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Edited Transcript of HOFT earnings conference call or presentation 12-Jun-19 7:00pm GMT

Q1 2019 Hooker Furniture Corp Earnings Call

Martinsville Jun 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Hooker Furniture Corp earnings conference call or presentation Wednesday, June 12, 2019 at 7:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Donald Lee Boone

Hooker Furniture Corporation - Co-President of Home Meridian Segment

* Douglas Townsend

Home Meridian International, Inc. - EVP and CEO of SLH

* Paul A. Huckfeldt

Hooker Furniture Corporation - CFO and Senior VP of Finance & Accounting

* Paul B. Toms

Hooker Furniture Corporation - Chairman & CEO

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Conference Call Participants

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* Anthony Chester Lebiedzinski

Sidoti & Company, LLC - Senior Equity Research Analyst

* Todd Lechtenberger - Amalfi Investments; Chief Executive Officer

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Presentation

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Operator [1]

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Greetings, ladies and gentlemen, and welcome to the Hooker Furniture quarterly investor conference call reporting its operating results for the fiscal 2020 first quarter end year. (Operator Instructions) As a reminder, this conference call is being recorded.

It is now my pleasure to introduce your host, Paul Huckfeldt, Vice President, Finance and Chief Financial Officer for Hooker Furniture Corporation.

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Paul A. Huckfeldt, Hooker Furniture Corporation - CFO and Senior VP of Finance & Accounting [2]

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Thank you, Ashley. Good afternoon, and welcome to our quarterly conference call to review our financial results for the fiscal 2020 first quarter, which ended May 5, 2019. We certainly appreciate your participation this afternoon. Paul Toms, our Chairman and CEO; and Lee Boone, Co-President of our Home Meridian division, will join me for our prepared remarks. For the question-and-answer portion of the call, several other of our business units heads will be available to take questions, including Michael Delgatti, President of our Hooker Domestic Upholstery and Emerging Channels; Home Meridian Co-President, Doug Townsend; Jeremy Hoff, President of Our Hooker Branded segment; and Anne Jacobson, our Chief Administrative Officer.

During our call, we may make forward-looking statements, which are subject to risks and uncertainties. A discussion of factors that could cause our actual results to differ materially from management's expectations is contained in our press release and SEC filing announcing our fiscal 2020 first quarter results. Any forward-looking statement speaks only as of today, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after today's call.

This morning, we reported consolidated net sales of $135.5 million and net income of $2 million or $0.17 per diluted share for our fiscal '20 first quarter ended May 5, 2019. Compared to last year, our net sales decreased 5.2% or $7.4 million, and net income decreased 72% or $5.2 million. Earnings per diluted share decreased from $0.61 a year ago.

Paul Toms will comment on our fiscal 2020 first quarter results.

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [3]

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Thank you, Paul, and good afternoon, everyone. Our disappointing earnings performance in the first quarter was driven primarily by several cost-related issues in our Home Meridian HMI segment. Reduced demand and soft retail conditions across the home furnishings industry drove the consolidated 5% sales dip, which also weighed on our earnings for the quarter.

Given the sales decline and the impact of a 10% tariff on furniture and furniture component parts imported from China, our Hooker Branded segment and All Other performed reasonably well for the quarter, but we have strategies for improvement in all of our businesses.

The cost-related issues at Home Meridian included a large quality chargeback, higher freight and demurrage costs as well as costs associated with higher inventories. In addition, Home Meridian's margins were more affected by the 10% tariff on imports from China than our other business units due to the nature of HMI's customer base, as many of its customers had large orders already in the pipeline at lower pre-tariff prices. However, increased pricing and resourcing strategies are in place. Our planned shift of production out of China to non-tariff countries is mostly on schedule. In fact, the shift is accelerating during the current quarter and is expected to be mostly complete by the end of the fiscal third quarter.

