affect us. Imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports affecting our products could increase our costs and decrease our earnings. ■ Changes in the value of the U.S.
Competitive and market forces could prohibit or delay future successful price increases for our products in order to offset on a timely basis increased costs of labor, finished goods, raw materials, freight and other product-related costs, which could adversely affect our sales, earnings, financial condition and liquidity. 18 Table of Contents Economic downturns could result in decreased sales, earnings and liquidity.
Competitive and market forces could prohibit or delay future successful price increases for our products in order to offset increased costs of labor, finished goods, raw materials, freight and other product-related costs on a timely basis, which could adversely affect our sales, earnings, financial condition and liquidity.
These price changes could decrease our sales, earnings, financial condition and liquidity during affected periods. ■ Supplier transitions, including cost or quality issues, could result in longer lead times and shipping delays.
These price changes could decrease our sales, earnings, financial condition and liquidity during the affected periods. 15 Table of Contents ■ Supplier transitions, including cost or quality issues, could result in longer lead times and shipping delays.
As a result, we are continually subject to the risk of losing market share to these non-U.S. furnishings sources, which could adversely affect our sales, earnings, financial condition and liquidity. Failure to anticipate or timely respond to changes in fashion and consumer tastes could adversely impact our business.
Over time, this practice may expand to smaller retailers. As a result, we are continually subject to the risk of losing market share to these non-U.S. furnishings sources, which could adversely affect our sales, earnings, financial condition and liquidity. Failure to anticipate or timely respond to changes in fashion and consumer tastes could adversely impact our business.
Transportation costs on our imported products are affected by a myriad of factors including the global economy, petroleum prices and ocean freight carrier capacity. In the recent past, especially during fiscal 2022, transportation costs, including ocean freight costs and domestic trucking costs, on imported products represented a significant portion of the cost of those products.
Transportation costs on our imported products are affected by a myriad of factors including the global economy, petroleum prices and ocean freight carrier capacity. In the recent past, especially after the COVID-19 pandemic, transportation costs, including ocean freight costs and domestic trucking costs, on imported products represented a significant portion of the cost of those products.
As discussed above, during fiscal 2020 and fiscal 2021 we transitioned a significant portion of our imported product purchases from China to Vietnam due to the imposition of tariffs on most furniture and component parts imported from China. As conditions dictate, we could be forced to make similar transitions in the future.
Additionally, we transitioned a significant portion of our imported product purchases from China to Vietnam due to the imposition of tariffs on most furniture and component parts imported from China. As conditions dictate, we could be forced to make similar transitions in the future.
In addition, the price increases are frequently implemented on future orders instead of existing order backlogs. Considering our lead times of five to six months, the benefits of new pricing could be offset by continued price increases from our suppliers that could impact us before we realize the benefit from our price increases.
In addition, the price increases are frequently implemented on future orders instead of existing order backlogs. Considering our lead times during periods of high demand, the benefits of new pricing could be offset by continued price increases from our suppliers that could impact us before we realize the benefit from our price increases.
A recovery in our sales could lag significantly behind a general recovery in the economy after an economic downturn, due to, among other things, the postponable nature and relatively significant cost of home furnishings purchases or scarcity of transportation and Asian manufacturing capacity during times of increased demand.
A recovery in our sales could lag significantly behind a general recovery in the economy after an economic downturn, due to, among other things, the nature and relatively significant cost of home furnishings purchases resulting in a temporary shift in consumer discretionary spending away from home furnishings, or scarcity of transportation and Asian manufacturing capacity during times of increased demand.
Consequently: ■ A disruption in supply from Vietnam or China or from our most significant suppliers in Asia could adversely affect our ability to timely fill customer orders for these products and decrease our sales, earnings and liquidity.
We rely on offshore sourcing from Vietnam for most of our sales. Consequently: ■ A disruption in supply from Vietnam or from our most significant suppliers in Asia could adversely affect our ability to timely fill customer orders for these products and decrease our sales, earnings and liquidity.
The inability to meet customers’ demands or recover higher costs could adversely affect our sales, earnings, financial condition and liquidity. 15 Table of Contents If demand for our domestically manufactured upholstered furniture declines, we may respond by realigning manufacturing. Our domestic manufacturing operations make only upholstered furniture.
The inability to meet customers’ demands or recover higher costs could adversely affect our sales, earnings, financial condition and liquidity. If demand for our domestically manufactured upholstered furniture declines, we may respond by realigning manufacturing or need to implement cost-saving measures. Our domestic manufacturing operations make only upholstered furniture.
One customer accounted for approximately 6% of our consolidated sales in fiscal 2023, our top five customers accounted for about 22% of our fiscal 2023 consolidated sales. Approximately 20% of our consolidated accounts receivable is concentrated in our top five customers.
One customer accounted for approximately 6% of our consolidated sales in fiscal 2024, and our top five customers accounted for about 22% of our fiscal 2024 consolidated sales. Approximately 16% of our consolidated accounts receivable is concentrated in our top five customers.
If these information systems or technologies are interrupted or fail, or we are unable to adapt our systems or those of third parties as a result of legislative or regulatory actions, our operations and reputation may be adversely affected, we may be subject to legal proceedings, including regulatory investigations and actions, which could diminish investor and customer confidence which could adversely affect our sales, earnings, financial condition and liquidity. 19 Table of Contents Unauthorized disclosure of confidential information provided to us by our customers, employees, or third parties could harm our business.
If these information systems or technologies are interrupted or fail, or we are unable to adapt our systems or those of third parties as a result of legislative or regulatory actions, our operations and reputation may be adversely affected, we may be subject to legal proceedings, including regulatory investigations and actions, which could diminish investor and customer confidence which could adversely affect our sales, earnings, financial condition and liquidity.
Changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability of consumer credit and broader national or geopolitical factors have particularly significant effects on our business. We have seen negative effects on all of these measures due to the COVID-19 pandemic.
Economic downturns could affect consumer spending habits by decreasing the overall demand for home furnishings. Changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability of consumer credit and broader national or geopolitical factors have particularly significant effects on our business. We have seen negative effects on all of these measures due to the COVID-19 pandemic.
Should more customers than we anticipate experience liquidity issues, if payment is not received on a timely basis, or if a customer declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition and liquidity.
Should more customers than we anticipate experience liquidity issues, if payment is not received on a timely basis, or if a customer declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition and liquidity. 17 Table of Contents Labor shortages and rising labor costs could disrupt operations at our domestic warehousing and manufacturing facilities.
In fiscal 2023, imported products sourced from Vietnam and China accounted for 91% of our import purchases and our top five suppliers in Vietnam and China accounted for 50% of our fiscal 2023 import purchases. Our supply chain could be adversely impacted by the uncertainties of health concerns and governmental restrictions.
In fiscal 2024, imported products sourced from Vietnam accounted for 88% of our import purchases and our top five suppliers in Vietnam accounted for 60% of our fiscal 2024 import purchases. Our supply chain could be adversely impacted by the uncertainties of health concerns such as COVID-19 or similar pandemics and governmental restrictions.
We may pursue new business lines in which we have limited or no prior experience or expertise. These pursuits may require substantial investment of capital, personnel and management attention.
Future acquisitions could result in dilution to existing shareholders and to earnings per share and decrease the value of our common stock. We may pursue new business lines in which we have limited or no prior experience or expertise. These pursuits may require substantial investment of capital, personnel and management attention.
The interruption, inadequacy or security failure of our information systems or information technology infrastructure or the internet or inadequate levels of cyber-insurance could adversely impact our business, sales, earnings, financial condition and liquidity.
Accordingly, our results of operations for any quarter are not necessarily indicative of the results of operations to be expected for a full year or the next quarter. 18 Table of Contents The interruption, inadequacy or security failure of our information systems or information technology infrastructure or the internet or inadequate levels of cyber-insurance could adversely impact our business, sales, earnings, financial condition and liquidity.
These risks are not the only ones we face. There may be additional risks that are presently unknown to us or that we currently believe to be immaterial that could affect us. » Risks related to our business and industry We rely on offshore sourcing from Vietnam and China for most of our sales.
These risks are not the only ones we face. There may be additional risks that are presently unknown to us or that we currently believe to be immaterial that could affect us. Economic downturns could result in decreased sales, earnings and liquidity.
At January 29, 2023, we had $73.7 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks, trade names and goodwill.
We may experience impairment of our long-lived assets, which would decrease our earnings and net worth. At January 28, 2024, we had $72.8 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks, trade names and goodwill.
The furniture industry is particularly sensitive to cyclical variations in the general economy and to uncertainty regarding future economic prospects, including those caused by pandemics such as COVID-19. Home furnishings are generally considered a postponable purchase by most consumers. Economic downturns could affect consumer spending habits by decreasing the overall demand for home furnishings.
The furniture industry is particularly sensitive to cyclical variations in the general economy and the current macro-economic uncertainties, including the economic downturn caused by pandemics such as COVID-19, persistent inflation and higher interest rates, and slow housing market. Home furnishings are generally considered a postponable purchase by most consumers.
In some cases, we were able to provide substitutions using inventory on hand, in-transit and from our domestic warehouses, but not enough to entirely mitigate the lost sales. Supply disruptions and delays on selected items could occur for six months or longer before the impact of remedial measures would be reflected in our results.
Supply disruptions and delays on selected items could occur for six months or longer before the impact of remedial measures would be reflected in our results.
However, we may fail to identify significant liabilities or risks that could negatively affect us or result in our paying more for the acquired company or assets than they are worth. We may also have difficulty assimilating and integrating the operations and personnel of an acquired business into our current operations.
We may acquire or invest in businesses such as those that offer complementary products or that we believe offer competitive advantages. However, we may fail to identify significant liabilities or risks that could negatively affect us or result in our paying more for the acquired company or assets than they are worth.
The implementation of our Enterprise Resource Planning ( “ ERP ” ) system could disrupt our business. We are in the process of implementing a common ERP system across all divisions.
These events could also impact retailers, who are our primary customers, possibly adversely affecting our sales, earnings, financial condition and liquidity. 13 Table of Contents The implementation of our Enterprise Resource Planning ( “ ERP ” ) system could disrupt our business. We are in the process of implementing a common ERP system across all divisions.
We rely on the internet and other electronic methods to transmit confidential information and we store confidential information on our networks.
Unauthorized disclosure of confidential information provided to us by our customers, employees, or third parties could harm our business. We rely on the internet and other electronic methods to transmit confidential information and we store confidential information on our networks.
Should these issues persist or increase due to the COVID-19 pandemic, similar future pandemics or for other reasons, our sales, earnings, financial condition and liquidity could again be adversely affected.
Should these issues re-occur or increase due to future pandemics or for other reasons, our sales, earnings, financial condition and liquidity could again be adversely affected. We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines.
We may not always accomplish these actions as quickly as anticipated and may not achieve the expected cost savings, which could adversely affect our sales, earnings, financial condition and liquidity. We may experience impairment of our long-lived assets, which would decrease our earnings and net worth.
