Hooker Furnishings Posts Third Straight Profitable Quarter as Tariff Recoveries Aid Results

Hooker Furnishings Corporation returned a third straight profitable quarter in its fiscal 2027 second quarter, even as weaker furniture demand kept sales under pressure. The company reported consolidated net income of $1.7 million for the 13 weeks ended August 2, compared with a $3.3 million loss a year earlier, while operating income improved to $1.3 million from a $510,000 operating loss.

Net sales fell 8.7% to $63.3 million from $69.2 million, but gross profit rose to $20.1 million from $17.2 million and gross margin widened to 31.8% from 24.9%. In its fiscal second-quarter results, Hooker said tariff recoveries and the continuing benefit of roughly $17.5 million in annualized fixed-cost reductions helped offset a difficult demand environment. Management described housing activity and consumer confidence as weak and said it does not expect a meaningful near-term improvement in market conditions.

The quarter also extended a broader earnings recovery. For the first six months of fiscal 2027, Hooker posted net income of $2.7 million, compared with a $6.3 million loss in the prior-year period. First-half operating income reached $2.9 million after a $1.0 million operating loss a year earlier, although sales declined 5.5% to $132.7 million.

Tariff refunds lifted results, but did not erase prior costs

Hooker received $7.9 million in tariff recoveries during the quarter. Of that amount, continuing operations recognized about $4.3 million as a reduction in cost of sales and about $200,000 of related interest income. Customer credits of roughly $500,000 reduced revenue, while discontinued operations recorded about $1.0 million of net pre-tax benefit. Another $1.8 million had not yet flowed through cost of sales at quarter-end and instead reduced inventory carrying values.

The recoveries stem from duties the company paid under tariffs imposed through the International Emergency Economic Powers Act. In February, the U.S. Supreme Court held that IEEPA does not authorize the president to impose tariffs. Those duties generated an estimated $10.3 million of cumulative pre-tax costs for Hooker during fiscal 2026, an amount that exceeded the recoveries reported in the latest quarter.

The timing matters when comparing periods. In the fiscal first quarter, Hooker had not recognized a receivable or reduced cost of sales for potential tariff refunds because the amount and timing were still uncertain. By the second quarter, cash had been received and parts of the recovery could be recognized in earnings. Management said it does not expect material additional tariff recoveries, so investors should not assume the same level of benefit will repeat in later quarters.

Even with the refund benefit, the company still faced pressure from softer volumes and promotional activity. Hooker Branded sales declined 4.5% to $34.6 million as lower unit volume and higher promotional discounts outweighed higher average selling prices. The segment nevertheless reported operating income of $870,000, up from approximately breakeven a year earlier, while gross margin expanded to 39.6% from 29.1%.

Domestic Upholstery improved as hospitality shipments fell

Domestic Upholstery also moved into the black for the quarter. Sales declined 5.3% to $27.2 million, but operating income reached $833,000 compared with a $408,000 loss in the prior-year quarter. Gross margin improved to 23.0% from 18.5%, helped by tariff recoveries on imported materials, lower imported-material costs and better overhead absorption. Double-digit growth in private-label and outdoor furnishings partly offset lower sales of upscale leather and custom fabric upholstery.

The All Other segment moved the opposite way because of weaker hospitality shipments and project timing. Sales fell 65.8% to $1.5 million, and the segment posted a $420,000 operating loss for the quarter compared with a $112,000 loss a year earlier. About 80% of first-half hospitality shipments occurred in the first quarter, leaving second-quarter revenue comparatively light even though the business remained profitable for the first six months.

That mix of lower sales and better profitability shows how much of the quarter’s improvement came from margins and cost structure rather than top-line growth. Consolidated selling and administrative expense rose to $18.3 million from $17.1 million, but the company said prior cost reductions continued to support operating performance. Gross profit increased by $2.9 million despite the nearly $6.0 million decline in quarterly revenue.

Backlog and cash improved, while the demand outlook stayed cautious

Orders offered a somewhat firmer signal than current sales. Consolidated backlog stood at $42.4 million at August 2, up 6.2% from the end of the prior-year second quarter and 8.4% from the end of the fiscal first quarter, according to Hooker. Hooker Branded backlog increased 34.7% year over year to $21.2 million, while Domestic Upholstery backlog rose 4.8% to $20.2 million.

Liquidity also strengthened. Cash and cash equivalents increased to $18.7 million at quarter-end from $10.6 million at the end of the first quarter and $1.1 million at fiscal 2026 year-end. Hooker attributed the increase primarily to tariff refund proceeds and accounts-receivable collections. No term-loan balance remained outstanding, while inventories declined to $43.4 million from $48.7 million at the start of the fiscal year.

Management is not forecasting a quick recovery in the furniture market. Instead, its second-half case rests on a leaner cost base, improved order momentum and new product activity. Retailer commitments for Hooker’s Margaritaville furnishings had reached about 100 in-store galleries and 10 free-standing stores, roughly double the level reported in December. Shipments began late in the second quarter and are expected to build through the second half of fiscal 2027 and into fiscal 2028.

The next test will be whether stronger backlog and new product shipments can translate into revenue without the same tariff-recovery boost. Hooker’s latest quarter showed that profitability can improve even with lower sales, but management’s own outlook leaves demand recovery as the main unresolved piece for the second half.