Despite Logistics Woes, Home Goods Companies Powering Ahead

Updated: Jul 7

By Sourcing Journal

This article was published in Sourcing Journal June 10, 2021. We are sharing because it provides examples of a sewn products sector that is currently thriving.


The home goods sector is experiencing strong growth as the pandemic drove consumers to invest in their houses inside and out. Companies such as Hooker Furniture and Malouf are overcoming logistics problems with significant sales gains and investments in product, distribution and delivery.


Hooker Furniture

Hooker Furniture Corporation reported net sales increased 56 percent to $162.9 million for its fiscal 2022 first quarter ended May 2 compared to the year-ago period.


Net income for the first quarter was $9.4 million, or 78 cents per diluted share, with the quarterly revenues and net income representing record-high sales and earnings for the company’s fiscal first quarter.


“We’re pleased to have surpassed our goal to return to the growth trajectory we were on prior to the global pandemic and economic downturn,” CEO Jeremy Hoff said. “While we expected a sizable sales improvement over last year’s first quarter when the pandemic-driven economic downturn began in mid-to-late-March, our results this quarter also represent a strong improvement over the first quarter of fiscal 2020.”


Hoff said compared to the first quarter two years ago, sales were up 20 percent, profitability improved significantly in all segments and incoming order rates were more than double historical norms.


“I’m especially proud of our team in delivering this strong rebound a year after the onset of the pandemic despite current industrywide logistics challenges including higher ocean and freight transit costs, raw materials shortages and inflation,” he said.


The Hooker Branded Segment led the way with an 89 percent sales gain compared to a year earlier, while the Home Meridian and Domestic Upholstery segments both reported 46 percent sales increases versus the prior year period. Hoff attributes the gains to industrywide high consumer demand for home products and dramatic improvements and expansions of product lines throughout company divisions over the past few years.


“With our strategy to prioritize best sellers, we maximized our ability to perform against significant operational constraints,” Hoff said. “Due to the industrywide demand surge for home furnishings, we were able to sell through some slow-moving inventory in the favorable environment. As a result, the Hooker Branded segment remained highly profitable due to increased revenues and reduced discounting and contributed over 75 percent of consolidated operating profit during the quarter.”


Home Meridian first quarter sales were up 46 percent to $84.4 million in the period, despite production challenges with Asian sources and logistics challenges, Hooker said.


First quarter operating income in the segment was $866,000, an increase of $3.3 million over the loss recorded during the economic shutdown last year. Operating income improvement was driven by higher sales and reductions in allowances, spending and fixed expenses, which were partially offset by higher logistics costs.


“Profits for the Home Meridian segment were subdued by significant excess freight costs experienced during the first quarter,” Hoff said. “We’ve implemented freight surcharges and price increases to mitigate these excess costs, but these headwinds are expected to continue impacting results in the segment over the next several months.”


In general, Home Meridian’s service position improved in the quarter, as in-bound shipments replenished out-of-stock items, but ACH, Home Meridian’s e-commerce division, struggled to return to an in-stock position after selling out of many best sellers during the early months of the pandemic, the company noted. Hooker said container availability and cargo bookings will continue to constrain service levels for the foreseeable future at Home Meridian.


“Our consolidated orders and backlogs are more than double historical norms as we head into the summer months,” said Hoff. “Given this strong position, we’re cautiously optimistic, considering the industry-wide supply chain, logistics and raw materials shortages and inflation. We believe we have mitigated these dynamics as much as possible through surcharges and price increases, yet these supply-side factors are unpredictable and often involve unexpected changes occurring almost daily.”


The CEO said several macroeconomic factors provided “a nice runway for growth,” such as the ongoing strong housing market and favorable demographics with the millennial generation “becoming highly engaged in household formation and home furnishing purchases.”


“On the negative side, we expect increased competition for the consumers’ discretionary income from industries such as travel, apparel and in-person events as the COVID-19 vaccinations continue to roll out,” he added. ““While we expect the extraordinary levels of demand for home furnishings to diminish somewhat, we also expect that demand for home furnishings will settle into a higher level of demand than pre-pandemic. Consumers aren’t going to fall out of love with their homes, and we are positioned to help them enhance their homes with comfortable, stylish and quality home furnishings.”


Malouf

To support the company’s growth in multiple product categories and to improve shipping and stock availability for its retail partners, Malouf Home has acquired a nearly 1.2 million-square-foot warehouse building in South Carolina.


Malouf, which sells beds and bedding, is now shipping product out of the facility to clients on the East Coast. Malouf now operates out of six distribution centers, in California, Ohio, North Carolina, South Carolina, Texas and Utah, where the company has its headquarters in Logan. Altogether, the company’s distribution network consists of over 6 million square feet.


“As we continue to expand our furniture line, we need more space to store the items and fulfill orders,” Eric Holmstead, director of North American sales, said. “The South Carolina building has capacity for all of our products, not just furniture, and gives us room for future growth. Home furnishings are still in high demand, so we’re planning accordingly to make sure we always meet that need.”


The new warehouse building includes 118 docks, two drive-ins and about 300 trailer spots.

“The facility is essentially a blank canvas, so we can be creative with our racking systems and other processes that support our two-day shipping policy,” Ryan Egbert, national director of distribution, said. “Over the past several weeks, we have fulfilled staffing requirements and have also updated the building so everything aligns with company standards and procedures.”


Malouf Home offers a wide range of innovative products, including mattresses, adjustable bed bases, furniture, pillows, sheets, mattress protectors, bed frames and mattress toppers. Malouf products are available in more than 15,000 retail partner locations in the U.S., and its growing international team now serves over 56 countries.

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