We may not always accomplish these actions as quickly as anticipated and may not achieve the expected cost savings, which could adversely affect our sales, earnings, financial condition and liquidity. 16 Table of Contents We may not be able to maintain, raise prices, or raise prices in a timely manner in response to inflation and increasing costs.
We may lose market share due to furniture retailers by-passing us and sourcing directly from non-U.S. furnishings sources. Some large furniture retailers are sourcing directly from non-U.S. furniture factories. Over time, this practice may expand to smaller retailers.
New business initiatives may fail outright or fail to produce an adequate return, which could adversely affect our earnings, financial condition and liquidity. We may lose market share due to furniture retailers by-passing us and sourcing directly from non-U.S. furnishings sources. Some large furniture retailers are sourcing directly from non-U.S. furniture factories.
The ERP system went live at Sunset West in the fourth quarter of fiscal 2023, and is expected to go-live in our legacy Hooker divisions in fiscal 2024, with Home Meridian segment following thereafter.
The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions and for consolidated reporting in early September 2023. We expect the ERP system to go live in the Home Meridian segment during fiscal 2026.
Labor shortages and rising labor costs could disrupt operations at our domestic warehousing and manufacturing facilities We observed a strong labor market after the COVID-19 pandemic. We continue to experience difficulties in recruiting skilled labor into our domestic upholstery plants and warehouses and in some skilled or professional positions.
At times, especially during the post COVID-19 demand surge, we have experienced difficulties in recruiting skilled labor into our domestic upholstery plants and warehouses and in some skilled or professional positions.
For example, when the ERP system went live at Sunset West in December 2022, the conversion process significantly impacted its shipping activities and negatively impacted its sales and profitability in the fiscal 2023 fourth quarter due to longer than expected post-implementation stabilization. We expect these issues to be resolved in the first quarter of fiscal 2024.
When the ERP system went live at Sunset West and legacy Hooker divisions, the conversion process significantly impacted shipping activities and negatively impacted sales and profitability in the respective periods, due to longer than expected post-implementation stabilization. The ERP system implementation subjects us to substantial costs and inherent risks associated with migrating from our legacy systems.
We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines. These activities could disrupt our business, divert management attention from our current business, pose integration concerns, dilute our earnings per share, decrease the value of our common stock and decrease our earnings and liquidity.
These activities could disrupt our business, divert management attention from our current business, pose integration concerns or difficulties, dilute our earnings per share, decrease the value of our common stock and decrease our earnings and liquidity. Growth by acquisition is highly dependent upon finding attractive targets and there can be no assurance those targets will be found.
Removed
Department of Commerce imposes tariffs on wooden bedroom furniture coming into the United States from China.
Added
In some cases, we believe we would have sufficient inventory on hand and in-transit or be able to provide substitutions from our domestic warehouses but may not be enough to entirely mitigate the lost sales.
Removed
In this case, none of the rates imposed have been of sufficient magnitude to alter our import strategy in any meaningful way; however, these and other tariffs are subject to review and could be increased or new tariffs implemented in the future. 14 Table of Contents ■ Changes in the value of the U.S.
Removed
As an example, COVID-19 had a material impact on our financial performance in the fiscal 2021 first quarter and on the market valuations, discount rates and other inputs used in our intangibles valuation analysis. We determined that an immediate intangible asset valuation was necessary given our performance and changing market dynamics.
Removed
As a result of the intangible asset valuation analysis, in the fiscal 2021 first quarter, we recorded $44.3 million in non-cash impairment charges to write down goodwill and certain tradenames in the Home Meridian segment and goodwill in the Shenandoah division of its Domestic Upholstery segment.
Removed
In fiscal 2023, we wrote off $12,500 representing the remaining value of the Right2Home trade name in the Home Meridian segment due to the decision to exit the ACH business unit in the fourth quarter of fiscal 2023.
Removed
The ERP system implementation subjects us to substantial costs and inherent risks associated with migrating from our legacy systems.
Removed
Our growth strategy includes growth by acquisition, which is highly dependent upon finding attractive targets and there can be no assurance those targets will be found. We may acquire or invest in businesses such as those that offer complementary products or that we believe offer competitive advantages.
Removed
New business initiatives may fail outright or fail to produce an adequate return, which could adversely affect our earnings, financial condition and liquidity. 17 Table of Contents We may fail to realize all of the anticipated benefits of the Sunset Acquisition.
Removed
We incurred significant debt, acquisition and acquisition-related costs in connection with the Sunset Acquisition, but we may fail to realize all the anticipated benefits of the Sunset Acquisition or they may take longer to realize than expected.
Removed
While we believe the Sunset Acquisition will be accretive to our earnings per share, this expectation is based on preliminary estimates which may materially change.
Removed
Although we do not expect to merge operations or change customer-facing services, the success of this acquisition will depend, in part, on our ability to improve each business by sharing best practices in order to lower costs, improve efficiencies and grow sales.
Removed
We have based our expectations in part on the historical results and trends in Sunset West’s business; however there can be no assurance regarding when or the extent to which we will be able to realize these benefits.
Removed
Achieving the anticipated benefits is subject to a number of uncertainties, including whether the business acquired can be operated in the manner we intend. Events outside of our control could also adversely affect our ability to realize the anticipated benefits from the acquisition.
Removed
Thus, the integration of Sunset West’s business may be unpredictable, subject to delays or changed circumstances, and we can give no assurance that the acquired business will perform in accordance with our expectations, or that our expectations with respect to integration or benefits as a result of the contemplated acquisition will materialize.
Removed
The integration process in on-going and could result in the diversion of management attention to the detriment of other areas, the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies.
Removed
If the integration is not completed as planned, our ongoing business and financial results may be adversely affected, which could adversely affect our sales, earnings, financial condition and liquidity. We may fail to realize the benefits of HMI segment restructuring and cost-savings efforts.
Removed
During the fourth quarter of fiscal 2023, management approved a plan to exit the Accentrics Home (ACH) e-commerce brand of the HMI segment along with repositioning the Prime Resources International (PRI) brand as a direct-container only business model.
Removed
We recorded a $24.4 million charge in the fiscal 2023 fourth quarter to write-down certain segment inventories to market and also recorded severance expenses.
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We expect to reduce the physical footprints at our Savannah, GA warehouse and High Point, NC administrative office over the course of the current 2024 fiscal year with a concurrent reduction in lease, warehouse, and related expenses. We expect these actions will return the HMI segment to profitability sometime in fiscal 2024.
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However, we may be unable to realize these cost savings in a timely manner or at all. If these efforts are unsuccessful, in whole or in part, our ongoing business and financial results may be adversely affected, which could adversely affect our sales, earnings, financial condition and liquidity.
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Accordingly, our results of operations for any quarter are not necessarily indicative of the results of operations to be expected for a full year or the next quarter. » Other general risk factors applicable to us and our business We may not be able to maintain, raise prices, or raise prices in a timely manner in response to inflation and increasing costs.
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These events could also impact retailers, who are our primary customers, possibly adversely affecting our sales, earnings, financial condition and liquidity. The impact of future pandemics could adversely affect our business, results of operations, financial condition, liquidity and stock price.
Removed
At the initial height of the COVID-19 pandemic, home furnishings purchases are largely postponable and heavily influenced by consumer confidence and most of our customers’ businesses are classified as non-essential. Consequently, traffic to our customers’ stores and demand for our products significantly decreased, our sales deteriorated and our earnings were negatively impacted.
Removed
COVID-19 also impacted our Asian supply chain, particularly as a result of mandatory shutdowns in locations where our products are manufactured in the Summer of calendar 2021, and we experienced out-of-stocks and lost sales as a result. Additionally, the demand surge that occurred after the initial height of the pandemic caused supplier capacity constraints, shipping container and steamship space shortages.
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These logistics issues increased costs, led to out-of-stocks and adversely affected our sales and earnings.
Removed
The extent of the continued impact of a pandemic or other global health crisis on our business and financial results depends on future developments, including the emergence of new and different strains of the virus and the effectiveness of vaccinations and other public health measures and could result in similar or worse public health outcomes compared to the Covid-19 pandemic.
Removed
The sweeping nature of pandemics makes it extremely difficult to predict how our business and operations could be affected in the longer run.
Removed
Any of the foregoing factors, or other cascading effects of this or other pandemics, could materially increase our costs, negatively impact our sales and damage the Company’s results of operations and its liquidity, possibly to a significant degree. The duration of any such impacts also cannot be predicted.

Item 2. Properties

Properties — owned and leased real estate

5 edited+0 added−0 removed1 unchanged
Biggest changeDU Manufacturing and Offices 166,000 Owned Mt. Airy, N.C. DU Manufacturing and warehousing 104,150 Leased Valdese, N.C. DU Manufacturing and warehousing 102,905 Leased Cherryville, N.C.
Biggest changeAll segments Office and Showrooms 238,359 Leased Atlanta, GA All segments Showrooms and warehousing 72,813 Leased Midway, GA HM, DU Warehouse 590,240 Leased Bedford, VA DU Manufacturing and Offices 327,000 Owned Hickory, N.C. DU Manufacturing and Offices 166,000 Owned Mt. Airy, N.C. DU Manufacturing and warehousing 104,150 Leased Valdese, N.C. DU Manufacturing and warehousing 102,905 Leased Cherryville, N.C.
We expect that we will be able to renew or extend these leases or find alternative facilities to meet our warehousing and distribution needs at a reasonable cost. All facilities set forth below are active and operational, representing in the aggregate approximately 3.8 million square feet of owned space, leased space or properties utilized under third-party operating agreements.
We expect that we will be able to renew or extend these leases or find alternative facilities to meet our warehousing and distribution needs at a reasonable cost. All facilities set forth below are active and operational, representing in the aggregate approximately 3.3 million square feet of owned space, leased space or properties utilized under third-party operating agreements.
ITEM 2. PROPERTIES Set forth below is information with respect to our principal properties on April 14, 2023. We believe all of these properties are well-maintained and in good condition. During fiscal 2023, we estimate our upholstery plants operated at approximately 87% of capacity on a one-shift basis. All our production facilities are equipped with automatic sprinkler systems.
ITEM 2. PROPERTIES Set forth below is information with respect to our principal properties on April 12, 2024. We believe all of these properties are well-maintained and in good condition. During fiscal 2024, we estimate our upholstery plants operated at approximately 60% of capacity on a one-shift basis. All our production facilities are equipped with automatic sprinkler systems.
DU Manufacturing Supply Plant 53,000 Owned Vista, CA DU Manufacturing and Offices 38,353 Leased Las Vegas, NV HB, DU, AO Showrooms 14,428 Leased Ho Chi Minh City, VN HB, HM Office, Warehouse and Distribution 108,364 Leased Dongguan, China HB, HM Office 1,855 Leased HB=Hooker Branded, HM=Home Meridian, DU=Domestic Upholstery ITEM 3. LEGAL PROCEEDINGS None.
