HOOKER FURNISHINGS Corp

Segment Reporting

Hooker Branded

Net sales decreased by $1.6 million, or 4.5%, in the second quarter and $3.4 million, or 4.6%, in the first six months, reflecting lower unit volume, higher promotional discounts, and key SKU out-of-stocks, due to significantly longer lead times out of Asia, partially offset by higher average selling prices. Gross profit increased by $3.2 million and $6.0 million, while gross margin expanded by 1,050 and 1,000 basis points, respectively, primarily due to tariff recoveries and higher selling prices. Inventory constraints in imported upholstery that began in the first quarter had largely eased by second quarter-end. The segment reported operating income of $870,000 in the second quarter and $2.1 million in the first six months, compared with approximately breakeven results in both corresponding prior-year periods. Backlog increased by 34.7% compared with the end of the prior-year second quarter.

Domestic Upholstery

Net sales decreased by $1.5 million, or 5.3%, in the second quarter and $2.1 million, or 3.6%, in the first six months, as lower sales of upscale leather and custom fabric upholstery were partially offset by double-digit growth in private-label and outdoor furnishings. Gross profit increased by $928,000 and $613,000, while gross margin improved by 450 and 180 basis points, respectively, supported by tariff recoveries on imported materials, lower imported-material costs, and improved overhead absorption. The segment reported second-quarter operating income of $833,000, compared with an operating loss of $408,000 in the prior-year period, and backlog increased by 4.8% compared with the end of the prior-year second quarter.

**All Other

**Hospitality business net sales decreased by $2.8 million, or 65.8%, in the second quarter and $2.2 million, or 23.5%, in the first six months, primarily due to project timing, with approximately 80% of first-half shipments occurring during the first quarter. Lower second-quarter shipments resulted in an operating loss for the quarter; however, the business remained profitable for the first six months.

Discontinued Operations

Although the Home Meridian divestiture was completed in the prior fiscal year, discontinued operations generated pre-tax income of $587,000 in the second quarter, reflecting tariff recoveries, customer-related adjustments and other post-divestiture activity.