Q3 2025 Hooker Furnishings Corp Earnings Call

Operator: Good day. Thank you for standing by.

Good day, Thank you for standing by welcome to the furnishing Corporation's third quarter 'twenty 'twenty four earnings webcast.

Operator: Welcome to Hooker Furnishings Corporation's third quarter 2024 earning webcast. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session.

This time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session. Just a question during the session you will need to buy star one one on your telephone you will then hear an automatic message advising yohan Israel.

Operator: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised.

Operator: Please be advised that today's conference is being recorded.

Please be advised that today's conference is being recorded.

Paul Huckfeldt: I will now hand the conference over to your speaker host today, Paul Huckfeldt, Chief Financial Officer. Please go ahead, sir.

I'll now hand, the conference I'll, let you sneak a house today.

Speaker Change: I'll have felt chief financial Officer. Please go ahead Sir.

Paul Huckfeldt: Thank you, Livia.

Speaker Change: Thank you Olivia.

Paul Huckfeldt: Good morning and welcome to our quarterly conference call to review our financial results for the fiscal 2025 third quarter, which began July 29th and ended October 27th. Joining me this morning is Jeremy Hoff, our Chief Executive Officer. We appreciate you. During our call, we may make forward-looking statements which are subject to risk. Discussion of factors that could cause our actual results to differ materially from management's expectations.

Speaker Change: Good morning, and welcome to our quarterly conference call to review our financial results for the fiscal 2023rd quarter, which began July 29 and ended October 27.

Speaker Change: Joining me this morning is Jeremy Hoff, our Chief Executive Officer, we appreciate your participation today.

Speaker Change: During our call we may make forward looking statements, which are subject to risks and uncertainties.

Speaker Change: The factors that could cause our actual results to differ materially from management's expectations is contained in our press release and S. E T.

Paul Huckfeldt: Thanks for tuning in.

Paul Huckfeldt: We'll see you next time. filing, announcing our. We have no obligation to update or revise any forward-looking statement to reflect events or circumstances.

Speaker Change: Filing announcing our fiscal 2025 third quarter results.

Speaker Change: Forward looking statements speak only as of today.

Speaker Change: Take no obligation to update or revise any forward looking statements to reflect events or circumstances after today.

Paul Huckfeldt: Our fiscal 2025 third quarter and nine month results were adversely affected by the ongoing low demand in the home furniture industry. as well as charges totaling about $7.5 million, including approximately $3.1 million of restructuring costs. related to the company's previously announced costs. certain trade names under the These factors resulted in an operating loss of 7.3%.

Speaker Change: Our fiscal third.

Speaker Change: Third quarter and nine months results were adversely affected by the ongoing low demand in the home furnishings industry as well as charges totaling about seven and a half million dollars, including approximately $3 1 million of restructuring costs.

Speaker Change: Related to the company's previously announced cost savings plan too.

Speaker Change: $2 4 million of bad debt expense related to the bankruptcy of a single large customer and 2 million noncash impairment charges.

Speaker Change: Certain trade names.

Speaker Change: Meridian segments.

Speaker Change: Factors yourself.

Speaker Change: And an operating loss of $7 3 million and a consolidated net loss of $4 1 million or 39 cents per diluted share in the third quarter.

Paul Huckfeldt: consolidated net loss of $4.1 million or $0.39 per diluted share. Consolidated net sales were $104 million. $12.5 million or 10.7%.

Speaker Change: Consolidated net sales were 104 million a decrease of $12 5 million or 10, 7% compared to the same quarter of the.

Speaker Change: Previous year.

Paul Huckfeldt: The nine-month period. Consolidated net sales were $293 million. 43 million or 12.9% compared to the same period. This decrease was also due to low demand affecting the home. and the absence of $11 million of liquidation. unprofitable ACH product.

Speaker Change: The nine month period.

Speaker Change: Consolidated net sales were 293 million, a decrease of $43 million or 12, 9% compared to the same period of the previous year.

Speaker Change: This decrease was also due to low demand affecting the whole.

Speaker Change: Industry and the absence of $11 million of liquidation sales.

Speaker Change: Unprofitable product.

Speaker Change: The company exited last year.

Paul Huckfeldt: The company reported a consolidated operating loss of $15 million. net loss of $10.2 million or $97 million. Share. Attributed to lower overall sales, higher ocean freight costs at Hooker Branded, under-absorbed indirect costs. Paul Street, as well as the seven and a half man in charge.

