Bear of the Day: Hooker Furniture Corporation (HOFT)

A slump in the industry keeps HOFT shares on the decline

Hooker Furniture Corporation (HOFT) has seen a slowdown in furniture sales as consumers have stayed on the sidelines. This Zacks Rank #5 (Strong Sell) recently missed on fiscal first quarter earnings.

In business for 91 years, this Virginia-based small cap company makes residential wood, metal and upholstered furniture. In February 2016, it acquired Home Meridian International which expanded the business. It is now one of the top 3 sources on the US furniture market.

Hooker Furniture has manufacturing facilities in Virginia and North Carolina with showrooms in High Point, N. C. and Ho Chi Minh City, Vietnam. Hooker has 8 distribution centers in North Carolina, Virginia, California and Vietnam.

HOFT Suffers a First Quarter Earnings Miss

On June 7, Hooker reported first quarter results which missed the Zacks Consensus Estimate for the second quarter in a row. Earnings were 36 cents per share compared to the Zacks Consensus of 46 cents per share, which was a 21.7% miss.

Excluding the Home Meridian sales, Hooker legacy sales fell 7% due to lower sales in the Hooker Casegoods segment.

The lower sales were reflective of the lower sales across the industry.

But Hooker said that since the end of the first quarter, it has seen improvement in the incoming order rate for both Hooker and Home Meridian casegoods as the consumer has resumed purchasing furniture.

A hot housing market and a record high stock market should also boost sales going forward.

Hooker Furniture Sees Improvement in the Second Half 

While the summer historically remains a slow period for furniture purchases, Hooker is already seeing improvement.

In May, they saw improvement in consumer spending and believe that will accelerate into the important Labor Day weekend which opens the fall selling season.

But the analysts aren’t buying the improvement story.

The fiscal 2017 Zacks Consensus Estimate has fallen to $2.00 from $2.20 in the last 60 days. Although, that is still earnings growth of 34% compared to last year, it is mostly due to its Home Meridian acquisition.

HOFT Shares Have Plunged in 2016

It’s been a tough year to be a stock owner of the furniture companies. Check out shares of Hooker this year.

 

 

 

 

 

 

 

Shares are cheap, with a forward P/E of 11.8. But investors are going to have to wait for a turnaround in the furniture industry. They’ll at least get a dividend, yielding 1.7%, for their troubles.

But if you must be in a furniture play right now, you might want to consider La-Z-Boy Incorporated (LZB) instead. It’s a Zacks Rank #2 (Buy) with rising earnings estimates for this fiscal year.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.

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