As we reported in our fourth quarter earnings release in mid-April, orders and backlogs were down in February and March and continued to be down throughout April. Reduced demand negatively impacted sales across all our business units and was experienced consistently across the industry, according to the reporting of most public furniture companies and what we've heard from conversations with our retail customers. We've been encouraged, however, by the mid-single-digit uptick in orders during the fiscal May period in our Hooker Branded segment. We believe Home Meridian's order rates remained below prior year due to many of their larger customers still delaying receipt of shipments and placement of reorders in response to the softer retail environment faced in the early part of the year. We expect to see Home Meridian orders start to improve during the fiscal 2020 second quarter and for second half performance to be much better for this segment.

Due primarily to loss of margin in the HMI segment, gross profit and operating income both decreased approximately $6.5 million in the quarter. The decreased operating profit in the Hooker Branded segment was mainly attributable to lower net sales. We're addressing all these challenges with strategies to improve profitability in each of our businesses. While we do expect the challenges to persist throughout the summer, we're more optimistic about the fall selling season. We believe that many of these issues negatively impacting profitability at Home Meridian are unlikely to reoccur. These include the large quality-related chargeback, which was confined to a single customer and limited product, demurrage cost, excess freight cost at year-end, delayed implementation of tariff-prompted price increases and postponed shipments to a few large retailers. While the lion's share of our operating units are on the residential furniture industry, it's noteworthy that both of our nonresidential business units, Samuel Lawrence Hospitality and H Contract, reported significant sales increases during the quarter.

SLH sales more than doubled and ended the quarter with a backlog nearly 70% higher than during the same period last year. H Contract had an approximate 40% sales increase, along with improved gross margins and operating profits.

Other business units that performed well in the quarter included Hooker Upholstery, which had a 3% sales increase and incoming orders 5% higher than a year ago. In the Home Meridian segment, Accentrics Home, which is dedicated to emerging channels such as e-commerce, grew sales by nearly 20%.

Turning now to the economy as a whole, the most significant macroeconomic development so far this year has been the increased tariff imposed on furniture and furniture components imported from China. Finished furniture and component parts shipped from China after May 10, 2019, became subject to an additional 15% tariff. The additional amount brings the total tariff on furniture imports from China to 25%.

As of February 2019, Hooker Furniture Corporation imported over 40% of our product line from China. By segment, our strategies to address the increased tariffs include at Home Meridian, the company's PRI value priced upholstery division is resourcing production away from China, projecting that 90% of production will be in non-tariffed countries by the fall. Other divisions are moving production in non-tariff countries to a lesser degree. Home Meridian is also receiving vendor price concessions from many Chinese producers and raising prices to customers where possible.

Hooker Casegoods and Hooker Upholstery are passing on most of the increased tariff costs beyond the amount offset by vendor concessions in the form of a surcharge that can be reversed if and when tariffs are dropped or reduced. Hooker Upholstery is moving a significant portion of their production outside of China during the coming 6 months. At Hooker Casegoods, our long-term relationship and the specialized craftsmanship of the company's main Chinese vendor makes moving entirely away from China a less desirable action. However, tariffs will be priced into all new items and the vendor is opening a factory in Vietnam where some production can be shifted. The company is continuing to develop production in alternative countries and is receiving vendor price concessions from Chinese producers.

Domestically produced upholstery divisions included in All Other are enacting selective price increases and receiving vendor concessions to help mitigate the impact of tariffs on component parts imported from China.

Taking a closer look at each of our segments, I'll begin with the Hooker Branded segment. As mentioned, given the sales decline and the business disruptions from the initial 10% tariff, this segment performed well. Our net sales in the segment were down $3.2 million or 7.4%. The segment was still highly profitable with a 13% operating margin during the quarter, and upper single-digit sales increase at Hooker Casegoods was partially offset by Hooker Upholstery's 3% sales increase. All Other, which includes domestically produced upholstery divisions, Bradington-Young, Shenandoah and Sam Moore, along with H Contract, reported a net sales decrease of $1.2 million or 4.2% from $29.5 million in last year's first quarter to $28.3 million in the current first quarter.