DU Manufacturing Supply Plant 53,000 Owned Vista, CA DU Manufacturing and Offices 43,813 Leased Las Vegas, NV HB, DU, AO Showrooms 14,428 Leased Ho Chi Minh City, VN HB, HM Office, Warehouse and Distribution 106,157 Leased Dongguan, China HB, HM Office 957 Leased HB=Hooker Branded, HM=Home Meridian, DU=Domestic Upholstery, AO=All Other ITEM 3. LEGAL PROCEEDINGS None.
Location Segment Use Primary Use Approximate Size in Square Feet Owned or Leased Martinsville, VA All segments Corporate Headquarters, Distribution, Manufacturing and Warehousing 1,595,151 Owned / Leased High Point, N.C. All segments Office and Showrooms 247,857 Leased Midway, GA HM, DU Warehouse 1,006,880 Leased Bedford, VA DU Manufacturing and Offices 327,000 Owned Hickory, N.C.
Location Segment Use Primary Use Approximate Size in Square Feet Owned or Leased Martinsville, VA All segments Corporate Headquarters, Distribution, Manufacturing and Warehousing 1,489,766 Owned / Leased High Point, N.C.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeQuantitative and Qualitative Disclosures About Market Risk 36 Item 8. Financial Statements and Supplementary Data 37
Biggest changeQuantitative and Qualitative Disclosures About Market Risk 36 Item 8. Financial Statements and Supplementary Data 36 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 36 Item 9A. Controls and Procedures 37 Item 9B. Other Information 37 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 37 Part III Item 10.
Item 3. Legal Proceedings 20 Item 4. Mine Safety Disclosures 20 Information about our Executive Officers 21 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22 Item 6. Selected Financial Data 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A.
Item 3. Legal Proceedings 20 Item 4. Mine Safety Disclosures 20 Information about our Executive Officers 21 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22 Item 6. Selected Financial Data 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 7A.
Added
Directors, Executive Officers and Corporate Governance 38 Item 11. Executive Compensation 38 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 38 Item 13. Certain Relationships and Related Transactions, and Director Independence 38 Item 14. Principal Accounting Fees and Services 38 Part IV Item 15. Exhibits, Financial Statement Schedules 39 Item 16.
Added
Form 10-K Summary 41 Signatures 42 Index to Consolidated Financial Statements F-1 All references to 2024, 2023, 2022, 2021 and 2020 or other years are referring to our fiscal years, unless otherwise stated. Our fiscal years end on the Sunday closest to January 31, with fiscal 2024 ending on January 28, 2024.
Added
Our quarterly periods are based on thirteen-week “ reporting periods ” (which end on a Sunday) rather than quarterly periods consisting of three calendar months. As a result, each quarterly period generally is thirteen weeks, or 91 days.
Added
In some years (generally once every six years) the fourth quarter will be fourteen weeks long and the fiscal year will consist of fifty-three weeks.
Added
On January 31, 2022, the first day of our 2023 fiscal year, we entered into an Asset Purchase Agreement with Sunset HWM, LLC ( “ Sunset West ” ) and its three members to acquire substantially all of the assets of Sunset West (the “ Sunset Acquisition ” ).
Added
The results of operations of Sunset West are included in the Domestic Upholstery segment ’ s results beginning with the fiscal 2023 first quarter. Consequently, Sunset West ’ s results are not included in our results prior to the 2023 fiscal year.
Added
All references to the “ Company, ” “ we, ” “ us ” and “ our ” in this document refer to Hooker Furnishings Corporation and its consolidated subsidiaries, unless specifically referring to segment information.
Added
All references to the “ Hooker, ” “ Hooker Division(s), ” “ Hooker Legacy Brands ” or “ traditional Hooker ” divisions or companies refer to all current business units and brands except for those in the Home Meridian segment. The Hooker Branded segment includes Hooker Casegoods and Hooker Upholstery.
Added
The Domestic Upholstery segment includes Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West. All Other includes H Contract, Lifestyle Brands, and BOBO Intriguing Objects, a business acquired during fiscal 2024. Forward-Looking Statements Certain statements made in this report, including statements under Part II, Item 7.
Added
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the notes to the consolidated financial statements included in this report, are not based on historical facts, but are forward-looking statements.
Added
These statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as “believes,” “expects,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “would,” “could” or “anticipates,” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy.
Added
Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.
Added
Those risks and uncertainties include but are not limited to: ■ general economic or business conditions, both domestically and internationally, including the current macro-economic uncertainties and challenges to the retail environment for home furnishings along with instability in the financial and credit markets, in part due to inflation and rising interest rates, including their potential impact on (i) our sales and operating costs and access to financing, (ii) customers, and (iii) suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses; ■ the direct and indirect costs and time spent by our associates associated with the implementation of our Enterprise Resource Planning system (“ERP”), including costs resulting from unanticipated disruptions to our business; ■ the cyclical nature of the furnishings industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers’ income available for discretionary purchases, and the availability and terms of consumer credit; ■ changes in consumer preferences, including increased demand for lower-priced furniture; ■ difficulties in forecasting demand for our imported products and raw materials used in our domestic operations; ■ risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, customs issues, freight costs, including the price and availability of shipping containers, ocean vessels, ocean and domestic trucking, and warehousing costs and the risk that a disruption in our offshore suppliers or the transportation and handling industries, including labor stoppages, strikes, or slowdowns, could adversely affect our ability to timely fill customer orders; ■ the impairment of our long-lived assets, which can result in reduced earnings and net worth; ■ adverse political acts or developments in, or affecting, the international markets from which we import products, including acts of war, duties or tariffs imposed on those products by foreign governments or the U.S. government; 4 Table of Contents ■ the interruption, inadequacy, security breaches or integration failure of our information systems or information technology infrastructure, related service providers or the internet or other related issues including unauthorized disclosures of confidential information, hacking or other cyber-security threats or inadequate levels of cyber-insurance or risks not covered by cyber-insurance; ■ risks associated with our Georgia warehouse including the inability to realize anticipated cost savings and subleasing excess space on favorable terms; ■ risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of skilled labor, and environmental compliance and remediation costs; ■ risks associated with Home Meridian segment restructuring and cost-savings efforts, including our ability to timely reduce expenses and continue to return the segment to profitability; ■ the risks related to the Sunset Acquisition including maintaining Sunset West’s existing customer relationships, debt service costs, interest rate volatility, the use of operating cash flows to service debt to the detriment of other corporate initiatives or strategic opportunities, the possible loss of key employees from Sunset West, the disruption of ongoing business or inconsistencies in standards, controls, procedures and policies across the business which could adversely affect our internal control or information systems and the costs of bringing them into compliance and failure to realize benefits anticipated from the Sunset Acquisition; ■ the risks related to the BOBO Intriguing Objects acquisition, including the possible loss of a key BOBO employee, inconsistencies in standards, controls, procedures and policies across the business which could adversely affect our internal control or information systems and failure to realize benefits anticipated from the BOBO acquisition; ■ changes in U.S. and foreign government regulations and in the political, social and economic climates of the countries from which we source our products; ■ risks associated with product defects, including higher than expected costs associated with product quality and safety, regulatory compliance costs (such as the costs associated with the US Consumer Product Safety Commission’s new mandatory furniture tip-over standard, STURDY) related to the sale of consumer products and costs related to defective or non-compliant products, product liability claims and costs to recall defective products and the adverse effects of negative media coverage; ■ disruptions and damage (including those due to weather) affecting our Virginia or Georgia warehouses, our Virginia, North Carolina or California administrative facilities, our High Point, Las Vegas, and Atlanta showrooms or our representative offices or warehouses in Vietnam and China; ■ the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers, including the loss of several large customers through business consolidations, failures or other reasons, or the loss of significant sales programs with major customers; ■ our inability to collect amounts owed to us or significant delays in collecting such amounts; ■ achieving and managing growth and change, and the risks associated with new business lines, acquisitions, including the selection of suitable acquisition targets, restructurings, strategic alliances and international operations; ■ capital requirements and costs; ■ risks associated with distribution through third-party retailers, such as non-binding dealership arrangements; ■ the cost and difficulty of marketing and selling our products in foreign markets, including new foreign markets which require material startup costs without the guarantee of future sales; ■ changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of our imported products and raw materials; and ■ price competition in the furniture industry. 5 Table of Contents Our forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions.
Added
The future events, developments or results described in this report could turn out to be materially different.
Added
Any forward-looking statement we make speaks only as of the date of that statement, and we undertake no obligation, except as required by law, to update any forward-looking statements whether as a result of new information, future events or otherwise and you should not expect us to do so.
Added
Also, our business is subject to a number of significant risks and uncertainties any of which can adversely affect our business, results of operations, financial condition or future prospects. For a discussion of risks and uncertainties that we face, see the Forward-Looking Statements detailed above and Item 1A, “Risk Factors” below.
Added
Investors should also be aware that while we occasionally communicate with securities analysts and others, it is against our policy to selectively disclose to them any material nonpublic information or other confidential commercial information.
Added
Accordingly, investors should not assume that we agree with any projection, forecast or report issued by any analyst regardless of the content of the statement or report, as we have a policy against confirming information issued by others. 6 Table of Contents Hooker Furnishings Corporation Part I

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

2 edited+0 added−0 removed6 unchanged
Biggest changeITEM 4. MINE SAFETY DISCLOSURES None. 20 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Hooker Furnishings’ executive officers and their ages as of April 14, 2023 and the calendar year each joined the Company are as follows: Name Age Position Year Joined Company Jeremy R. Hoff 49 Chief Executive Officer and Director 2017 Paul A.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES None. 20 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Hooker Furnishings’ executive officers and their ages as of April 12, 2024 and the calendar year each joined the Company are as follows: Name Age Position Year Joined Company Jeremy R. Hoff 50 Chief Executive Officer and Director 2017 Paul A.
Huckfeldt 65 Chief Financial Officer and Senior Vice President - Finance and Accounting 2004 Anne J. Smith 61 Chief Administration Officer and President - Domestic Upholstery 2008 Tod R. Phelps 54 Senior Vice President - Operations and Chief Information Officer 2017 Jeremy R. Hoff has been Chief Executive Officer and Director since February 2021. Mr.