The company reported a consolidated operating loss of $15 million and a net loss of $10 2 million or 97 cents per diluted share attributed to lower overall sales higher ocean freight costs at hooker branded under absorb indirect costs at domestic upholstery as well as the seven and a half.

Charges mentioned earlier.

Jeremy Hoff: Now I'll turn the results of the call over to Jeremy to comment. Thank you, Paul, and good morning, everyone. Despite sustained macroeconomic challenges and the charges recorded in Q3, we are encouraged by the sequential quarterly... and by the results of our cost reduction efforts, which will be more fully realized beginning 4th of July. These improvements reflect our team's focus in managing controllables and reducing non-strategic costs in a difficult environment, while investing in impactful initiatives to expand our addressable market and growth including our recently announced global licensing agreement with Mark. We're also encouraged by positive development in the macroeconomic environment such as cooling inflation and recent interest rate cuts in September.

Speaker Change: Now I'll turn the call over to Jeremy to comments on our fiscal 2025 third quarter results. Thank you Paul and good morning, everyone. Despite sustained macroeconomic challenges and the charges recorded in Q3, we are encouraged by the sequential quarterly improvement in our core business profitability and by the results of our cost reduction.

Speaker Change: Efforts, which will be more fully realized beginning fourth quarter. These improvements reflect our team's focus on managing controllable and reducing non strategic costs in a difficult environment, while investing in impactful initiatives to expand our addressable market and growth opportunities, including our recently announced global licensing agreement with Mark.

Speaker Change: Greenville.

We're also encouraged by positive developments in the macroeconomic environment, such as cooling inflation and recent interest rate cuts in September and November which should begin to increase demand for furnishings.

Jeremy Hoff: which should begin to increase demand. Our October high point market introductions were positively and Placement across the board. In addition, we have the best retail placement market to date at Outdoor Furniture Specialist The early feedback of three major case or Hooker Branded gave us the confidence to place an issue. early before these groups were officially introduced. As a result, the collections will ship this month with a second cutting in January, increasing our speed to market. This puts us in a strong position for the coming fiscal year with our available product in anticipation of increased demand and the typically stronger fall selling.

Speaker Change: October high point market introductions were positively received with significant placements across the board. In addition, we had the best retail placement market to date at outdoor furniture specialists Sunset West.

The early feedback of three major case gigs collections for Hooker branded gave us the confidence to place initial counties early before these groups were officially introduced in October.

Speaker Change: As a result, the collections will ship this month with a second cutting in January increasing our speed to market by six months. This puts us in a strong position for the coming fiscal year with our available product assortment.

Speaker Change: In anticipation of increased demand and the typically stronger fall selling season, we built up hooker branded inventory by $11 million or 40% compared to previous quarter and in addition, we are aggressively producing our top collections to ensure we will be in stock during the first quarter of fiscal 'twenty. Six these inventories are high quality assortment center.

Jeremy Hoff: We built up Hooker Branded Inventory by $11 million, or 40% compared to previous years. In addition, we are aggressively producing our top collections to ensure we will be in stock during the first quarter of fiscal year. These inventories are high quality assortment centered on our best selling and most profitable.

Third on our best selling and most profitable skus.

Paul Huckfeldt: Now I want to turn the discussion over to Paul, who will discuss highlights. Thanks, Jeremy. Beginning with Hooker Branded, net sales decreased by $4 million or 10.7%. compared to the prior. primarily to lower average selling prices, while gross revenue in this segment. by 6.7% compared to the previous year's third quarter, discounts increased by 390 basis due mainly to higher discounting on... Unit volume decreased by a modest 2.1% compared to the previous year's third quarter, but exceeded the first and second quarter. quarter, the segment reported an operating loss of 1.7 million on historically low third quarter sales.

Paul: Now I want to turn the discussion over to Paul who will discuss highlights in each of our segments.

Paul: Thanks, Jeremy.

Paul: Beginning with Hooker branded net sales decreased by 4 million or 10, 7% in the fiscal third quarter compared to the prior year period.

Paul: Due primarily to lower average selling prices, while gross revenue in this segment.

Paul: Decreased by six 7% compared to the previous year's third quarter discounts increased by 390 basis points.

Paul: Due mainly to higher discounting on excess inventory.

Paul: Unit volume decreased by a modest two 1% compared to the previous year's third quarter, but exceeded the first and second quarters of this fiscal year.