Lower sales were driven by reduced shipments in our domestic upholstery manufacturing divisions, partially offset by continued growth at H Contract, which specializes in furnishings for senior living and retirement communities.

Profitability performance in the segment was solid with the segment reporting an operating income margin of approximately 10%. A new Sam Moore division President joined the company shortly after the end of the quarter and will focus on growing the top line through helping Sam Moore transition into a more robust, full-line upholstery resource, with a broader selection and better-selling programs.

At this point, I'd like to turn the call over to Lee Boone to give more detail on the HMI segment this quarter.

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Donald Lee Boone, Hooker Furniture Corporation - Co-President of Home Meridian Segment [4]

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Thanks, Paul. Home Meridian sales decreased $3 million or 4.2% compared to last year's first quarter, and we reported a $5 million operating loss in the quarter. Higher-than-expected nonrecurring quality-related charges in the quarter negatively impacted sales by $2.1 million or 3%, and accounted for about 40% of the segment's quarterly operating loss. Home Meridian's profitability was also negatively impacted by import tariffs that were not fully recovered in selling prices, excessive freight costs and business disruptions from the resourcing of production away from China. Demurrage and per diem costs due to port congestion and delays by us and some customers on receipt of inventory also contributed to high cost of goods sold for the quarter.

Management is implementing numerous countermeasures to improve top line and bottom line results. Top line initiatives include new product and licensing initiatives with mega accounts as well as a new container mixing warehouse in Vietnam operational this month, which will enable retailers to mix product from multiple factories on the individual shipping containers.

Countermeasures to improve profitability include sourcing moves away from China and underperforming factories, pricing improvements with select retail customers, elimination of certain low-margin products and focused spending reductions. Unfortunately, the recently increased tariff rate of 25% on China-sourced goods will continue to impact results into Q2, hopefully, to a lesser degree as we continue to move production to other countries.

Our countermeasures to mitigate tariffs are well underway. We have adjusted pricing on all goods remaining in China to make up margin losses, and we are making good progress resourcing production to Vietnam and Malaysia.

Approximately 50% of our PRI upholstery reproduction will be produced in Vietnam by the end of Q2 and roughly 90% is scheduled to move by this fall. Not only will these moves solidify our new upholstery base outside China, it will deliver higher margins on the transferred products. In addition to motion upholstery, we are shifting production of other merchandise categories away from China, including hospitality furnishings, kitchen cabinets, accent casegoods and upholstery headboards. Last year, 35% of Home Meridian's production came from China. By year-end, we expect that number to be less than 15%.

Sluggish furniture retail conditions industry-wide in Q1 resulted in reduced orders, customer requested shipping delays and corresponding lower sales. The biggest shortfall were in our clubs business where we did not receive a reorder of a major upholstery purchase from last year. In addition, a few of our largest retailers experienced significantly lower sales in Q1, which combined with long supply chain lead times and the recent tariff increase, caused them to delay and cancel orders in Q1 as well as Q2.

Q1 results were also negatively impacted across all business units by unusually high freight and container expenses resulting from logistical backups at retailer warehouses and Home Meridian's stateside warehouses. These issues were costly but temporary problems, and we're working with each individual customer and warehouse location for a quick resolution. We expect significant improvements in Q2 and beyond.

The combination of all these issues occurring on top of lower sales volume in Q1 lead to the operating result for the quarter -- the operating loss for the quarter. In addition to the remedial actions outlined above, Home Meridian is conducting a thorough profitability review to improve future results. Additional margin improvements will come from repricing merchandise for certain mega accounts, the elimination of low-margin products and targeted spending reductions across the company.

On a more positive note, Home Meridian launched a new mass channel division in Q1 that is dedicated to developing business with mass retailers. The core product line of the new mass merchants division is ready to assemble, or RTA furniture, a new category for HMI representing significant incremental sales and profit growth opportunity. Two experienced leaders have been hired from the industry who will develop the business this year. First shipments are targeted for Q4.

