About two weeks back, I took Motley Fool Hidden Gems recommendation Hooker Furniture (Nasdaq: HOFT) to task for its waffling stand (if waffles can stand) on the issue of free trade.
Now, I know that free trade is not exactly all the rage these days, with politicians jumping up and down on every stage and rostrum in the nation renouncing NAFTA and denouncing the shipping of U.S. jobs overseas. (Personally, I certainly got enough criticism when I spoke out in favor of outsourcing to know which way the political winds are currently blowing.)
But Hooker was taking an especially shameful position. On the one hand, it outsourced a lot of its furniture production to China, reaping profits from cheap foreign labor. But on the other hand, it signed on to an American Furniture Manufacturers (AFM) complaint filed with the U.S. International Trade Commission (ITC), alleging that China was "dumping" wooden bedroom furniture on the U.S. market at ultra-low prices. (The company was not alone -- La-Z-Boy (NYSE: LZB), Bassett Furniture Industries (Nasdaq: BSET), and Stanley Furniture (Nasdaq: STLY) also signed the complaint.)
But earlier this week, Hooker made an abrupt U-turn, withdrawing from the AFM and "declaring neutrality" on the issue of whether China is dumping its goods on the U.S.
There are times when a company's conscience and its desire to make a buck dictate one and the same course of action. This was one of those times. Hooker has been drawing down its inventory recently, and will need to ramp up imports this year if it is to meet the surge in demand it's projecting for home furniture. It imports a lot of that product from China -- but the ITC complaint concerns only bedroom furniture, and the company only earns 4% of its revenues from such sales.
So when the international brouhaha over the AFM's anti-dumping complaint put the rest of its product supply at risk, with Chinese partners angrily threatening to delay shipment of goods to their "partners" who had signed on to the complaint, Hooker found free-trade religion. Management now says it has "always" supported "free, fair and legal trade." Well, good for it.
Many view this as a promising company -- read more in One Stock to Get Hooked On. Its executives have normally shown good business sense, and it's refreshing to see them grab the right waffle here.
Free trade good. Protectionism bad. Flame away, Fools!
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Motley Fool contributor Rich Smith
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