Hooker Furniture Corp. (NASDAQ:HOFT) Q3 2020 Earnings Conference Call - Final Transcript

Dec 06, 2019 • 09:00 am ET

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Hooker Furniture Corp. (NASDAQ:HOFT) Q3 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] We have a question from the line of Anthony Lebiedzinski with Sidoti & Company. Your line is now open.

Analyst
Anthony Chester Lebiedzinski

Good morning. Thank you for taking the question. So, I guess, first, I just wanted to get a better handle on the HMI. It seems like this is not the first quarter that we've had some of these issues. So, I guess, with respect to the single large retail customer that you reference here, it sounds like, if I heard correctly that you still expect to do some business with this customer next year, but it sounds like significantly less. Is that correct?

Executive
Douglas Townsend

Anthony, this is Doug. Yes, that is correct.

Analyst
Anthony Chester Lebiedzinski

Good morning, Doug.

Executive
Douglas Townsend

Good morning.

Analyst
Anthony Chester Lebiedzinski

Okay. I guess -- good morning -- so, and as far as reasons why your sales are down so much with this customer and expect to be down so much, can you perhaps expand on that?

Executive
Douglas Townsend

Part of it is it's project based, and so it's not like traditional furniture, where you put something on someone's floor and then it sells for a long time on the floor. So there's different cycles and you gain more projects or less projects depending on the cycle. And I think part of it is just kind of resetting and resizing the business to one that is manageable, and has a little less volatility.

Analyst
Anthony Chester Lebiedzinski

Okay. So -- and then you -- it sounds like you expect to be able to offset some of this because of some new customers. Will you be able to fully offset the sales decline from this one customer next year or not?

Executive
Douglas Townsend

Our intention is to fully offset.

Analyst
Anthony Chester Lebiedzinski

Okay, got it, okay. And so, as far as the cost, as far as the chargebacks associated, so I know what happened in the quarter here that you just reported. As far as the fourth quarter, is there an expectation of -- what is the expectation for further chargebacks for 4Q from this customer?

Executive
Douglas Townsend

Our current expectation is that the chargebacks are behind us and that we don't know of any other ones that are related to this.

Executive
Paul B. Toms

Anthony, this is Paul Toms, chiming in.

Analyst
Anthony Chester Lebiedzinski

Good morning, Paul.

Executive
Paul B. Toms

Couple of things in addition to what Doug said, I would reinforce. I think in total, we definitely expect Home Meridian to grow next year, in spite of some continued attrition with that one single large customer. And as far as chargebacks, there may be -- a lot of the chargebacks we've received this year from that customer are related to two significant product returns, late last year in the fourth quarter. We believe the trailing chargebacks are behind us, but we have accrued in the third quarter for what we believe could be residual kind of last charges related to those products, so we could have some, but I believe we're properly accrued for it in this quarter's results.

Analyst
Anthony Chester Lebiedzinski

Okay, all right. That's very helpful. Okay, so Paul, while we are on the subject of Home