Hooker Furniture Reports Record Sales and Profits for First Quarter; Results Include Two Months of Operations from Bradington-Young

Business Wire, March 27, 2003

Business Editors

MARTINSVILLE, Va.--(BUSINESS WIRE)--March 27, 2003

Hooker Furniture (Nasdaq-SCM: HOFT) today reported sales of $74.5 million for its first quarter ended February 28, 2003, the highest quarterly net sales in its history and an increase of 22.2% from $60.9 million in the first quarter of 2002.

First quarter 2003 net income of $5.0 million or $0.88 per share was a Company record for "first quarter net income" and represents a 54.6% increase from $3.2 million or $0.57 per share for the same period last year.

The 2003 first quarter sales and income include the results of Bradington-Young ("B-Y"), the Company's newly acquired upscale leather upholstery operation, for January and February 2003. The Company completed its acquisition of B-Y on January 2, 2003, for $24.5 million in cash less approximately $4.1 million in assumed debt, plus a post-closing working capital adjustment expected to be approximately $1.6 million. The Company also expects to capitalize acquisition-related fees of approximately $500,000, most of which were paid during the first quarter of 2003.

The 2003 first quarter sales and earnings increases are attributed to higher unit volume of imported product lines and the inclusion of B-Y's results of operations in the Company's results from the date of acquisition. Net sales for the Company's case goods business increased 7.9% for its 2003 first quarter compared with the year ago period.

"We are pleased with our overall performance given the sluggish economy and current poor retail environment," said Paul B. Toms Jr., chairman and chief executive officer. Toms observed that the latest quarter continues trends seen in the last several quarters: solid sales growth in imported product lines offset by declining levels of incoming orders and shipments for domestically produced case goods products.

"Shipments of imported products are increasing as we improve the flow of inventory from overseas suppliers, enabling us to ship our backlog and improve delivery service to all our customers," Toms said, adding, "we believe our improved service level has contributed to the significant increase we have seen in new orders for imported products." Product availability to Hooker's customers has improved across all product lines, with 85% of imported products and 90% of domestically produced case goods presently available for shipment within 15 days of order receipt. Most of B-Y's upholstery products are custom built for shipment within four weeks of order receipt, consistent with industry norms.

The Company's manufacturing employees continued to work reduced, 35-hour work schedules in all domestic case goods plants for the 2003 first quarter and also took an additional week down in December, reflecting the weakness in incoming orders and to control inventory levels. The Company expects to stay on 35-hour workweeks for the foreseeable future and has scheduled an additional week down in April. B-Y's upholstery facilities continued to operate on reduced, 36-hour work schedules during January and February 2003. We expect B-Y to continue working on reduced schedules for the foreseeable future. We generally evaluate B-Y's work schedules monthly based on incoming order rates.

Hooker is optimistic about the potential sales from its four newest domestically produced bedroom furniture groups introduced at the Fall 2002 International Home Furnishings Market. These bedroom groups were well-received by retail buyers across the country and the Company is currently in the process of shipping the last of these four introductions to stores. "We're optimistic about the prospects for the new bedroom groups once retail conditions improve," Toms said. "Our employees have worked hard to produce four new bedroom groups over the course of the last four months while maintaining excellent product quality and staying on schedule despite numerous weather related delays," he said, adding, "About ninety-six percent of our complete line of bedroom products is in stock and ready for immediate delivery. With just a slight upturn in business, we are well-positioned to grow our bedroom sales, which should have a favorable impact on our overall business."

For the first quarter, Hooker reported its gross profit margin increased to 27.6% of net sales, compared to 25.3% for the first quarter of 2002, due primarily to the mix of products shipped. The gross profit margin for upholstery products manufactured by B-Y is comparable to the gross profit margin the Company achieves on its domestically produced case goods, ranging typically from 20-25% of net sales. During the 2003 first quarter, the Company's domestic case goods operations continued to experience reductions in raw material costs as a percentage of sales volume, compared to the prior year period. However, these improvements were offset by increased labor and overhead costs as a percentage of sales volume, resulting from the reduced work schedules and weather-related downtime experienced during the 2003 quarter. In comparison, the Company's domestic case goods factories worked full 40 hour-per-week schedules during January and February of 2002.