Editor's note: The original version of this article reported that Hooker Furniture would outsource its production from the Maiden, N.C. plant to Asia. This is inaccurate. We apologize for the error.
Motley Fool Hidden Gems
selection Hooker Furniture (Nasdaq: HOFT) announced yesterday that it will close one of its four U.S. wood furniture manufacturing plants, located in Maiden, N.C. This is not going to be a popular decision -- but it was almost certainly the right one. Moreover, this is not the first time the company has made such a tough choice.
Last year, Hooker shuttered a factory in Kernersville, N.C., putting 270 workers out of work. Now, Hooker will do the same thing with 240 workers in Maiden. This is not an easy choice for any company to make. And the list of firms that have endured the firestorm of bad publicity from shutting down plants in recent years is a long one, stretching from Alcoa (NYSE: AA) to General Motors (NYSE: GM) to U.S. Steel (NYSE: X) (the closest I can think of a company name starting with "Z").
Regardless, these are the kinds of difficult decisions that companies need to make in order to earn profits for their owners so that they can stay in business and keep their remaining workers employed. By closing its Kernersville plant, for example, Hooker was able to guarantee the rest of its workers a 35-hour workweek while simultaneously boosting efficiency at its remaining plants up from 70% capacity to 85%. Yesterday's announcement of the Maiden closure should bring Hooker's remaining workers back to "normal" employment (presumably meaning 40 hours a week). It should also boost profitability while still ensuring that the company's products remain competitively priced for sale to resellers such as Federated Department Stores (NYSE: FD), Neiman Marcus (NYSE: NMG.A), and Dillard's (NYSE: DDS).
What's more, Hooker's decision was precisely the kind of smart management that Fool co-founder Tom Gardner was hoping the company would produce when he recommended the company in August 2003. At the time, Tom predicted that Hooker could conceivably double in value if, among other things, the company remained "willing to make tough economic decisions for the benefit of long-term outside and employee owners" (Hooker's employees own 30% of the company's stock) and able to execute by "continuing to pursue the more attractive economics of its import business."
Hooker held true to its mission to serve stockholders one year ago, and in large part because of that steadfastness the company has already reached Tom's hoped-for target of doubling in value. And Hooker's continued devotion to serving its owners' interests preserves the possibility that this company could double yet again.
To learn more about Hooker, why Tom Gardner picked it as one of his very first Hidden Gems recommendations, and how the company has managed to double its share price in under a single year, consider reading any of these fine Fool articles:
Fool contributor Rich Smith
owns no interest in any of the companies mentioned in this article.
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