Paul: Yeah.

Paul: For the quarter the segment reported an operating loss of $1 7 million, an historically low third quarter net sales.

Paul Huckfeldt: This result included approximately a million dollars of severance charges related to our Incoming orders decreased by 13 percent. Quarter-end backlog was 30% lower than at the end of the prior year's third quarter. remained 18% higher than pre-pandemic levels, which were at the end. For the nine-month period, net sales decreased by $14 million, or $11.7 million. also due primarily to lower average selling prices resulting from the price reductions implemented in the previous year in response unit volume was essentially flat, decreasing by about 1% compared to the prior year.

Paul: As a result. This result included approximately $1 million of severance charges related to our cost reduction plan.

Paul: Incoming orders decreased by 13% year over year.

Paul: Our quarter end backlog was 30% lower than at the end of the prior year's third quarter, but remained 18% higher than pre pandemic levels, which were at the end of fiscal 2023rd quarter.

Paul: For the nine month period, net sales decreased by $14 million or 11, 7% also due primarily to lower average selling prices, resulting from the price reductions implemented in the previous year in response to reduced ocean freight costs unit.

Paul: <unk> was essentially flat decreasing by about 1% compared to the prior year nine months period.

Paul Huckfeldt: turn to the home Iridian. Net sales decreased by 5.1 million or 11.8%. sales through major furniture chains and independent furniture stores decreased. partially offset by an Incoming orders increased by 8% compared to last year. 3rd quarter, while decreasing modestly by 2.9%.

Paul: Turning to homework the home Meridian segment net sales decreased by $5 1 million or 11, 8% in the third quarter.

Paul: Compared to the prior prior to the third quarter due to reduced unit volume.

Paul: Over 40% of the sales decrease was attributable to the loss of a major customer following its bankruptcy.

Paul: Sales through major furniture chains, and independent furniture store decrease because these decreases were partially offset by an 8% increase in sales in our hospitality business market with two consecutive quarters of higher revenues.

Paul: Incoming orders increased by 8% compared to the previous year third quarter, while decreasing modestly by two 9% for the nine month period. Despite the absence of orders from the discontinued product lines and the large customer bankers.

Paul Huckfeldt: Despite the absence of orders, ACH product line, and the large... Quarter-end backlog was 32% higher than the prior year. by increased net sales. decrease that sales, Home Meridian achieved a gross margin of 20.5 percent, its highest level since the acquisition in 2008.

Paul: Quarter end backlog was 32% higher than the prior year third quarter backlog.

Paul: Despite increased net sales.

Paul: The decreased net sales home meridian achieved a gross margin of 25% its highest level since the acquisition in 2016, the restructuring efforts at home Meridian over the recent years have shown meaningful results start to create a sustainable profitability, including significantly reduced allowances improved product margins.

Paul Huckfeldt: and Restructuring Efforts at Home Radio. have shown meaningful results towards creating sustainable property. including significantly reduced... product margins, and lower fixed costs across nearly all of them. For the quarter, the segment reported an operating loss of $3.7 million, driven by $2.4 million in bad debt charges. 2 million in non-cash intangible asset impairments. $233,000 of severance costs related to the cost... with a 9-month period, net sales decreased by $19 million. large part due to the absence of $11 million in ACH.

Paul: And lower fixed cost across nearly all of this segment.

Paul: For the quarter the segment reported operating loss of $3 7 million driven by $2 4 million in bad debt charges due to the previously mentioned customer bankruptcy.

Paul: $2 million in noncash intangible asset impairment charges and $233000 of severance costs severance costs related to the cost reduction plan.

Paul: For the nine months period, net sales decreased by $19 million or 16% in large part due to the absence of $11 million in ACA H liquidation sales, which accounted for approximately 60% of the sales decrease decrease and 75% of the unit volume decrease.

Paul Huckfeldt: sales decreased in nearly all channels during the period except for the hospitality Lastly, the domestic upholstery segment net sales decreased by $3.2 million or $10 billion. compared to the prior year third quarter. decreased sales at Shenandoah, Braddington Young, and HF Customs, attributable to the persistent low demand. This decrease was partially offset by a 9% increase in sales at Sunset West. delivered year-over-year quarterly sales growth. Gross profit decreased due to lower net sales, but the gross margin remained the same. quarter, the segment reported an operating loss of $281,000. You can see the sequential improvement compared to the 1.3 million in operating losses recorded.