Fortunately, we are beginning to see some strengthening in our incoming orders as strong Memorial Day sales delivered better results. We are well positioned to benefit from improving retail conditions as they develop. We have not lost floor space retail and in fact, stand to gain placements with many of largest customers with a wave of over 30 new product programs that are scheduled for shipment in Q2 and Q3.

Despite the poor performance in Q1 and the remedial actions underway, Home Meridian management is convinced our overall strategy is sound and will deliver long-term results as well as enhanced shareholder value.

At this time, I'd like to turn the call over to Paul Huckfeldt who will elaborate further on our quarterly results.

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Paul A. Huckfeldt, Hooker Furniture Corporation - CFO and Senior VP of Finance & Accounting [5]

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Thank you, Lee. Consolidated average selling prices increased 4.9%, mostly due to favorable product and customer base but that was not sufficient to offset the unit volume decrease of 8.7%, which resulted from decreased order volumes in both our reporting segments and in All Other. Unit volumes were down high single digits -- high single to low double digits across all of our segments.

Consolidated gross profit decreased $6.4 million to $25.5 million for the fiscal 2020 first quarter and decreased from 22.4% to 18.8% as a percent of net sales. Hooker Branded gross profit decreased both in absolute terms and as a percent of net sales due to lower Hooker Casegoods sales and to a lesser extent, increased product costs, partially offset by the increased sales and higher gross margin in our Hooker Upholstery division, which is benefiting from well-placed product introductions last year.

Gross profit significantly declined in absolute terms and as a percentage of net sales in the Home Meridian segment. As we've already discussed, margin was negatively impacted by quality chargebacks, unrecovered tariff and freight charges and some lower-margin sales programs that we've been working to improve as well as increased warehousing and distribution costs.

Gross margin decreased slightly in absolute terms but increased as a percent of net sales in All Other, primarily due to increased sales and profitability in H Contract and moderately lower material costs in our domestic upholstery units, partially offset by higher direct labor and overhead as a percent of sales, which is attributable to the lower volumes.

Consolidated selling, general and administrative expenses stayed essentially flat but increased as a percent of sales due to the lower sales in the quarter.

Higher employee compensation and benefits costs were offset by lower selling expenses on the lower sales volume. Recognition of a deferred gain of about $275,000 related to the sale of a former distribution facility partially offset the absence of a $1 million gain on company-owned life insurance, which was recorded in this quarter last year. For these reasons, operating income for fiscal 2020 first quarter decreased $6.5 million to $2.9 million. Operating margin decreased from 6.6% to 2.1%.

On the balance sheet, our cash balance increased $16.8 million from the fiscal 2019 year-end to $28.3 million. We generated $20.3 million in cash from operating activities, much of it from the collection of accounts receivable that was outstanding at the end of the fiscal fourth quarter, and $1.4 million in proceeds from the sale of that former distribution facility, which we had owner-financed. I should also note that we adopted ASC 842, the new lease accounting standard this quarter, which put about $44 million of new assets and a similar liability on our balance sheet.

At the end of the fiscal 2020 first quarter, we had access to $27.7 million on our revolving line of credit and $24.5 million of cash surrender value of our company-owned life insurance, which gives us considerable financial flexibility.

Now I'll turn the call back to Paul Toms for some closing comments and his outlook.

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [6]

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Thanks, Paul. While we were glad to see mid-single-digit improvement and orders in the Hooker Branded segment so far in the second quarter, the order activity is inconsistent across divisions. Overall, the residential furniture industry is experiencing deflated demand in somewhat sluggish retail conditions. We expect the newly enacted 25% tariff on Chinese imports to cause some additional business disruptions in the industry throughout the next several months. We're more optimistic about the second half of the year and expect demand to increase to normal or above-average levels beginning around Labor Day and continuing into the fall, which is traditionally the strongest season of the year for furniture sales. We also expect that some of our large retail customers will have completed their rebalancing of inventories and be in a better position to receive new products.

Both short term and long term, we're addressing all of our challenges. And almost every division, we have active strategies to expand our business beyond the current product line and customer base. We remain confident in our business model, in strategies and in our strategic execution and are making the necessary investments, both capital and human to perform at a very high level.