Huckfeldt 66 Chief Financial Officer and Senior Vice President - Finance and Accounting 2004 Anne J. Smith 62 Chief Administration Officer and President - Domestic Upholstery 2008 Tod R. Phelps 55 Senior Vice President - Operations and Chief Information Officer 2017 Jeremy R. Hoff has been Chief Executive Officer and Director since February 2021. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+1 added−4 removed5 unchanged
Biggest changeAt January 29, 2023, Zacks Investment Research, Inc. reported that these two SIC Codes consisted of Bassett Furniture Industries, Inc., Compass Diversified Holdings, Dorel Industries, Ethan Allen Interiors, Inc., Flexsteel Industries, Inc., Hooker Furnishings Corporation, Horrison Resources Inc., Instadose Pharma Corp., Kimball International, Inc., La-Z-Boy, Inc., Leggett & Platt, Inc., Luvu Brands, Inc., MasterBrand, Inc., Natuzzi Spa, Nova Lifestyle, Inc., Purple Innovation, Inc., The Rowe Companies, Sleep Number Corp. and Tempur Sealy International, Inc. 23 Table of Contents
Biggest changeAt January 28, 2024, Zacks Investment Research, Inc. reported that these two SIC Codes consisted of Bassett Furniture Industries, Inc., Compass Diversified Holdings, Dorel Industries, Ethan Allen Interiors, Inc., Flexsteel Industries, Inc., Hooker Furnishings Corporation, Horrison Resources Inc., IDP Holdings (USA) Corp., La-Z-Boy, Inc., Leggett & Platt, Inc., Luvu Brands, Inc., MasterBrand, Inc., Natuzzi Spa, Nova Lifestyle, Inc., Purple Innovation Inc., The Rowe Companies, Sleep Number Corp. and Tempur Sealy International, Inc. 22 Table of Contents
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our stock is traded on the NASDAQ Global Select Market under the symbol “HOFT”. As of January 29, 2023, we had approximately 11,500 beneficial shareholders.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our stock is traded on the NASDAQ Global Select Market under the symbol “HOFT”. As of January 28, 2024, we had approximately 7,500 beneficial shareholders.
Removed
Purchase of Equity Securities by the Issuer and Affiliated Purchasers On June 6, 2022, our Board of Directors authorized the repurchase of up to $20 million of the Company’s common shares.
Added
Performance Graph (1) The following graph compares cumulative total shareholder return for the Company with a broad performance indicator, the Russell 2000® Index (2), and a published industry index, the Household Furniture Index (3), for the period from February 3, 2019 to January 28, 2024.
Removed
The authorization does not obligate us to acquire a specific number of shares during any period and does not have an expiration date, but it may be modified, suspended, or discontinued at any time at the discretion of our Board of Directors.
Removed
Repurchases may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and subject to our cash requirements for other purposes, compliance with the covenants under the loan agreement for our revolving credit facility and other factors we deem relevant.
Removed
The following table details the repurchase activities in the fourth quarter of fiscal 2023: Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of Publicly Announced Program Maximum Dollar Value of Shares That May Yet Be Purchased Under The Program $ 10,640,433 October 31, 2022 - December 4, 2022 88,975 17.34 88,975 9,095,935 December 5, 2022 - January 1, 2023 73,634 17.45 73,634 7,809,500 January 2, 2023 - January 29, 2023 58,858 19.75 58,858 6,646,127 Total 221,467 $ 18.02 221,467 Through fiscal 2023, we had used approximately $13.3 million of the authorization to purchase 819,632 of our common shares (at an average price of $16.27 per share), with approximately $6.6 million remaining available for future purchases under the authorization as of the end of fiscal 2023. 22 Table of Contents Performance Graph (1) The following graph compares cumulative total shareholder return for the Company with a broad performance indicator, the Russell 2000® Index (2), and a published industry index, the Household Furniture Index (3), for the period from January 28, 2018 to January 29, 2023.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

4 edited+0 added−1 removed3 unchanged
Biggest changeFiscal Year Ended (1) January 29, January 30, January 31, February 2, February 3, 2023 2022 2021 2020 2019 (In thousands, except per share data) Income Statement Data: Net sales $ 583,102 $ 593,612 $ 540,081 $ 610,824 $ 683,501 Cost of sales 461,056 488,508 426,810 494,365 535,172 Inventory valuation expense (2) 28,752 3,402 523 2,501 842 Casualty loss (3) - - - - 500 Gross profit 93,294 101,702 112,748 113,958 146,987 Selling and administrative expenses 95,815 84,475 80,410 88,867 91,928 Goodwill impairment (4) - - 39,568 - - Trade names impairment (4) 13 - 4,750 - - Intangible asset amortization (4) 3,512 2,384 2,384 2,384 2,384 Operating (loss)/income (6,046 ) 14,843 (14,364 ) 22,707 52,675 Other income, net 416 373 336 458 369 Interest Expense, net 519 110 540 1,238 1,454 (Loss)/income before income taxes (6,149 ) 15,106 (14,568 ) 21,927 51,590 Income tax (benefit)/expense (1,837 ) 3,388 (4,142 ) 4,844 11,717 Net (loss)/income (4,312 ) 11,718 (10,426 ) 17,083 39,873 Per Share Data: Basic (loss)/earnings per share $ (0.37 ) $ 0.99 $ (0.88 ) $ 1.44 $ 3.38 Diluted (loss)/earnings per share (0.37 ) 0.97 (0.88 ) 1.44 3.38 Cash dividends per share 0.82 0.74 0.66 0.61 0.57 Net book value per share (5) 21.33 22.01 21.76 23.25 22.37 Weighted average number of shares outstanding (basic) 11,593 11,852 11,822 11,784 11,759 Balance Sheet Data: Cash and cash equivalents $ 19,002 $ 69,366 $ 65,841 $ 36,031 $ 11,435 Trade accounts receivable 62,129 73,727 83,290 87,653 112,557 Inventories 96,675 75,023 70,159 92,813 105,204 Working capital 137,265 170,777 169,612 171,838 170,516 Total assets 381,716 374,559 352,273 393,708 369,716 Long-term debt (including current maturities) (6) 24,266 - - 30,138 35,508 Shareholders’ equity 236,021 261,128 257,503 274,121 263,176 (1) Our fiscal years end on the Sunday closest to January 31, with fiscal 2023 ending on January 29, 2023.
Biggest changeFiscal Year Ended (1) January 28, January 29, January 30, January 31, February 2, 2024 2023 2022 2021 2020 (In thousands, except per share data) Statement of Operations Data: Net sales $ 433,226 $ 583,102 $ 593,612 $ 540,081 $ 610,824 Cost of sales 322,705 461,056 488,508 426,810 494,365 Inventory valuation expense 1,829 28,752 (2) 3,402 523 2,501 Gross profit 108,692 93,294 101,702 112,748 113,958 Selling and administrative expenses 92,678 95,815 84,475 80,410 88,867 Goodwill impairment (3) - - - 39,568 - Trade names impairment (3) - 13 - 4,750 - Intangible asset amortization (3) 3,656 3,512 2,384 2,384 2,384 Operating income/(loss) 12,358 (6,046 ) 14,843 (14,364 ) 22,707 Other income, net 1,653 416 373 336 458 Interest Expense, net 1,573 519 110 540 1,238 Income/(loss) before income taxes 12,438 (6,149 ) 15,106 (14,568 ) 21,927 Income tax expense/(benefit) 2,573 (1,837 ) 3,388 (4,142 ) 4,844 Net income/(loss) 9,865 (4,312 ) 11,718 (10,426 ) 17,083 Per Share Data: Basic earnings/(loss) per share $ 0.91 $ (0.37 ) $ 0.99 $ (0.88 ) $ 1.44 Diluted earnings/(loss) per share 0.91 (0.37 ) 0.97 (0.88 ) 1.44 Cash dividends per share 0.89 0.82 0.74 0.66 0.61 Net book value per share (4) 21.54 21.33 22.01 21.76 23.25 Weighted average number of shares outstanding (basic) 10,838 11,593 11,852 11,822 11,784 Balance Sheet Data: Cash and cash equivalents $ 43,159 $ 19,002 $ 69,366 $ 65,841 $ 36,031 Trade accounts receivable 51,280 62,129 73,727 83,290 87,653 Inventories 61,815 96,675 75,023 70,159 92,813 Working capital 123,389 137,265 170,777 169,612 171,838 Total assets 343,586 381,716 374,559 352,273 393,708 Long-term debt (including current maturities) (5) 22,874 24,266 - - 30,138 Shareholders' equity 225,975 236,021 261,128 257,503 274,121 (1) Our fiscal years end on the Sunday closest to January 31, with fiscal 2024 ending on January 28, 2024.
The fiscal years presented above all had 52 weeks, except for the 2019 fiscal year that ended on February 3, 2019, was a 53-week fiscal year. (2) Represents the inventory write downs of ACH and other excess inventories related to the exit of ACH and repositioning of the PRI business in fiscal 2023.
The fiscal years presented above all had 52 weeks. (2) Represents the inventory write downs of ACH and other excess inventories related to the exit of ACH and repositioning of the PRI business in fiscal 2023. See Note 3 to our Consolidated Financial Statements for additional information. (3) Represents impairment charges and amortization expense on acquisition-related intangibles.
Prior periods shown consisted of term loans incurred to fund a portion of the Home Meridian and Shenandoah acquisitions, which were paid off in January 2021. 24 Table of Contents
(5) Long-term debt (including current maturities): Fiscal 2024 and 2023 amounts consist of acquisition related term loans to fund the Sunset Acquisition. Fiscal 2020 amounts consisted of term loans incurred to fund a portion of the Home Meridian and Shenandoah acquisitions, which were paid off in January 2021. 23 Table of Contents
(5) Net book value per share is derived by dividing “shareholders’ equity” by the number of common shares issued and outstanding, excluding unvested restricted shares, all determined as of the end of each fiscal period. (6) Long-term debt (including current maturities): Fiscal 2023 amounts consist of acquisition related term loans to fund the Sunset Acquisition.
See Note 10 to our Consolidated Financial Statements for additional information on our intangible assets. (4) Net book value per share is derived by dividing “shareholders’ equity” by the number of common shares issued and outstanding, excluding unvested restricted shares, all determined as of the end of each fiscal period.
Removed
See Note 3 to our Consolidated Financial Statements for additional information. (3) Represents the insurance deductible for a casualty loss experienced at one of our Hooker Branded segment facilities in fiscal 2019. (4) Represents impairment charges and amortization expense on acquisition-related intangibles. See Note 10 to our Consolidated Financial Statements for additional information on our intangible assets.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

58 edited+49 added−55 removed33 unchanged
Biggest changeUnit volume increased as all divisions were operating near full capacity and working through backlog. ■ All Other net sales increased significantly in fiscal 2023 driven by increased sales volume at H Contract due to the recovery of the senior living industry after the COVID pandemic. 28 Table of Contents Gross Profit/(Loss) and Margin Fifty-two weeks ended January 29, 2023 January 30, 2022 $ Change % Change % Segment Net Sales % Segment Net Sales Hooker Branded $ 59,344 29.7 % $ 63,146 31.5 % $ (3,802 ) -6.0 % Home Meridian (2,620 ) -1.2 % 15,213 5.5 % (17,833 ) -117.2 % Domestic Upholstery 32,633 20.8 % 20,860 19.5 % 11,773 56.4 % All Other 3,937 37.7 % 2,483 34.5 % 1,454 58.6 % Consolidated $ 93,294 16.0 % $ 101,702 17.1 % $ (8,408 ) -8.3 % Consolidated gross profit and margin both decreased as compared to the prior year, attributed primarily to a gross loss at the Home Meridian segment, while partially offset by an increase in gross profit and margin at Domestic Upholstery segment. ■ The Hooker Branded segment gross profit and margin decreased due to increased warehousing costs which exceeded such costs in the prior year by 160 bps.