Paul: Sales decreased in nearly all channels during the period, except for the hospitality business, which experienced a 23% increase.

Paul: Lastly, the domestic upholstery segment net sales decreased by $3 2 million or 10% compared to the prior year third quarter due to decreased sales at Shenandoah Redington, and HFF custom attributable to the persistent low demand.

Paul: This decrease was partially offset by a 9% increase in sales at Sunset West, which has delivered year over year quarterly sales growth for three consecutive quarters. This fiscal year.

Paul: Gross profit decreased due to lower net sales, but the gross margin remained stable.

Paul: For the quarter the segment reported an operating loss of $281000.

Paul: Sequential improvement compared to the $1 3 million in operating losses recorded in each of the physical.

Paul: Fiscal 2025, first and second quarters.

Paul Huckfeldt: The results also included approximately $560,000 in severance costs related to the cost of Incoming orders decreased by 4.8% during the quarter, and the quarter-end backlog was 30% lower than the prior year third quarter. including Sunset West, the order backlog remained consistent with pre-pandemic levels at the end of the fiscal 2020-30.

Paul: This result also included approximately 560000 of severance costs related to the cost reduction plan.

Paul: Incoming orders decreased by four 8% during the quarter and the quarter end backlog was 30% lower than the prior year third quarter backlog excluding.

Excluding sense at West the order backlog remained consistent with pre pandemic levels at the end of the fiscal 2020.

Paul: Third quarter.

Paul Huckfeldt: For the nine-month period, net sales decreased by $10.6 million or $10.8 million. also due to decreased sales at Braddington Young, Shenandoah, and HF Customs, partially offset by a 10% increase in Sunset West.

Paul: For the nine month period net sales decreased by $10 6 million or 10, 8% also due to decreased sales at Shenandoah.

Paul: Shenandoah NHS custom, partially offset by a 10% increase sunset west net sales.

Paul Huckfeldt: Turning now to cash inventories and capital, cash and cash equivalents were $20.4 million at the end of the third quarter. $22.7 million from the previous year. Inventory levels increased by 4.7 million from year end. primarily by a $6 million. During the nine-month period, we used cash and cash-equipped... on hand on $7.4 million of dividends. to further develop our cloud-based ERP. In addition to our cash balance, we have an aggregate of $28.3 million available under our existing revolver at quarter one. as well as $29 million in cash surrender value, a company I would like...

Paul: Turning now to cash inventory capital cash and cash equivalents were $20 4 million at the end of the third quarter, a decrease of $22 7 million from the previous year and in January.

Paul: Inventory levels increased by $4 7 million from year end.

Paul: Primarily by a $6 million increase in hooker branded inventory.

Paul: During the nine months period, we used cash and cash equivalents.

<unk> had $7 4 million of dividends.

$2 8 million to further develop our cloud based ERP system at $2 7 million in capital expenditures.

Paul: In addition to our cash balance we have an accurate aggregate of $28 $3 million available under our existing revolver at quarter end.

Paul: As well as $29 million in cash surrender value of company owned life insurance.

Paul Huckfeldt: We expect to finalize the refinancing of our credit facility and pay off our term debt. As Jeremy mentioned, we're aggressively building inventory to support three new major case goods collections, as well as our best selling and most profitable inventory. Accelerate speed to market and product availability for both current and new. The inventory build is also driven by what is expected. longer than typical lunar new year holiday in Vietnam. expected longer post-holiday ramp-up period resulting from the extended holiday. lower production demand in Vietnam, as well as potential U.S. East Coast port strikes.

Paul: We expect to finalize the refinancing of our credit facility and paid off our term debt in the coming days.

Speaker Change: As Jeremy mentioned, we're aggressively building inventory to support three new major case goods collection as well as our best selling and most profitable skus to accelerate speed to market and product availability for both current and next fiscal year.

Speaker Change: The inventory build is also driven by what is expected to be longer than typical lunar new year holiday in Vietnam and expected longer post holiday ramp up period, resulting from the extended holiday.

Speaker Change: And lower production demand in Vietnam, as well as potential U S East Coast Port strike in January of 2025.

Paul Huckfeldt: Earlier this week we announced the payment of our regular quarterly dividend in December, which we believe demonstrates our confidence.

Speaker Change: Earlier this week, we announced the payment.