This ends the formal part of our discussion, and at this time, I'll turn the call back over to our operator, Ashley, for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Anthony Lebiedzinski with Sidoti & Company.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [2]

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So I wanted to get just a better understanding as far as HMI, the larger loss, just in terms of what was kind of nonrecurring versus recurring. I know you guys gave some details as far as the quality-related chargeback of $2.1 million. Just wanted to get a better sense of the magnitude of costs related to the higher freight and demurrage costs as well as the higher costs related to inventories.

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Douglas Townsend, Home Meridian International, Inc. - EVP and CEO of SLH [3]

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The freight cost -- Anthony, this is Doug Townsend. The freight cost related to the return from the fourth quarter filled up the warehouses, and we had to get temporary warehouses, and then we had these extra per diem and demurrage charges that went through Q1 as well, and we'll have a little bit in Q2 as well, but then that will -- then those will go away. And the short-term warehouses, we'll get out of in Q3 and Q4. So that will be with us for a little while. The return charge was a onetime event and the quality charge was a onetime event that we don't expect to happen again.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [4]

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Got it, okay. All right. And then so back in the fourth quarter, there was also a product quality issue from an Asian vendor. So is this related to that? Or is this just a spillover from the fourth quarter? Or is this a separate issue?

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Douglas Townsend, Home Meridian International, Inc. - EVP and CEO of SLH [5]

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The freight charges and the extra warehouses are related to that return. We actually didn't get the returns until Q1, and so that's when the freight charges came but we had accrued for it and talked about it in Q4.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [6]

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Got it. Okay. All right. That's helpful. Okay. And then so obviously, you continue to move product sourcing away from China, you gave us some numbers for some of the segments. So in totality, by the end of the fiscal year, where would you expect your percentage -- as far as your penetration from China, whether it's percentage of sales or percentage of imports, so where do you think that will be by the end of the fiscal year?

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Donald Lee Boone, Hooker Furniture Corporation - Co-President of Home Meridian Segment [7]

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This is Lee, Anthony. By year-end, we anticipate having 90% to 95% of the China production moved out of China that we intend to move, not 100% will be moved out because there's not appropriate places to move a small part of it, but 90% to 95% will be moved by the end of this year.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [8]

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Right. But is that specifically for Home Meridian or is that for the company as a whole?

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Donald Lee Boone, Hooker Furniture Corporation - Co-President of Home Meridian Segment [9]

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That's for Home Meridian.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [10]

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Home Meridian. But my question was just in terms of Hooker Furniture Corporation as a whole.

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [11]

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So our reliance on China was 40% at the end of last year. I would think by the end of this year, it would be closer to 20%.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [12]

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Got it. Okay, that's very helpful.

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [13]

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I do think we have strategies in place between concessions by vendors and price increases to mitigate most of the impact of the products, the 25% tariff on the products that remain in China.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [14]

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Got it. Okay. And also as far as your inventories, where would you expect those to be at the end of the fiscal year?

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [15]

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I don't know that we've modeled that, Anthony, but probably not a lot different than where they are now. The part of our business that's supported by inventory, specifically e-commerce for Home Meridian and for Hooker and on the Hooker side, interior design business and a lot of our smaller foundational accounts, that business label grow in total, and so we'll need more inventory to continue to support at that high level. At the same time, we've probably got $10 million or $12 million of more inventory than we need right now, half related to the return from the fourth quarter and the other half just inventory build as business slowed, but we had orders placed based on expectation of higher demand. So I think we kind of -- probably not a lot different inventory level than where we are now, but it will be composed differently and hopefully, appropriate for the demand at that time.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [16]

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Okay. And getting back to HMI, so you mentioned some top line initiatives with the mega accounts. Is that -- was that the reference to the RTA? Or is there anything else that's part of that top line initiatives?