Biggest changeHowever, the favorable price variances were not sufficient to offset the sales volume loss. 27 Table of Contents Gross Profit/(Loss) and Margin Fifty-two weeks ended January 28, 2024 January 29, 2023 $ Change % Change % Segment Net Sales % Segment Net Sales Hooker Branded $ 57,671 36.8 % $ 60,871 29.6 % $ (3,200 ) -5.3 % Home Meridian 24,367 17.0 % (2,620 ) -1.2 % 26,987 1030.0 % Domestic Upholstery 24,048 19.0 % 32,633 20.8 % (8,585 ) -26.3 % All Other 2,606 41.5 % 2,410 58.6 % 196 8.1 % Consolidated $ 108,692 25.1 % $ 93,294 16.0 % $ 15,398 16.5 % Despite sales decreases across segments, consolidated gross profit and margin both increased as compared to the prior year, primarily attributable to the absence of the inventory write-down at the Home Meridian segment in the current period. ■ The Hooker Branded segment’s gross profit decreased in fiscal 2024 due to a decline in net sales, while gross margin significantly increased due to lower product costs driven by reduced ocean freight expenses.
If any of these risks materialize, our business, financial condition and future prospects could be adversely impacted; and ■ Our commitments and contractual obligations and off-balance sheet arrangements described on page 34 and in Note 19 to our Consolidated Financial Statements on page F-34 of this report.
If any of these risks materialize, our business, financial condition and future prospects could be adversely impacted; and ■ Our commitments and contractual obligations and off-balance sheet arrangements described on page 32 and in Note 19 to our Consolidated Financial Statements on page F-34 of this report.
A disruption in our supply chain, or from Vietnam or China in general, could significantly impact our ability to fill customer orders for products manufactured in those countries. Our supply chain could be adversely impacted by the uncertainties of health concerns and governmental restrictions.
A disruption in our supply chain, or from Vietnam in general, could significantly impact our ability to fill customer orders for products manufactured in those countries. Our supply chain could be adversely impacted by the uncertainties of health concerns and governmental restrictions.
The Amendment also included customary representations and warranties and requires us to comply with customary covenants, including, among other things, the following financial covenants: ● Maintain a ratio of funded debt to EBITDA not exceeding: o 2.50:1.0 through July 30, 2023; o 2.25:1.0 through July 30, 2024; and o 2.00:1.00 thereafter. ● A basic fixed charge coverage ratio of at least 1.25:1.00; and ● Limit capital expenditures to no more than $15.0 million during any fiscal year.
The Amendment also included customary representations and warranties and requires us to comply with customary covenants, including, among other things, the following financial covenants: ● Maintain a ratio of funded debt to EBITDA not exceeding: o 2.25:1.0 through July 30, 2024; and o 2.00:1.00 thereafter. ● A basic fixed charge coverage ratio of at least 1.25:1.00; and ● Limit capital expenditures to no more than $15.0 million during any fiscal year.
The timing of our working capital needs can vary greatly depending on demand for and availability of raw materials and imported finished goods but is generally the greatest in the mid-summer as a result of inventory build-up for the traditional fall selling season. Long-term cash requirements relate primarily to funding lease payments.
The timing of our working capital needs can vary greatly depending on demand for and availability of raw materials and imported finished goods but is generally the greatest in the mid-summer as a result of inventory build-up for the traditional fall selling season. Long-term cash requirements relate primarily to repayment of long-term debt and funding lease payments.
Repurchases may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and subject to our cash requirements for other purposes, compliance with the covenants under the loan agreement for our revolving credit facility and other factors we deem relevant.
Repurchases could be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and subject to our cash requirements for other purposes, compliance with the covenants under the loan agreement for our revolving credit facility and other factors we deem relevant.
This note describes commitments, contractual obligations and off-balance sheet arrangements, some of which are not reflected in our consolidated financial statements. In Management’s Discussion and Analysis, we analyze and explain the annual changes in some specific line items in the consolidated financial statements for fiscal 2023 compared to fiscal 2022.
This note describes commitments, contractual obligations and off-balance sheet arrangements, some of which are not reflected in our consolidated financial statements. In Management’s Discussion and Analysis, we analyze and explain the annual changes in some specific line items in the consolidated financial statements for fiscal 2024 compared to fiscal 2023.
We also provide information regarding the performance of each of our operating segments and All Other. The analysis and discussions of fiscal 2022 compared to fiscal 2021 results are in our 2022 Form-10K available through Hooker Furnishings and SEC websites.
We also provide information regarding the performance of each of our operating segments and All Other. The analysis and discussions of fiscal 2023 compared to fiscal 2022 results are in our 2023 Form-10K available through Hooker Furnishings and SEC websites.
We must also pay a quarterly unused commitment fee that is based on the average daily amount of the facility utilized during the applicable quarter; ■ 2022 Secured Term Loan. The Amendment provided us with a $18 million term loan (the “Secured Term Loan”), which was disbursed to us on July 26, 2022.
We must also pay a quarterly unused commitment fee that is based on the average daily amount of the facility utilized during the applicable quarter; 31 Table of Contents ■ 2022 Secured Term Loan. The Amendment provided us with a $18 million term loan (the “Secured Term Loan”), which was disbursed to us on July 26, 2022.
On July 26, 2027, the entire outstanding indebtedness is due in full, including all principal and interest. 32 Table of Contents We may prepay any outstanding principal amounts borrowed under either the Secured Term Loan or the Unsecured Term Loan at any time, without penalty provided that any payment is accompanied by all accrued interest owed.
On July 26, 2027, the entire outstanding indebtedness is due in full, including all principal and interest. We may prepay any outstanding principal amounts borrowed under either the Secured Term Loan or the Unsecured Term Loan at any time, without penalty provided that any payment is accompanied by all accrued interest owed.
The effective tax rate was higher in fiscal 2023 due to the impact of the cash surrender value of company-owned life insurance which was added to the favorable tax impact of the pretax loss in current year, versus a subtraction from tax expense in the case of a pretax profit.
The effective tax rate was higher in fiscal 2023 due to the impact of state tax benefits and the cash surrender value of company-owned life insurance which were added to the favorable tax impact of the pretax loss, versus a subtraction from tax expense in the case of a pretax profit in the current year.
Contractual term-loan and interest payments assuming identical effective interest rates as of the end of fiscal 2023 are expected to be $2.7 million in fiscal 2024, $2.6 million in fiscal 2025, $2.5 million in fiscal 2026, $2.5 million in fiscal 2027 and $19.2 million in fiscal 2028 including the payoff of $18 million Secured Term Loan.
Contractual term-loan and interest payments assuming identical effective interest rates as of the end of fiscal 2024 are expected to be $2.8 million in fiscal 2025, $2.7 million in fiscal 2026, $2.6 million in fiscal 2027, and $19.3 million in fiscal 2028 including the payoff of $18 million Secured Term Loan.
The authorization does not obligate us to acquire a specific number of shares during any period and does not have an expiration date, but it may be modified, suspended, or discontinued at any time at the discretion of our Board of Directors.
The authorization did not obligate us to acquire a specific number of shares during any period and did not have an expiration date, but it could be modified, suspended, or discontinued at any time at the discretion of our Board of Directors.
If we are unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain from our largest import furniture suppliers, or from Vietnam or China in general, could adversely affect our sales, earnings, financial condition and liquidity.
If we are unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain from our largest import furniture suppliers, or from Vietnam in general, could adversely affect our sales, earnings, financial condition and liquidity. 35 Table of Contents
All references to the “Hooker,” “Hooker Division,” “Hooker Legacy Brands” or “traditional Hooker” divisions or companies refer to the current components of our Hooker Branded segment, the Domestic Upholstery segment including Bradington-Young, HF Custom, Shenandoah Furniture and Sunset West, and All Other which includes H Contract and Lifestyle Brands. Furniture sales account for all of our net sales.
All references to the “Hooker,” “Hooker Division,” “Hooker Legacy Brands” or “traditional Hooker” divisions or companies refer to the current components of our Hooker Branded segment, the Domestic Upholstery segment including Bradington-Young, HF Custom, Shenandoah Furniture and Sunset West, and All Other which includes H Contract, Lifestyle Brands and BOBO Intriguing Objects.
Standby letters of credit in the aggregate amount of $8.6 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the Existing Revolver as of January 29, 2023. There were no additional borrowings outstanding under the Existing Revolver as of January 29, 2023.
Standby letters of credit in the aggregate amount of $6.7 million, used to collateralize certain insurance arrangements and for imported product purchases, were outstanding under the Existing Revolver as of January 28, 2024. There were no additional borrowings outstanding under the Existing Revolver as of January 28, 2024.
We were in compliance with each of these financial covenants at January 29, 2023 and expect to remain in compliance with existing covenants for the foreseeable future. Revolving Credit Facility Availability As of January 29, 2023, we had $26.4 million available under our $35 million Existing Revolver to fund working capital needs.
We were in compliance with each of these financial covenants at January 28, 2024 and expect to remain in compliance with existing covenants for the foreseeable future. Revolving Credit Facility Availability As of January 28, 2024, we had $28.3 million available under our $35 million Existing Revolver to fund working capital needs.
We lease office space, warehousing facilities, showroom space and office equipment under leases expiring over the next five years. Future minimum annual commitments under leases and operating agreements are $10 million in fiscal 2024, $10.1 million in fiscal 2025, $10.2 million in fiscal 2026, $10.3 million in fiscal 2027 and $8.9 in fiscal 2028.
We lease office space, warehousing facilities, showroom space and office equipment under leases expiring over the next five years. Future minimum annual commitments under leases and operating agreements are $9.5 million in fiscal 2025, $9.6 million in fiscal 2026, $9.4 million in fiscal 2027, $7.8 million in fiscal 2028 and $7.3 in fiscal 2029.
FY22 Average Selling Price FY23 % Increase / (Decrease) vs.
FY23 Average Selling Price FY24 % Increase / (Decrease) vs.
On March 3, 2023, our Board of Directors declared a quarterly cash dividend of $0.22 per share, payable on March 31, 2023 to shareholders of record at March 17, 2023. Our Board of Directors will continue to evaluate the appropriateness of the current dividend rate considering our performance and economic conditions in future quarters.
On March 4, 2024, our Board of Directors declared a quarterly cash dividend of $0.23 per share, payable on March 29, 2024 to shareholders of record at March 18, 2024. Our Board of Directors will continue to evaluate the appropriateness of the current dividend rate considering our performance and economic conditions in future quarters.
As of January 29, 2023, $6.3 million was outstanding under the Unsecured Term Loan, and $18 million was outstanding under the Secured Term Loan. We incurred $37,500 in debt issuance costs in connection with our term loans.
As of January 28, 2024, $4.9 million was outstanding under the Unsecured Term Loan, and $18 million was outstanding under the Secured Term Loan. We incurred $37,500 in debt issuance costs in connection with our term loans.