Speaker Change: Our regular quarterly dividend in December, which we believe demonstrates our confidence in the company's future success.

Jeremy Hoff: Now I'll turn the conversation back to Jeremy for his outline. Over the last few months, the key economic Impact Furniture Sales have been trending positively. such as interest rate cuts, which drive home mortgage rates, and cooling inflation.

Jeremy Hoff: Now I'll turn the conversation back to Jeremy for his outlook.

Jeremy Hoff: Over the last few months the key economic indicators that impact furniture sales have been trending positively such as interest rate cuts, which drive home mortgage rates and cooling inflation. Additionally in November a leading real estate industry groups stated its belief that the worst of the housing inventory shortages ending in the forecast and forecast an.

Jeremy Hoff: Additionally, in November, a leading real estate industry group stated its belief that the worst of the housing inventory shortage is ending, and the forecast forecast an approximately 10% increase in home sales. And October year-over-year furniture store sales rose for the second month in a row.

Jeremy Hoff: Maximally, 10% increase in home sales for 2025 with mortgage rates stabilizing around 6%.

Jeremy Hoff: In October year over year furniture store sales rose for the second month in a row lastly, consumer sentiment rose in November to its highest level since April and the stock market continues near all time highs while the macroeconomic outlook is improving our team has continued to focus on the controllable and improvements already underway at hooker furnishings or <unk>.

Jeremy Hoff: Lastly, consumer sentiment rose in November to its highest level since April, and the stock market continues near all-time highs. While the macroeconomic outlook is improving, our team has continued to focus on the controllables and improvements already underway. well equip us to navigate any remaining...

Jeremy Hoff: Balance sheet financial condition and management team should well equipped us to navigate any remaining challenges as we focus on maximizing efficiencies with the cost reductions while simultaneously investing in expansion strategies that will position us for revenue and profitability growth when demand fully returns.

Jeremy Hoff: for Revenue and Profitability Growth When Demand Fuller This ends the formal part of our discussion, and at this time I will turn the call back over to our operator, Livio, for questions. Thank you.

Speaker Change: This ends the formal part of our discussion and at this time I will turn the call back over to our operator Olivia for questions.

Operator: Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, you may press star 1-1 again. Please stand by while we compile the Q&A roster.

Speaker Change: Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone and weekly name to be announced soon showing a question you May press star one again, please standby, while we compile the Q&A roster.

Operator: Now first question coming from the line of Anthony Lebiedzinski with Zodiac Company, your line is now open. Anthony, your line is open. Please check your mute button.

Speaker Change: Now first question coming from the line of Anthony <unk>.

Speaker Change: <unk> with Sidoti <unk> Company. Your line is now open.

Speaker Change: Anthony Your line is open please check your mute button.

Anthony Lebiedzinski: Can you hear me now? Yes. Thank you. Yeah, sorry about that. Yeah, I was on mute.

Speaker Change: Can you hear me now.

Speaker Change: Yes.

Speaker Change: Yes, sorry about that yeah I was on mute so.

Anthony Lebiedzinski: So good morning to all of you. And yeah, thanks for taking the questions. So first, you know, just curious. So since the election, have you guys seen any notable changes in demand from your customers? It seems like just talking to others in the industry, they talked about the election being a certainly distraction for the end consumers. So curious to get your thoughts on what you've seen so far.

Speaker Change: And good morning to all of you and thanks for taking the questions.

Speaker Change: So first.

Speaker Change: I was just curious so since the election have you guys seen any notable changes in demand from your customers. It seems like just talking to.

Others in the industry they talked about the election.

Speaker Change: Certainly distraction for the end consumer so I'm curious to get your thoughts on what <unk> seen so far.

Jeremy Hoff: Yeah, so we've noticed that we've had a noticeable positive bump in order rate since the election. That's good to hear. Certainly encouraging. And then, you know, in terms of the three new case goods, the collections, you talked about the speed to market certainly driving that. How impactful could that be for the fourth quarter as you look to get those products to retailers? Well, it definitely, you know, gives us a better shot at some some better shipments that Hooker branded, because we're going to ship first cutting in November, second cutting in January, specifically to direct container customers that that will affect first.

Speaker Change: Yes, so we've noticed that we've had a noticeable positive bump in order rates since the election for sure.

Speaker Change: That's good to hear are certainly encouraging and then.

Speaker Change: Of the.

Speaker Change: <unk> U K 's the collections.

