Havertys Announces Increase In Quarterly Dividend and First Quarter 2024 Results

Rhea-AI Summary

Havertys (NYSE:HVT and HVT.A) announced a 6.7% increase in quarterly dividend, with diluted EPS dropping to $0.14 from $0.74. Sales decreased by 18.1%, but gross profit margin rose to 60.3%. The company plans to open new stores and invest in business expansion.

Positive

• The increase in quarterly dividend showcases financial strength and long-term outlook.

• Gross profit margin improved to 60.3% from 59.1% despite a drop in sales.

• Investments in new stores and online presence indicate a commitment to growth and market share.

Negative

• Diluted EPS decreased significantly from $0.74 to $0.14, signaling a challenging quarter.

• Total sales decreased by 18.1%, impacting the overall revenue generation.

• Comparative store sales also saw a decline of 18.5%, reflecting challenges in the housing market.

Insights

Financial Analyst

Analyzing the dividend increase by Haverty's, a 6.7% hike is a notable sign of management's confidence in the company's financial health and a positive signal to investors prioritizing steady income. However, the reported decrease in EPS from $0.74 to $0.14 suggests a significant drop in profitability, likely contributing to investor concerns. The decrease in consolidated sales by 18.1% and comparable-store sales by 18.5% would typically send a cautionary signal, potentially reflecting broader economic trends or sector-specific challenges. However, the gross profit margin increase, from 59.1% to 60.3%, is an interesting counterpoint, indicating efficiency improvements or possibly a favorable shift in sales mix. The reduction in operating costs, while contributing to the bottom line, should be monitored to understand whether it represents sustainable savings or cuts that could impact long-term growth. Haverty's balance sheet remains robust with no debt and $117.9 million in cash, a strong position that allows for continued dividend payments and planned store expansions.

Retail Market Analyst

The retail furniture sector is sensitive to housing market fluctuations and Haverty's first-quarter results reflect such a correlation. The reported challenges due to a weak housing market and the subsequent 18.5% decrease in comparable-store sales are significant, suggesting that Haverty's is not immune to macroeconomic pressures. The strategic pivot towards offering a 'regret-free guarantee' and a 'free-in home design service', which grew by 10.4%, demonstrates an attempt to differentiate and add value for customers. However, investors should question whether these service improvements can offset the downward trend in core merchandise sales. The plans to open new stores indicate a growth strategy; nonetheless, the timing of these openings in a potentially contracting market might raise concerns about occupancy costs and their impact on future profitability. The high gross profit margin is impressive, yet investors might ponder the sustainability of this metric against an industry where discounting is common to drive traffic and sales.

Operations Management Expert

Haverty's strategic approach in reducing operating costs amidst a sales decline is notable. Operational flexibility, as indicated by the reduction in warehouse and delivery costs through attrition and lower expenditures, suggests a lean operational model that could benefit the company in the long term. The expansion plans, while aggressive, show a targeted approach to growth in specific markets, potentially leveraging economies of scale. With that said, the overall reduction in SG&A expenses, coupled with a high gross margin, points to effective cost management. As the company plans to enter new markets and grow its retail square footage by 3.4% in 2024, investors should consider the company's track record of managing costs effectively and the potential for these new stores to contribute to increased sales volume.

ATLANTA, GA / ACCESSWIRE / May 1, 2024 / HAVERTYS (NYSE:HVT and HVT.A), today announced an increase to its quarterly dividend (the 12th consecutive annual increase) and reported operating results for the first quarter ended March 31, 2024.

Dividend

The board of directors declared a 6.7% increase in the quarterly dividend, from $0.30 per share to $0.32 per share on the company's common stock. The quarterly dividend for the company's Class A common stock is also being increased from $0.28 to $0.30 per share.

The dividend is payable on June 14, 2024, to stockholders of record at the close of business on May 24, 2024. Havertys has paid a cash dividend in each year since 1935.

First quarter 2024 versus first quarter 2023:

• Diluted earnings per common share ("EPS") of $0.14 versus $0.74.
• Consolidated sales decreased 18.1% to $184.0 million. Comparable-store sales decreased 18.5%.
• Gross profit margin increased to 60.3% from 59.1%.