Additionally, based on our analysis and the requirements of ASC 280: Segment Reporting, the operational results of the newly acquired Sunset West division are included in the Domestic Upholstery segment starting in the first quarter of fiscal 2023 on a prospective basis. See Note 18 to our consolidated financial statements for additional financial information regarding our segments.
Additionally, based on our analysis and the requirements of ASC 280: Segment Reporting, the operational results of the newly acquired BOBO Intriguing Objects division are included in All Other starting in the second quarter of fiscal 2024 on a prospective basis. See Note 18 to our consolidated financial statements for additional financial information regarding our segments.
Net (Loss)/Income and (Loss)/Earnings Per Share Fifty-two weeks ended January 29, 2023 January 30, 2022 $ Change % Change Net (loss)/income % Net Sales % Net Sales Consolidated $ (4,312 ) -0.7 % $ 11,718 2.0 % $ (16,030 ) -136.8 % Diluted (loss)/earnings per share $ (0.37 ) $ 0.97 The analysis and discussion of fiscal 2022 compared to fiscal 2021 results are available in Item 7 of our 2022 Annual Report on Form-10K available through Hooker Furnishings and SEC websites.
Net Income / (Loss) and Earnings (Loss) Per Share Fifty-two weeks ended January 28, 2024 January 29, 2023 $ Change % Change Net income / (loss) % Net Sales % Net Sales Consolidated $ 9,865 2.3 % $ (4,312 ) -0.7 % $ 14,177 328.8 % Diluted earnings / (loss) per share $ 0.91 $ (0.37 ) The analysis and discussion of fiscal 2023 compared to fiscal 2022 results are available in Item 7 of our 2023 Annual Report on Form-10K available through Hooker Furnishings and SEC websites.
Concentrations of Sourcing Risk In fiscal 2023, imported products sourced from Vietnam and China accounted for 91% of our import purchases and our top five suppliers in Vietnam and China accounted for 50% of our fiscal 2023 import purchases.
Concentrations of Sourcing Risk In fiscal 2024, imported products sourced from Vietnam accounted for 88% of our import purchases and our top five suppliers in Vietnam accounted for 60% of our fiscal 2024 import purchases.
In addition to our cash balance, at fiscal 2023 third quarter end, we had $26.4 million available under our $35 million revolving credit facility with BofA (the “Existing Revolver”) to fund working capital needs and have access to $27.6 million in cash surrender value of Company-owned life insurance policies.
In addition to our cash balance, we had $28.3 million available under our $35 million revolving credit facility with BofA (the “Existing Revolver”) to fund working capital needs and have access to $28.5 million in cash surrender value of Company-owned life insurance policies.
During fiscal 2022, we used a portion of the $19.2 million generated from operations and $372,000 in life insurance proceeds to pay $8.8 million in cash dividends, $6.7 million in capital expenditures to enhance our systems and facilities and $560,000 for insurance premiums on Company-owned life insurance policies. 31 Table of Contents During fiscal 2021, we used existing cash, a portion of the $68.3 million generated from operations and $1.3 million in life insurance proceeds to retire our $30.1 million in outstanding term loans related to the Home Meridian acquisition, pay $7.8 million in cash dividends, $1.2 million in capital expenditures to enhance our systems and facilities and to pay $555,000 for insurance premiums on Company-owned life insurance policies.
During fiscal 2022, we used a portion of the $19.2 million generated from operations and $372,000 in life insurance proceeds to pay $8.8 million in cash dividends, $6.7 million in capital expenditures to enhance our systems and facilities and $560,000 for insurance premiums on Company-owned life insurance policies.
Share Repurchase Authorization On June 6, 2022, our Board of Directors authorized the repurchase of up to $20 million of the Company’s common shares.
Share Repurchase Authorization In fiscal 2023, our Board of Directors authorized the repurchase of up to $20 million of the Company’s common shares.
Dividends We declared and paid dividends of $0.82 per share or approximately $9.6 million in fiscal 2023, an increase of 10.8% or $0.08 per share compared to $0.74 per share in fiscal 2022.
Dividends We declared and paid dividends of $0.89 per share or approximately $9.7 million in fiscal 2024, an increase of 8.5% or $0.07 per share compared to $0.82 per share in fiscal 2023.
As of January 29, 2023, unamortized loan costs of $33,750 were netted against the carrying value of our term loans on our condensed consolidated balance sheets.
As of January 28, 2024, unamortized loan costs of $26,250 were netted against the carrying value of our term loans on our consolidated balance sheets.
The effective tax rates for fiscal 2023 and 2022 were 29.9% and 22.4%, respectively.
The effective tax rates for fiscal 2024 and fiscal 2023 were 20.7% and 29.9%, respectively.
Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations.
Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. Specific areas requiring the application of management’s estimates and judgments include, among others, revenue recognition and inventory valuation.
Results of Operations The following table sets forth the percentage relationship to net sales of certain items for the annual periods included in the consolidated statements of income: Fifty-two weeks ended January 29, January 30, 2023 2022 Net sales 100.0 % 100.0 % Cost of sales 79.1 82.3 Inventory write downs 4.9 0.6 Gross profit 16.0 17.1 Selling and administrative expenses 16.4 14.2 Intangible asset amortization 0.6 0.4 Operating (loss)/income (1.0 ) 2.5 Other income (expense), net 0.1 0.1 Interest expense, net 0.1 - (Loss)/Income before income taxes (1.0 ) 2.6 Income tax (benefit)/expense (0.3 ) 0.6 Net (loss)/income (0.7 ) 2.0 27 Table of Contents Fiscal 2023 Compared to Fiscal 2022 Net Sales Fifty-two weeks ended January 29, 2023 January 30, 2022 $ Change % Change % Net Sales % Net Sales Hooker Branded $ 199,602 34.2 % $ 200,692 33.8 % $ (1,090 ) -0.5 % Home Meridian 216,338 37.1 % 278,902 47.0 % (62,564 ) -22.4 % Domestic Upholstery 156,717 26.9 % 106,827 18.0 % 49,890 46.7 % All Other 10,445 1.8 % 7,191 1.2 % 3,254 45.3 % Consolidated $ 583,102 100 % $ 593,612 100 % $ (10,510 ) -1.8 % Unit Volume and Average Selling Price ( “ ASP ” ) Unit Volume FY23 % Increase / (Decrease) vs.
Results of Operations The following table sets forth the percentage relationship to net sales of certain items for the annual periods included in the consolidated statements of operations: Fifty-two weeks ended January 28, January 29, 2024 2023 Net sales 100.0 % 100.0 % Cost of sales 74.5 79.1 Inventory valuation expense 0.4 4.9 Gross profit 25.1 16.0 Selling and administrative expenses 21.4 16.4 Intangible asset amortization 0.8 0.6 Operating income / (loss) 2.9 (1.0 ) Other income, net 0.4 0.1 Interest expense, net 0.4 0.1 Income / (Loss) before income taxes 2.9 (1.0 ) Income tax expense / (benefit) 0.6 (0.3 ) Net income / (loss) 2.3 (0.7 ) 26 Table of Contents Fiscal 2024 Compared to Fiscal 2023 Net Sales Fifty-two weeks ended January 28, 2024 January 29, 2023 $ Change % Change % Net Sales % Net Sales Hooker Branded $ 156,590 36.2 % $ 205,935 35.3 % $ (49,345 ) -24.0 % Home Meridian 143,538 33.1 % 216,338 37.1 % (72,800 ) -33.7 % Domestic Upholstery 126,827 29.3 % 156,717 26.9 % (29,890 ) -19.1 % All Other 6,271 1.4 % 4,112 0.7 % 2,159 52.5 % Consolidated $ 433,226 100 % $ 583,102 100 % $ (149,876 ) -25.7 % Unit Volume and Average Selling Price ( “ ASP ” ) Unit Volume FY24 % Increase / (Decrease) vs.
Financial Condition, Liquidity and Capital Resources Summary Cash Flow Information – Operating, Investing and Financing Activities Fifty-Two Weeks Ended January 29, January 30, January 31, 2023 2022 2021 Net cash (used in)/provided by operating activities $ (21,718 ) $ 19,209 $ 68,263 Net cash used in investing activities (29,965 ) (6,862 ) (476 ) Net cash provided by/(used in) financing activities 1,319 (8,822 ) (37,977 ) Net (decrease)/increase in cash and cash equivalents $ (50,364 ) $ 3,525 $ 29,810 During fiscal 2023, we used a portion of the $25 million term-loan proceeds and existing cash and cash equivalents on hand to fund the $25 million Acquisition, build up inventory levels by $19 million, pay $13.3 million in purchases and retirement of common stock, $9.6 million in cash dividends, $5.4 million for the development of our new cloud-based ERP system, $4.2 million capital expenditures to enhance our business systems and facilities, and $492,000 in life insurance premiums on Company-owned life insurance policies.
Financial Condition, Liquidity and Capital Resources Summary Cash Flow Information – Operating, Investing and Financing Activities Fifty-Two Weeks Ended January 28, January 29, January 30, 2024 2023 2022 Net cash provided by/(used in) operating activities $ 55,471 $ (21,718 ) $ 19,209 Net cash used in investing activities (8,558 ) (29,965 ) (6,862 ) Net cash (used in)/provided by financing activities (22,756 ) 1,319 (8,822 ) Net increase/(decrease) in cash and cash equivalents $ 24,157 $ (50,364 ) $ 3,525 30 Table of Contents During fiscal 2024, we used a portion of the $55.5 million cash generated from operations and $1.0 million life insurance proceeds to fund $11.7 million share repurchases, $9.7 million in cash dividends to our shareholders, $6.8 million capital expenditures including investments in our new showrooms, $5.1 million for development of our cloud-based ERP system, $2.4 million on the BOBO acquisition, and $406,000 in life insurance premiums on Company-owned life insurance policies.
We anticipate spending approximately $4.0 million in fiscal 2024, with a significant amount of time invested by our associates. Material Capital Commitments Our material capital commitments primarily consist of term loan and lease payments.
To complete the ERP system implementation as anticipated, we will be required to expend significant financial and human resources. We anticipate spending approximately $4.0 million in fiscal 2025, with a significant amount of time invested by our associates. Material Capital Commitments Our material capital commitments primarily consist of term loans and lease payments.
For financial reporting purposes, we are organized into three reportable segments- Hooker Branded, Home Meridian and Domestic Upholstery, with our other businesses included in All Other. We regularly monitor our reportable segments for changes in facts and circumstances to determine whether changes in the identification or aggregation of operating segments are necessary.
Furnishings sales account for all of our net sales. For financial reporting purposes, we are organized into three reportable segments- Hooker Branded, Home Meridian and Domestic Upholstery, with our other businesses included in All Other.
Intangible Asset Amortization Fifty-two weeks ended January 29, 2023 January 30, 2022 $ Change % Change % Net Sales % Net Sales Intangible asset amortization $ 3,512 0.6 % $ 2,384 0.4 % $ 1,128 47.3 % Intangible asset amortization expense was higher in fiscal 2023 due to Sunset Acquisition-related amortization expense.