Speaker Change: You talked about.

Speaker Change: Speed to market.

Speaker Change: Driving that.

Speaker Change: How impact Im sorry, how impactful could that be for the fourth quarter as you look to.

Speaker Change: Get those products to.

Speaker Change: Retailers.

Speaker Change: Okay.

Speaker Change: Well it definitely.

Speaker Change: Gives us a better shot at some some better shipment to hooker branded because we're going to ship first cutting in November 2nd cutting in January spin.

Speaker Change: Specifically to direct container customers that that will affect first.

Anthony Lebiedzinski: But I think the more significant part of it is the fact that we're putting those collections in position for the next fiscal year to gain, you know, the full benefit of those hitting floors for the entire year and not half. All right. That makes a lot of sense. And you've done a nice job improving the gross margin at the HMI. Do you think you can further improve from here?

Speaker Change: But I think the more significant part of it is the fact that we're putting those collections and positioned for the next fiscal year to gain.

Speaker Change: The full benefit of those hitting floors for the entire year and not half of the year.

Speaker Change: Alright that makes a lot of sense.

You've done a nice job of improving the gross margin that the HMA.

Speaker Change: Do you think you can further improve from here or what are your thoughts there Jeremy.

Jeremy Hoff: What are your thoughts there, Jeremy?

Jeremy Hoff: I would say a little bit and you know, just to stress most of that improvement was simply getting out of businesses we should not have been in, you know, which obviously takes the average. very positive compared to where we were when we had businesses losing money, low margin business like the ACH business.

I would say a little bit and just stare.

Speaker Change: Most of that improvement was simply getting out of businesses, we should not have been in.

Speaker Change: Which obviously takes the average.

Speaker Change: Very positive compared to where we were when we had businesses, losing money even at low margin business like the CH business. The fact that we're out of that it's no longer a drag on the overall average so that's been the biggest benefit for us, but we do still think there is a little bit of room for improvement.

Jeremy Hoff: The fact that we're out of that, it's no longer a drag on the overall average. for us, but we do still think there's a little bit of room. Gotcha.

Anthony Lebiedzinski: And so, as far as the inventory situation here, so, you know, you talked about having access inventories Overall, your inventory was higher at the end of the third quarter than we expected.

Speaker Change: Got you.

Speaker Change: As far as the inventory situation here, so you talked about having excess inventories.

Speaker Change: Overall your inventory.

Speaker Change: Was higher at the end of the third quarter then.

Speaker Change: Expected so.

Jeremy Hoff: How would you describe your current inventory position and the quality of that inventory and any sort of goal for your inventory at the end of your fiscal year? I would call our inventory position the best it's been probably, Paul, in probably two years. And I say that not only because of the positive inventory we have on the Hooker branded side that are some of our best SKUs, but not having the drag of something like ACH on the other side, which negatively impacts the entire inventory as well. So we really don't have the problem inventory within our system anymore, like we did with the ACH.

How would you describe your current inventory position and the quality of that inventory and you sort of.

Speaker Change: Oh.

Speaker Change: <unk> for your inventory at the end of your fiscal year.

I would call our inventory position the best it's been probably.

Speaker Change: Paul in probably two years.

Speaker Change: Thanks, Doug.

Speaker Change: And I say that not only because of the positive inventory we have on the hooker branded side that are some of our best skus, but not having the drag of something like <unk> on the other side.

Speaker Change: Which negatively impacts the entire inventory as well so we really don't have the.

Speaker Change: The problem inventory within our system anymore like we did with the Hh we only are increases in really good skus.

Jeremy Hoff: We only...our increase is in really... Yeah, we talked, I know my channel. We talked about discounting excess inventories and building. What we're doing is cleaning up. and better SKUs in the new product. All right, yeah, that makes a lot of sense.

Speaker Change: I know what my title of consistent we talked about discounting of excess inventories and building inventory and what we're doing is cleaning up the inventory get rid of.

Speaker Change: Slow moving stuff to free up working capital to invest in.

And better skus into new products and in our best selling Skus, yes.

Speaker Change: Alright that makes a lot of sense, Okay, and then lastly for me before I pass it onto other so Jeremy I know you were very upbeat about the Margarita avail launch when you announced this.

Anthony Lebiedzinski: Okay.