Clarence H. Smith, Chairman and CEO said, "Our sales reflect the challenges from the ongoing weak housing market. The decline in demand requires exceptional customer engagement and operational flexibility. We began highlighting our regret-free guarantee early in 2024 and continued promoting our free-in home design service which grew 10.4% in the first quarter compared to last year and was 32.3% of our total written business. Our teams generated another quarter of excellent gross margins of 60.3% and the prudent reductions in operating costs generated positive results for the quarter.

We are investing capital to expand our business and are on track to open five new stores this year and five in 2025. Our new store located in Southaven, MS in the Memphis, TN market opened at the end of March. The three stores we previously announced are in-fill opportunities in growing areas of Florida and should open in the second and third quarter this year. We plan to enter the Houston, TX market later this year with one store slated to open in the fourth quarter and additional locations in early 2025. This is a sizeable new market within our distribution footprint that we believe aligns well with the Havertys brand.

We are making important investments in our stores and online presence to be well-positioned to gain additional market share at the reversal of this near-term demand cycle. The board's decision to increase the quarterly dividend reflects our strong financial position and long-term outlook as we invest in our business and return capital to our stockholders."

Key Results

(amounts in millions, except per share amounts)

Results of Operations
		Three Months Ended March 31,
		2024				2023
Sales		$	184.0			$	224.8
Gross Profit			111.0				132.8
Gross profit as a % of sales			60.3	%			59.1	%
SGA
Variable			37.0				44.9
Fixed			72.4				73.5
Total			109.4				118.4
SGA as a % of sales
Variable			20.1	%			20.0	%
Fixed			39.3	%			32.7	%
Total			59.4	%			52.7	%
Pre-tax income			3.2				15.4
Pre-tax income as a % of sales			1.7	%			6.9	%
Net income			2.4				12.4
Net income as a % of sales			1.3	%			5.5	%
Diluted earnings per share ("EPS")		$	0.14			$	0.74

Other Financial and Operations Data
		Three Months Ended March 31,
		2024				2023
EBITDA (in millions)(1)		$	6.6			$	18.8
Sales per square foot		$	169			$	208
Average ticket		$	3,208			$	3,192

Liquidity Measures
		Three Months Ended March 31,									Three Months Ended March 31,
Free Cash Flow		2024				2023			Cash Returns to Shareholders		2024				2023
Operating cash flow		$	3.1			$	11.1		Share repurchases		$	-			$	-
									Dividends			4.8				4.5
Capital expenditures			(6.4	)			(6.7	)	Cash returns to shareholders		$	4.8			$	4.5
Free cash flow		$	(3.3	)		$	4.4
Cash at period end		$	117.9			$	127.0

(1) See the reconciliation of the non-GAAP metrics at the end of the release.

First Quarter ended March 31, 2024 Compared to Same Period of 2023

• Total sales down 18.1%, comp-store sales down 18.5% for the quarter. Total written sales were down 12.6% and written comp-store sales declined 13.0% for the quarter.
• Gross profit margins increased to 60.3% in 2024 from 59.1% in 2023.
• SG&A expenses were 59.4% of sales versus 52.7% and decreased $9.0 million. The primary drivers of this change are:
  • decrease of $4.8 million in selling expenses, primarily variable costs tied to commissioned-based compensation expense and third-party creditor costs.
• decrease in warehouse and delivery costs of $3.2 million primarily from reduced headcount via attrition and lower expenditures for supplies and fuel.
• decrease of $0.6 million in advertising expenses driven by reduced spending on television and interactive marketing partly offset by increased technology costs.

Balance Sheet and Cash Flow for the Three Months ended March 31, 2024

• Cash, cash equivalents, and restricted cash equivalents at March 31, 2024 are $117.9 million.
• Generated $3.1 million in cash from operating activities primarily from earnings and changes in working capital including a $5.1 million increase in customer deposits, a $1.9 million reduction in inventories, and a $12.8 million decrease in vendor repayments and accrued liabilities.
• Invested $6.4 million in capital expenditures.
• Paid $4.8 million in quarterly cash dividends.
• No debt outstanding at March 31, 2024 and credit availability of $80.0 million.

Expectations and Other

• We are increasing our expectations for gross profit margins for 2024 to be between 60.0% to 60.5%. The adjustment is based on our merchandising mix and anticipated changes in product and freight costs. Gross profit margins fluctuate quarter to quarter in relation to our promotional cadence.
• Fixed and discretionary expenses within SG&A for the full year of 2024 are expected to be in the $290.0 to $292.0 million range, a reduction in our previous guidance related to advertising and other costs. Variable SG&A expenses for the full year of 2024 are anticipated to be in the 19.9% to 20.2% range.
• Our effective tax rate for 2024 is expected to be 26.5% excluding the impact from discrete items and any new tax legislation.
• Planned capital expenditures for the full year of 2024 are approximately $32.0 million. We expect retail square footage will increase approximately 3.4% in 2024 over 2023.