Intangible Asset Amortization Fifty-two weeks ended January 28, 2024 January 29, 2023 $ Change % Change % Net Sales % Net Sales Intangible asset amortization $ 3,656 0.8 % $ 3,512 0.6 % $ 144 4.1 % Intangible asset amortization expense was higher in fiscal 2024 due to the reassessment and amortization of Sam Moore trade name.
In fiscal 2023, dividends totaled $0.82 per share or $9.6 million in the aggregate, an increase of 10.8% or $0.08 per share, compared to the prior year.
In fiscal 2024, dividends totaled $0.89 per share or $9.7 million in the aggregate, an increase of 8.5% or $0.07 per share compared to the prior year. Notably, we have continuously paid annual dividends since 1969.
Before the fiscal 2023, H Contract’s results included sales of seating products sourced from HF Custom. Due to a change in the way management internally evaluates operating performance, beginning with fiscal 2023 first quarter, HF Custom’s results, which are included in Domestic Upholstery, now include sales of seating products formerly included in H Contract’s results.
Due to a change in the way management internally evaluates operating performance, beginning with fiscal 2024 third quarter, Hooker Branded and Domestic Upholstery segments’ results now include sales of products formerly included in H Contract’s results. Fiscal 2024 and fiscal 2023 results discussed below have been recast to reflect this change. The Home Meridian segment is unchanged.
Operating (Loss)/Profit and Margin Fifty-two weeks ended January 29, 2023 January 30, 2022 $ Change % Change % Segment Net Sales % Segment Net Sales Hooker Branded $ 20,529 10.3 % $ 30,667 15.3 % $ (10,138 ) -33.1 % Home Meridian (37,181 ) -17.2 % (21,260 ) -7.6 % (15,921 ) -74.9 % Domestic Upholstery 8,871 5.7 % 4,675 4.4 % 4,196 89.8 % All Other 1,735 16.6 % 761 10.6 % 974 128.0 % Consolidated $ (6,046 ) -1.0 % $ 14,843 2.5 % $ (20,889 ) -140.7 % Operating profitability decreased both in absolute terms and as a percentage of net sales in fiscal 2023 compared to the prior-year period due to the factors discussed above.
Operating Profit / (Loss) and Margin Fifty-two weeks ended January 28, 2024 January 29, 2023 $ Change % Change %Segment Net Sales %Segment Net Sales Hooker Branded $ 16,844 10.8 % $ 22,030 10.7 % $ (5,186 ) -23.5 % Home Meridian (5,530 ) -3.9 % (37,181 ) -17.2 % 31,651 85.1 % Domestic Upholstery 1,131 0.9 % 8,871 5.7 % (7,740 ) -87.3 % All Other (87 ) -1.4 % 234 5.7 % (321 ) -137.2 % Consolidated $ 12,358 2.9 % $ (6,046 ) -1.0 % $ 18,404 304.4 % Consolidated operating profitability increased both in absolute terms and as a percentage of net sales in fiscal 2024 compared to the prior-year period due to the factors discussed above. 29 Table of Contents Interest Expense, net Fifty-two Weeks Ended January 28, 2024 January 29, 2023 $ Change % Change % Net Sales % Net Sales Interest expense, net $ 1,573 0.4 % $ 519 0.1 % $ 1,054 203.1 % Consolidated interest expense increased in fiscal 2024 due to interest incurred for the entire year on the term loans, which we entered in July of 2022 as well as higher interest rates.
S&A expenses decreased as a percentage of net sales due to increased net sales. ■ All Other S&A expenses increased in absolute terms while decreased as a percentage of net sales due to higher selling costs on increased net sales.
Consolidated S&A expenses increased as a percentage of net sales due to a decrease in net sales. ■ Hooker Branded segment’s S&A expenses increased both in absolute terms and as a percentage of net sales.
During fiscal 2023, we used a portion of cash on hand and cash collected from accounts receivable to fund $19 million increase in inventory, $13.3 million share repurchases, $9.6 million in cash dividends to our shareholders, $5.4 million for development of our new cloud-based ERP system, and $4.2 million capital expenditure for enhancements of other systems and facilities.
During fiscal 2023, we used a portion of the $25 million term-loan proceeds and existing cash and cash equivalents on hand to fund the $25 million Sunset Acquisition, pay $13.3 million in purchases and retirement of common stock, build up inventory levels by $19 million, $9.6 million in cash dividends, $5.4 million for the development of our new cloud-based ERP system, $4.2 million capital expenditures to enhance our business systems and facilities, and $492,000 in life insurance premiums on Company-owned life insurance policies.
Interest Expense, net Fifty-two Weeks Ended January 29, 2023 January 30, 2022 $ Change % Change % Net Sales % Net Sales Interest expense, net $ 519 0.1 % $ 110 0.0 % $ 409 371.8 % Consolidated interest expense increased in fiscal 2023 due primarily to interest on new term loans and the amounts drawn on the revolving credit facility throughout the year. 30 Table of Contents Income Taxes Fifty-two weeks ended January 29, 2023 January 30, 2022 $ Change % Change % Net Sales % Net Sales Consolidated income tax (benefit)/expense $ (1,837 ) -0.3 % $ 3,388 0.6 % $ (5,225 ) -154.2 % Effective Tax Rate 29.9 % 22.4 % We recorded income tax benefit of $1.8 million for fiscal 2023, compared to income tax expense of $3.4 million for fiscal 2022.
Income Taxes Fifty-two weeks ended January 28, 2024 January 29, 2023 $ Change % Change % Net Sales % Net Sales Consolidated income tax expense / (benefit) $ 2,573 0.6 % $ (1,837 ) -0.3 % $ 4,410 240.1 % Effective Tax Rate 20.7 % 29.9 % We recorded income tax expense of $2.6 million for fiscal 2024, compared to income tax benefit of $1.8 million for fiscal 2023.
The Company reported a consolidated operating loss of $6.0 million or (1.0%) operating margin, as compared to operating income of $14.8 million in the previous fiscal year.
The Company recorded a consolidated operating income of $12.4 million compared to an operating loss of $6.0 million in the prior fiscal year. Consolidated net income was $9.9 million, or $0.91 per diluted share, compared to a net loss of $4.3 million or ($0.37) per diluted share in the prior fiscal year.
We believe that our liquidity and capital requirements will be further improved through the write down of ACH inventories and other excess inventories, as discussed above. With strategic inventory management, reasonable capital expenditures, and prudent expense management, we believe we have the financial resources to support our business operations for the foreseeable future.
With strategic inventory management, reasonable capital expenditures, and prudent expense management, we believe we have the financial resources to support our business operations for the foreseeable future. Commitment to shareholders: Our $25 million share repurchase program was completed during fiscal 2024.
S&A expenses increased as a percentage of net sales due to lower net sales. ■ Domestic Upholstery segment S&A expenses increased in absolute terms in fiscal 2023 due principally to the addition of Sunset West’s S&A expenses, as well as higher compensation expenses and higher selling costs resulting from higher net sales at each division.
S&A expenses increased as a percentage of net sales due to lower net sales. ■ Domestic Upholstery segment’s S&A expenses decreased in absolute terms due to decreased commissions due to lower sales, decreased wage expenses resulting from personnel changes, and decreased bonus expenses due to missed profit targets.
Selling and Administrative Expenses ( “ S&A ” ) Fifty-two weeks ended January 29, 2023 January 30, 2022 $ Change % Change % Segment Net Sales % Segment Net Sales Hooker Branded $ 38,814 19.4 % $ 32,479 16.2 % $ 6,335 19.5 % Home Meridian 33,215 15.4 % 35,139 12.6 % (1,924 ) -5.5 % Domestic Upholstery 21,584 13.8 % 15,135 14.2 % 6,449 42.6 % All Other 2,202 21.1 % 1,722 23.9 % 480 27.9 % Consolidated $ 95,815 16.4 % $ 84,475 14.2 % $ 11,340 13.4 % Consolidated selling and administrative expenses increased in absolute terms and as a percentage of net sales driven by increased S&A expenses at Hooker Branded segment and the addition of Sunset West expenses. ■ Hooker Branded segment S&A expenses increased in absolute terms and as a percentage of net sales driven by general spending increases as business returned to more normal levels and because of inflation in multiple line items including wages and benefits.
Selling and Administrative Expenses ( “ S&A ” ) Fifty-two weeks ended January 28, 2024 January 29, 2023 $ Change % Change % Segment Net Sales % Segment Net Sales Hooker Branded $ 40,829 26.1 % $ 38,840 18.9 % $ 1,989 5.1 % Home Meridian 28,575 19.9 % 33,215 15.4 % (4,640 ) -14.0 % Domestic Upholstery 20,582 16.2 % 21,584 13.8 % (1,002 ) -4.6 % All Other 2,692 42.9 % 2,176 52.9 % 516 23.7 % Consolidated $ 92,678 21.4 % $ 95,815 16.4 % $ (3,137 ) -3.3 % 28 Table of Contents Consolidated selling and administrative expenses decreased in absolute terms due to reduced costs at Home Meridian and Domestic Upholstery segments, though partially offset by increased expenses in the Hooker Branded segment.
If the actual results differ from the estimates and judgements used in these fair values, the amounts recorded in the Consolidated Financial Statements could result in a possible impairment of these assets or require acceleration of the amortization expense of finite-lived intangible assets. 35 Table of Contents Inventory Inventories, consisting of finished furniture for sale, raw materials, manufacturing supplies and furniture in process, are stated at the lower of cost, or market value, with cost determined using the last-in, first-out (LIFO) method.
Due to the highly-customized nature of our hospitality products, we typically require substantial prepayments on these orders, with the balance due within 30 days of delivery. 34 Table of Contents Inventory Inventories, consisting of finished furniture for sale, raw materials, manufacturing supplies and furniture in process, are stated at the lower of cost, or market value, with cost determined using the last-in, first-out (LIFO) method.
Specific areas requiring the application of management’s estimates and judgments include, among others, revenue recognition, inventory valuation, assumptions pertaining to valuation of goodwill and intangible assets and useful lives of long-lived assets. Accordingly, a different financial presentation could result depending on the judgments, estimates or assumptions that are used.
Accordingly, a different financial presentation could result depending on the judgments, estimates or assumptions that are used.
Capital Expenditures We expect to spend between $2.5-$3.5 million in capital expenditures in fiscal 2024 to maintain and enhance our operating systems and facilities. 33 Table of Contents Enterprise Resource Planning During calendar 2021, our Board of Directors approved an upgrade to our current ERP system and implementation efforts began shortly thereafter.
Enterprise Resource Planning During calendar 2021, our Board of Directors approved an upgrade to our current ERP system and implementation efforts began shortly thereafter. The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions in early September 2023. We expect it to go live in the Home Meridian segment in fiscal 2026.
During fiscal 2023, we received $25 million in term loan proceeds to replenish cash used to make the Sunset Acquisition. In the third quarter of fiscal 2023, our Board of Directors approved the increase of our quarterly dividend to $0.22 per share, an increase of 10% or $0.02 per share, representing the seventh consecutive annual dividend increase.