Jeremy Hoff: And then, you know, lastly for me, before I pass it on to others, so Jeremy, I know you were very upbeat about the Margaritaville launch when you announced this, I believe in October. Can you provide any more details as to how impactful that deal could be for you guys? Well, we believe it's... to be very impactful. You know, what's interesting about the Margaritaville license from our standpoint is it really affects a lot of our divisions. It's not really just going to be a Hooker-branded thing, for example, it's going to be Hooker Legacy. It's going to really affect positively, we believe, our contract.

Speaker Change: I believe in October can you provide any more details as to how impactful that deal could be for you guys.

We believe it's it's going to be very impactful.

Speaker Change: What's interesting about the Margaritaville license from our standpoint is it really affects a lot of our divisions. It's not really just going to be a hooker branded thing for example, it's going to be hooker legacy.

Speaker Change: To really affect positively we believe our contract divisions.

Jeremy Hoff: There's a lot of opportunity with hospitality and through each contract that will give us an advantage with a lot of those jobs. You know, Margaritaville is building a significant number of homes in areas that will be attached to in pricing those models and what not. It opens a lot of doors that would not be open otherwise.

Speaker Change: There's a lot of opportunity with hospitality and through H contract.

Speaker Change: That will give us an advantage with a lot of those jobs because Margarita Bill is building a significant number of homes in areas that will be attached to.

Speaker Change: In pricing those those models and whatnot. So there's just it opens a lot of doors that.

Speaker Change: That would not be open otherwise.

Anthony Lebiedzinski: Gotcha, well thank you very much and best of luck. Of course, thank you Anthony. Thank you.

Jeremy Hoff: Got you. Thank you very much and best of luck of course, Thank you Anthony.

Operator: Our next question coming from the line of Dave Storms with Stonegate.

Speaker Change: Thank you and our next question coming from the line of Dave Thomas with Stonegate. Your line is now open.

Dave Storms: Your line is now open. Good morning. I just wanted to ask my first question around the macro demand environment going into this holiday season. Is there any potential to see continued discounting through the back part of this year? Repeat that, Dave. There was a little bit of static or something on that. Apologies. Just around the macro environment and the holiday season coming up, is there any potential for continued discounting as we go into the back quarter of the year?

Speaker Change: Good morning, Good morning, Hey, Dave.

Speaker Change: Hi, Good morning, just wanted to ask my first question around the macro demand environment going into this holiday season is there any potential to see continued discount tegra.

The back back part of this year.

Speaker Change: Can you repeat that Dave.

Speaker Change: Little bit of static or something on the line.

Speaker Change: Apologies just around the macro environment.

Speaker Change: And the holiday season coming up is there any potential for continued discounting as we got into the back quarter of the year.

Jeremy Hoff: We don't believe any more than normal. Normal, yeah, normal promotions, you know, e-com in particular. run some specials, but it's targeted, it's targeted. Understood.

Speaker Change: We don't believe any more than any more than normal normal normal promotions.

<unk> in particular.

Speaker Change: We tend to run some specials, but it's targeted its targeted promotions.

Dave Storms: Thank you.

Jeremy Hoff: And then just wanted to touch on the bankruptcy. Are there any other customers that you're seeing as highly at risk? And is there any recourse to recover some of that write-off? Well, you probably know who that big customer is. There's probably not a lot of recourse. done what we can to mitigate that business, that loss. And that's really the only big customer that we, you know, there's always a small customer here or there that's bankrupt. We haven't really noticed a particularly significant change. bankruptcies or distressed receivables, but that was one that... That was one that was just, it was a big customer and we, you know, we got caught.

Speaker Change: Understood. Thank you and then just wanted to touch on the bankruptcy are there any other customers that youre seeing as highly at risk.

Speaker Change: And is there any recourse to recover some of that write off.

Well, you probably know who that big customer is.

Speaker Change: <unk>.

Speaker Change: There's probably not a lot of recourse.

Speaker Change: We've done what we can to mitigate that that loss.

Speaker Change: And Thats really the only big customer.

Speaker Change: There's always a small customer here, they're bankrupt, we haven't really noticed a particularly.

Speaker Change: Significant change in the peso.

Speaker Change: Bankruptcies are distressed the distressed receivables, but that was one.

Speaker Change: That was one that was just it was a big customer and we.

Speaker Change: We got caught.

Dave Storms: Understood, and then I did have another question around the license and deal.

Speaker Change: Understood and then I did have another question around the licensing deal I was hoping you could speak a little more around the logistics and next steps and maybe what early what does it look like it looks like this is a <unk>.

