Hooker Furniture Corporation reported third-quarter financial results that reflect both the challenges of a strategic restructuring and the resilience of its core business segments. The company's revenue of $70.7 million fell significantly below both Stonegate Capital Partners' estimate of $85.2 million and consensus estimates of $85.5 million, representing a 32.2% year-over-year decline. This substantial decrease was primarily driven by the company's sale of the majority of its HMI business segment, a transformative move that has reshaped Hooker Furniture's operational focus.
Despite the overall revenue decline, the company's legacy brands demonstrated notable strength. Hooker Branded net sales grew 4.4% year-over-year, while Domestic Upholstery increased 3.0%, indicating continued consumer demand for these core product lines. This performance underscores the durability of Hooker Furniture's established brands even as the company navigates broader market challenges including housing market weakness, high mortgage rates, and subdued consumer demand.
The strategic divestiture of the HMI segment has had a positive impact on the company's margin profile. Consolidated gross margins grew to 25.6%, showing sequential improvement following the sale of what management described as a lower-margin business. This margin expansion represents a significant development for Hooker Furniture as it works to improve profitability amid difficult market conditions. The company's operating income of ($16.3) million and adjusted earnings per share of ($1.99) were substantially below estimates of ($2.2) million and ($0.15) respectively, largely due to one-time trade name impairment charges related to the HMI transaction.
Management has indicated that these impairment charges are expected to be mostly one-time in nature, suggesting that future quarters may show improved profitability as the company moves beyond these restructuring costs. The company has reaffirmed its focus on navigating current macroeconomic headwinds while positioning itself to return to profitability. This strategic direction is particularly important for investors monitoring the company's ability to adapt to changing market conditions and consumer preferences.
The upcoming launch of the Margaritaville collection has generated significant interest within the industry, potentially representing a new growth avenue for the company. As Hooker Furniture continues its transition following the HMI divestiture, investors will be watching closely to see how the company leverages its strengthened margin profile and core brand strength to overcome current market challenges. The full details of the company's performance and strategic outlook are available in the Stonegate Capital Partners coverage update.