In the third quarter of fiscal 2024, the Board of Directors approved the increase of the quarterly dividend to $0.23 per share, an increase of 4.5% over the previous quarterly dividend, representing the eighth consecutive annual dividend increase.
The Hooker Branded segment ’ s net sales slightly decreased by $1.1 million, or 0.5%, as compared to the all-time record net sales this segment achieved in the prior fiscal year.
The year-end backlog was 16% lower than the previous year-end but increased by 30% compared to fiscal 2024 third quarter end. 25 Table of Contents The Domestic Upholstery segment ’ s net sales decreased by $29.9 million, or 19.1% compared to the all-time record sales this segment achieved in the prior fiscal year due to fulfillment of historical high order backlog.
We believe our new High Point and Las Vegas showrooms and plans to show at the Atlanta Market this summer present an opportunity for us to get our brands in front of more customers and prospects in the next 12 months than at any time in our history. 34 Table of Contents Critical Accounting Policies and Estimates The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.
Critical Accounting Policies and Estimates The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.
Consolidated gross profit and margin decreased by $8.4 million and 110 bps, respectively, primarily due to the gross loss in the Home Meridian segment resulting from the $24.4 million write down of ACH and other excess inventories, and to a lesser extent, a decrease in gross profit and margin in the Hooker Branded segment.
Despite the sales decrease, consolidated gross profit increased by $15.4 million and gross margin improved by 910 bps, compared to the prior fiscal year, due primarily to the one-time $24.4 million inventory write-down in fiscal 2023 at Home Meridian, as well as increased gross margin at Hooker Branded in fiscal 2024.
Overview Executive Summary- Fiscal 2023 Results of Operations Consolidated net sales decreased by $10.5 million, or 1.8%, compared to the previous fiscal year. The decrease was driven by a $62.6 million, or 22.4% sales decline in the Home Meridian segment, which was largely offset by a significant increase of $49.9 million or 46.7% in the Domestic Upholstery segment.
Overview Executive Summary- Fiscal 2024 Results of Operations Fiscal 2024 consolidated net sales were $433.2 million, a decrease of $149.9 million or 25.7%, compared to the previous fiscal year.
Through the end of fiscal 2023, we had used approximately $13.3 million of the authorization to purchase 819,632 of our common shares (at an average price of $16.27 per share), with approximately $6.7 million remaining available for future purchases under the authorization as of the end of the fiscal 2023.
In fiscal 2024 second quarter, our Board of Directors approved an additional $5 million for the repurchase of our common shares, adding to the $20 million authorization it approved in fiscal 2023. 32 Table of Contents During fiscal 2024, we had used approximately $11.7 million of the authorization to purchase 620,634 of our common shares at an average price of $18.79 per share.
Despite a significant decrease in incoming orders compared to the strong rebound in the prior year, order backlog remained 76% higher than pre-pandemic levels at fiscal 2020 year end. The Home Meridian segment experienced a decline of $62.6 million, or 22.4% in net sales, compared to the prior year.
Despite decreased sales, this segment delivered a solid operating income of $16.8 million and operating margin of 10.8%, compared to $22 million and 10.7% in the prior year. Incoming orders remained flat compared to the prior year and the backlog was 25% lower than the previous year-end but remained 40% higher than the fiscal 2020 year-end.
ASP increased due to a large percentage of the shipments carrying price increases we implemented during the two most recent years to mitigate higher freight and product costs. ■ Home Meridian segment’s net sales decreased by 22.4% compared to the prior year period.
Net sales in the prior year represented the second highest in history, driven by the demand surge and the fulfillment of a historically high order backlog. ASP remained essentially unchanged. In the prior year, we implemented price increases to mitigate higher freight and product costs.
Consolidated net loss was $4.3 million or ($0.37) per diluted share, as compared to net income of $11.7 million or $0.97 per diluted share in the prior year period. 25 Table of Contents Our fiscal 2023 performance is discussed in greater detail below under “Review” and “Results of Operations”.
Our fiscal 2024 performance is discussed in greater detail below under “Review” and “Results of Operations”. 24 Table of Contents Review Fiscal 2024 marked the third full fiscal year since the initial COVID crisis and was a pivotal year for us.
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Fiscal 2022 results discussed below have been recast to reflect this change. The Hooker Branded and Home Meridian segments are unchanged.
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We regularly monitor our reportable segments for changes in facts and circumstances to determine whether changes in the identification or aggregation of operating segments are necessary. Before the fiscal 2024 third quarter, H Contract’s results included sales of products sourced from the Hooker Branded and Domestic Upholstery segments.
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Hooker Branded segment net sales had a minor decrease of $1.1 million, or 0.5%. Despite being a small portion of the consolidated results, All Other revenue increased by 45.3% or $3.3 million.
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This decline was attributed to industry-wide soft demand and the exit of unprofitable product lines in the Home Meridian segment, the latter of which resulted in an approximate $21 million reduction in revenue.
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The charge was initially expected to be $34 million, but estimates were refined during our year-end financial close and was ultimately less than originally estimated in part as sales of the inventory thus far in fiscal 2024 have been at less of a discount than originally expected. These decreases were partially offset by increased profitability in the Domestic Upholstery segment.
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All three segments experienced sales declines with Home Meridian’s net sales down by $72.8 million or 33.7%, Hooker Branded’s net sales down by $49.3 million or 24.0%, and Domestic Upholstery’s net sales down by $29.9 million or 19.1%, all compared to each respective segment’s prior fiscal year sales.
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Review Fiscal 2023 was a challenging year as we faced macro-economic uncertainties, ongoing inflation, volatile interest rates and a slowdown in the demand for home furnishings following the prior year’s demand surge after the initial COVID crisis.
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Since 2020, we have navigated through some of the most challenging years of our 100-year history: the economic downturn of the pandemic, a demand surge for home furnishings, supply chain disruptions, inventory unavailability, historical high ocean freight costs, significant, persistent inflation and higher interest rates, a slow housing market, and a temporary shift in consumer discretionary spending away from home furnishings.
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Despite these challenges, we were encouraged by the improvements in the global supply chain, a strong labor market, and our overseas vendors returning to normal production levels.
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Against the backdrop of these historical disruptions and anemic industry demand, we were able to leverage the strength of our balance sheet and make necessary strategic investments in our business in fiscal 2024 while improving profitability, strengthening our balance sheet and continuing our over 50-year history of dividend payments, including our eighth consecutive annual dividend increase.
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As discussed below, we were pleased to report solid results in both Hooker Branded and Domestic Upholstery segments; however, we had to make difficult but necessary decisions aimed at optimizing our resources and improving profitability in the Home Meridian segment.
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On top of that, we completed a $25 million share re-purchase program during fiscal 2024.
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At the beginning of the fiscal year, this segment experienced inventory unavailability due to the COVID-related lockdown at our suppliers in Vietnam and their slow re-openings in late 2021 and early 2022. Inventory levels increased throughout fiscal 2023, allowing us to fulfill a significant portion of the large order backlog carried over from the prior year.
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Among other investments in fiscal 2024 were: (1) a new cloud-based Enterprise Resource Planning system, which went live in our Legacy Hooker divisions in early September 2023, (2) expanding our showroom footprints by investing in the much larger and better-located showroom in High Point and new showrooms in Atlanta and Las Vegas, (3) acquiring BOBO Intriguing Objects, an accessories and home décor resource (4) adding east coast distribution to the Sunset West outdoor product line, including leveraging our existing facilities at both HF Custom and our Savannah distribution facility by adding assembly operations at each to support east coast distribution.
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However, in the third quarter, there was a temporary delay in shipments due to inventory mix issues. Dealers delayed receipts of orders until collections could ship complete. This was resolved in the fourth quarter.
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In addition to these investments, we made substantial progress at Home Meridian by liquidating the inventory from its exited low-margin e-commerce division and setting it on an expected path of sustainable profitability. We believe these investments and improvements will act as a springboard to much improved profitability once demand improves.
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By the end of fiscal year 2023, inventory had increased by $35 million in this segment compared to the previous year-end and more than doubled compared to fiscal 2020 and 2021 year-end.
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We were pleased to report a consolidated profit for fiscal 2024 despite a challenging and difficult environment for home furnishings. The Hooker Branded segment ’ s net sales decreased by $49.3 million or 24.0% compared to the prior fiscal year due to soft demand for home furnishings.
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Meanwhile, gross profit and margin for the segment decreased by $3.8 million or 180 bps due to much higher-than-expected demurrage expenses and increased warehousing labor costs, driven by the large inventory volume as well as port and warehouse congestion in the U.S..
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This decrease was further amplified by the strong sales in the prior year, driven by a surge in demand after the COVID crisis and fulfillment of historically high order backlog carried over from fiscal 2022. Hooker Branded’s fiscal 2024 net sales were at 97% of the pre-pandemic level in fiscal 2020.
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Operating income decreased to $20.5 million, with an operating margin of 10.3%, compared to $30.7 million and 15.3%, respectively, in the prior year.
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The sales decline resulted in a decrease of $3.2 million in gross profit; however, gross margin increased by 720 bps due to the combination of reduced ocean freight costs and the lingering effect of price increases implemented in the prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Chinese currency floats within a limited range in relation to the U.S. Dollar, resulting in exposure to foreign currency exchange rate fluctuations. 36 Table of Contents Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar could increase the price we pay for imported products beyond the negotiated periods.
Biggest changeSince we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effect of any price increases from suppliers in the prices we charge for imported products.
Dollars with our foreign suppliers, typically for periods of at least one year. We accept the exposure to exchange rate movements beyond these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. Most of our imports are purchased from suppliers located in Vietnam and China.
Dollars with our foreign suppliers, typically for periods of at least one year. We accept the exposure to exchange rate movements beyond these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. Most of our imports are purchased from suppliers located in Vietnam.
A 1% increase in the BSBY rate would result in an annual increase in interest expenses on our terms loans of approximately $237,000. Raw Materials Price Risk We are exposed to market risk from changes in the cost of raw materials used in our domestic upholstery manufacturing processes; principally, wood, fabric and foam products.
At current borrowing levels, a 1% increase in the BSBY rate would result in an annual increase in interest expenses on our terms loans of approximately $223,000. Raw Materials Price Risk We are exposed to market risk from changes in the cost of raw materials used in our domestic upholstery manufacturing processes; principally, wood, fabric and foam products.
There was no outstanding balance under the Existing Revolver as of January 29, 2023 other than standby letters of credit in the amount of $8.6 million. As of January 29, 2023, $24.3 million was outstanding under our term loans.
There was no outstanding balance under the Existing Revolver as of January 28, 2024 other than standby letters of credit in the amount of $6.7 million. As of January 28, 2024, $22.9 million was outstanding under our term loans.
We generally expect to reflect substantially all of the effect of any price increases from suppliers in the prices we charge for imported products. However, these changes could adversely impact sales volume or profit margins during affected periods.
However, these changes could adversely impact sales volume or profit margins during affected periods.

Other HOFT 10-K year-over-year comparisons