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [17]

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So the RTA initiative is primarily a fiscal year '21 start. We might get some shipments in Q4 this year, but it won't help this year a lot. The top line initiatives are more sales programs of existing product categories with our mega accounts and a new licensing initiative that we'll be launching at the October market.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [18]

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Got it. Okay. And you also talked about your nonresidential sales doing well. So what percentage of your total sales is that now?

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Paul A. Huckfeldt, Hooker Furniture Corporation - CFO and Senior VP of Finance & Accounting [19]

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7% to 8% of HMI sales or no...

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [20]

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(inaudible) it's probably $40 million combined between SLH, so 7%, something like that.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [21]

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Got it. Okay. And then lastly, do you have any updated thoughts on your capital allocation plans, just overall, how you're thinking about cash flow priorities now?

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Paul A. Huckfeldt, Hooker Furniture Corporation - CFO and Senior VP of Finance & Accounting [22]

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I think right now, we're going to just manage -- short term, we're going to manage -- just manage the business. I think with the uncertainty about tariffs, I think we need some cushion in cash. I think that's always served us well in the past, just having -- so that we don't have to make a decision based on generating cash. So I think in the short term, our capital allocation is steady as she goes. We still believe over the long term that strategic acquisition is the best use of cash going forward to continue to diversify the company and build on the niches where we're underrepresented. We're continuing to pay the dividend. A couple of weeks ago, we declared the same $0.15 dividend that we declared previously and expect to continue that. And I think the goal right now is to conserve capital and see how the rest of this year develops and then preferably look to strategic acquisitions once we get things stabilized.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [23]

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Got it. Okay. So would you need the tariff issues to go away before you would consider making any acquisitions?

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Paul A. Huckfeldt, Hooker Furniture Corporation - CFO and Senior VP of Finance & Accounting [24]

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I don't think go away, but I think just get them under control. Paul?

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Operator [25]

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(Operator Instructions) And our next question comes from the line of Todd Lechtenberger with Amalfi Funds.

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Todd Lechtenberger - Amalfi Investments; Chief Executive Officer, [26]

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Just real quick, just from a broader context, you put it in a press release when you kind of mentioned it in your comments, but you made the point that you expect demand to increase to normal or above-average levels beginning around Labor Day. What kind of -- can you give a little more color on that, like what's -- why that expectation given the recent softness? What -- kind of what leads you to believe that?

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [27]

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Okay. This is Paul Toms, and I think there's several things. One is we've seen business improve in May and especially late May around Memorial Day over what we were experiencing in most of the first quarter. Hasn't been across all of our divisions but it has been across multiple divisions. I just -- I think there's been a lot of uncertainty in the first half of the year between just the tariffs, government shutdown, a very volatile stock market at the end of last year in December. We feel like those are behind us. Yes, we've got the additional tariffs but I think we have strategies to mitigate those as do, hopefully, other people. And I think as we get through this summer, that housing looks better right now with interest rates declining, home prices moderating, inventories increasing. It seems like we're set up for improvement in the housing sector. And I just -- I can't pinpoint one specific thing that caused the downturn in business earlier this year but I believe that, generally, things are better and we've seen it, as I said recently. I think the large customers, we're seeing more an impact on our business than what our large customers are seeing but they entered this with more inventory than they needed. So the first thing they've done is put the brakes on and say, I don't need the product that I ordered from you and maybe ready to ship or already on the order. So we're kind of having to hold off on delivering those, and that's also delayed their placing of reorders on merchandise they currently run as well as some of the new orders for products, new products that they would order. But I feel like that as their business improves and I think it has modestly over Memorial Day, I think we'll start to see them take inventory again since they've got their inventories more correctly sized. And then, I guess lastly, the fall is always the strongest selling season, kicked off by Labor Day. So I expect that to be the case again this year.

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Operator [28]

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Ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Paul Toms for any closing remarks.

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Paul B. Toms, Hooker Furniture Corporation - Chairman & CEO [29]

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Well, we don't have any additional remarks, but we appreciate you joining us for the call. We hope to have better results to report in September, and thank you for joining us today. Good day.

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Operator [30]

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Ladies and gentlemen, thank you for your participation in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.