[Management View]
Key metrics: Net sales decreased by 8.8% to $85.3 million. Operating loss reduced by 31% to $3.6 million. Net loss improved to $3.1 million from $4.1 million YoY. Gross margin improved by 190 basis points.
Strategic priorities: Implementing a multiphase cost-reduction strategy targeting $25 million in annualized savings by FY2027. Enhancing supply chain efficiency with a new Vietnam warehouse.

[Outlook]
Performance guidance: Anticipate reducing total annual spend rate by approximately 25%. Potential second-half seasonality strength.
Future plans: Continued focus on product innovation, cost optimization, and operational excellence. Launch of Margaritaville licensing program and redesigned corporate website.

[Financial Performance]
YoY trends: Net sales down 8.8%, operating loss reduced by 31%, net loss improved from $4.1 million to $3.1 million, gross margin improved by 190 basis points.
QoQ trends: Not specified.

[Q&A Highlights]
Question 1: Can you comment on the cadence of shipments from February through April, particularly after Liberation Day?
Answer: The cadence changed drastically due to tariffs, affecting the HMI customer more than Hooker branded and domestic upholstery customers.

Question 2: Can you quantify the impact of discounting on gross margins at Hooker Branded?
Answer: No specific quantification available at the moment.

Question 3: What's driving the higher orders at Hooker legacy brands in May, and any updates on HMI since April?
Answer: The broadened merchandising strategy with Collected Living is having a positive effect. HMI still faces significant uncertainty due to tariffs.

Question 4: How did Memorial Day sales go for your retail partners?
Answer: Overall sentiment was relatively positive for most retailers.

Question 5: Can you detail the cadence of cost savings initiatives for the rest of the year?
Answer: Expect $2.5 million less in costs compared to last year from phase one. Phase two initiatives expected to have a significant impact in Q4, around $3.5 million.

Question 6: What are your capital allocation priorities after dividends and debt?
Answer: Strengthening the balance sheet is the top priority. No specific plans for share buybacks at the moment.

Question 7: Do you expect the strong May momentum to carry over into the rest of the year?
Answer: Historically, the second half is stronger than the first. Uncertain if May's trend will continue throughout the year.

[Sentiment Analysis]
Tone of analysts: Inquisitive and focused on understanding the impact of tariffs, cost savings, and future performance.
Tone of management: Cautiously optimistic, emphasizing cost reduction, supply chain improvements, and strategic initiatives.

[Quarterly Comparison]
| Key Metrics | Q1 FY2026 | Q1 FY2025 |
|------------------------|-----------------|-----------------|
| Net Sales | $85.3 million | $93.6 million |
| Operating Loss | $3.6 million | $5.2 million |
| Net Loss | $3.1 million | $4.1 million |
| Gross Margin | +190 basis points| - |

[Risks and Concerns]
- Persistent softness in the housing market.
- Higher mortgage rates and declining consumer sentiment.
- Unresolved Vietnam import tariffs affecting over 80% of products.
- Order backlog and incoming orders decline at Home Meridian due to prior-year bankruptcy of a major customer.

[Final Takeaway]
Hooker Furnishings is navigating a challenging market environment with strategic cost reduction and supply chain initiatives. Despite a decline in net sales, the company has improved its operating and net losses, and gross margins. The new Vietnam warehouse is expected to significantly enhance supply chain efficiency. Management remains cautiously optimistic about the second half of the year, focusing on product innovation and operational excellence to drive long-term shareholder value.