Jeremy Hoff: I was hoping you could speak a little more around the logistics and next steps and maybe what early wins would look like. It looks like this is a decent amount of white space for you all. Yeah, that's what you're mentioning is the reason we're going to launch in October. The temptation, of course, is to move faster than that and try to launch in April. You know, right is going to be much more important than fast for us. Right. So, you know, the logistics right now of everything are pulling that together from a, you know, Sunset West, our outdoor company is obviously heavily involved.

Speaker Change: This amount of white space for you all.

Speaker Change: Yes, and Thats. What you are mentioning is the reason we're going to launch in October.

Speaker Change: The temptation of course is to move faster than that and try to launch in April.

Speaker Change: Right is going to be much more important and fast for us and we want to get this.

Speaker Change: Right so.

The logistics right now of everything are pulling that together from a sense that westar outdoor company.

Speaker Change: Obviously heavily involved.

Jeremy Hoff: All of our domestic upholstery is involved, Hooker Branded is involved, contracts involved, hospitality. So right now the biggest thing we're working on is pulling everything together the way it needs to be pulled together in order. put our best foot forward on a lot.

Speaker Change: All of our domestic upholstery is involved hooker branded involve contracts involved hospitality. So right now the biggest thing we're working on is pulling everything together.

Speaker Change: The way it needs to be pulled together in order to make to put our best foot forward on a launch so that will continue until we get there.

Dave Storms: That will continue. That's very helpful.

Dave Storms: And then just one last question for me, a two-parter around cost savings. Should we expect any further severance costs in 4Q? And then looking into the next year, should we expect the $10 million to be evenly spread out, or would we expect that to be more back-end weighted as those cost savings ramp? We don't expect significant additional, at this point anyway, we don't expect significant additional restructuring costs. We've got one more element. One more reasonably large element of our cost savings program that we still need to execute. But I would say that most of it is going to be in place for the better part of the year.

Speaker Change: That's very helpful. And then just one last question for me a two quarter around cost savings.

Speaker Change: Should we expect any further severance costs and <unk> and then looking into the next year should we expect the $10 million to be.

Speaker Change: Evenly spread out or would you expect that to be more backend weighted as the close those cost savings ramp.

We don't expect significant additional at this point anyway, we don't expect significant additional restructuring costs. We've got one more elements one more reasonably large elements of our cost savings program that we still need to execute but I would say that most of it is going to be in place for <unk>.

Speaker Change: The better part of the year.

Jeremy Hoff: haven't started really, we haven't fully realized a lot of those savings yet, but we expect to start seeing those. fourth quarter. And I would say that most of the $10 million will be evenly spread.

Speaker Change: We haven't started really we haven't fully realized a lot of those savings yet, but we expect to start seeing those in the fourth.

Speaker Change: The fourth quarter.

Speaker Change: And I would say that most of the $10 million will be evenly spread through that through next year.

Dave Storms: Understood.

Dave Storms: That's all. Very helpful. Thank you. That's all very helpful.

Speaker Change: Understood. Thanks, all very helpful.

Speaker Change: Google Cloud.

Speaker Change: Yes.

Dave Storms: Thank you for taking my questions and good luck in the fourth quarter. Thank you.

Speaker Change: That's all very helpful. Thank you for taking my questions and good luck in the fourth quarter. Thank you.

Operator: And I am showing no further questions in the Q&A queue at this time.

Speaker Change: Thank you.

Speaker Change: I'm showing no further questions in the Q&A queue. At this time I will now turn the call back over to Mr. Jeremy Hall for any closing remarks.

Jeremy Hoff: I will now turn the call back over to Mr. Jeremy Hoff for any closing remarks. I would like to thank everyone on the call for their interest in Hooker Furnishings and wish you all a happy holiday season. We look forward to sharing our fiscal 25 full year results in April next year. Take care.

Jeremy Hoff: I'd like to thank everyone on the call for their interest in Hooker furnishings and wish you all a happy holiday season, we look forward to sharing our fiscal 'twenty five full year results in April next year take care.

Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation, and you may now disconnect.

Speaker Change: Ladies and gentlemen that does conclude our conference for today. Thank you for your participation and you may now disconnect.

Speaker Change: Okay.

Okay.

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Speaker Change: Bill.

Speaker Change: Yes.

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Speaker Change: Okay.

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