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		Three Months Ended March 31,
(In thousands, except per share data)		2024				2023
Net sales		$	183,997			$	224,754
Cost of goods sold			72,978				91,969
Gross profit			111,019				132,785
Expenses:
Selling, general and administrative			109,356				118,361
Other expense (income), net			23				(4	)
Total expenses			109,379				118,357
Income before interest and income taxes			1,640				14,428
Interest income, net			1,555				1,010
Income before income taxes			3,195				15,438
Income tax expense			802				3,066
Net income		$	2,393			$	12,372
Basic earnings per share:
Common Stock		$	0.15			$	0.77
Class A Common Stock		$	0.13			$	0.72
Diluted earnings per share:
Common Stock		$	0.14			$	0.74
Class A Common Stock		$	0.13			$	0.71
Cash dividends per share:
Common Stock		$	0.30			$	0.28
Class A Common Stock		$	0.28			$	0.26

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(In thousands)		March 31, 2024				December 31, 2023				March 31, 2023
Assets
Current assets
Cash and cash equivalents		$	111,818			$	120,635			$	120,170
Restricted cash and cash equivalents			6,045				7,142				6,876
Inventories			92,078				93,956				114,254
Prepaid expenses			17,361				17,067				11,430
Other current assets			13,697				12,793				19,590
Total current assets			240,999				251,593				272,320
Property and equipment, net			173,128				171,588				139,212
Right-of-use lease assets			196,976				202,306				207,673
Deferred income taxes			15,594				15,641				16,332
Other assets			13,832				13,005				12,878
Total assets		$	640,529			$	654,133			$	648,415
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable		$	16,980			$	18,781			$	15,632
Customer deposits			40,912				35,837				46,382
Accrued liabilities			35,681				46,289				40,372
Current lease liabilities			37,572				37,357				36,180
Total current liabilities			131,145				138,264				138,566
Noncurrent lease liabilities			174,680				180,397				185,866
Other liabilities			28,014				27,106				27,571
Total liabilities			333,839				345,767				352,003
Stockholders' equity			306,690				308,366				296,412
Total liabilities and stockholders' equity		$	640,529			$	654,133			$	648,415

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(In thousands)		Three Months Ended March 31,
		2024				2023
Cash Flows from Operating Activities:
Net income		$	2,393			$	12,372
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			4,946				4,362
Share-based compensation expense			2,643				1,957
Other			58				(840	)
Changes in operating assets and liabilities:
Inventories			1,878				4,079
Customer deposits			5,075				(1,587	)
Other assets and liabilities			(1,104	)			5,721
Accounts payable and accrued liabilities			(12,754	)			(14,990	)
Net cash provided by operating activities			3,135				11,074
Cash Flows from Investing Activities:
Capital expenditures			(6,399	)			(6,655	)
Proceeds from sale of land, property and equipment			48				13
Net cash used in investing activities			(6,351	)			(6,642	)
Cash Flows from Financing Activities:
Dividends paid			(4,845	)			(4,528	)
Taxes on vested restricted shares			(1,853	)			(2,788	)
Net cash used in financing activities			(6,698	)			(7,316	)
Decrease in cash, cash equivalents and restricted cash equivalents during the period			(9,914	)			(2,884	)
Cash, cash equivalents and restricted cash equivalents at beginning of period			127,777				129,930
Cash, cash equivalents and restricted cash equivalents at end of period		$	117,863			$	127,046

GAAP to Non-GAAP Reconciliation

We report our financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides additional useful information but should not be considered in isolation or as substitutes for the related GAAP measures. We believe that EBITDA is a meaningful measure to share with investors.

Reconciliation of GAAP measures to EBITDA

		Three Months Ended March 31,
(in thousands)		2024				2023
Income before income taxes, as reported		$	3,195			$	15,438
Interest income, net			(1,555	)			(1,010	)
Depreciation			4,946				4,362
EBITDA		$	6,586			$	18,790

Comparable Store Sales 

Comparable-store or "comp-store" sales is a measure which indicates the performance of our existing stores and website by comparing the sales growth for stores and online for a particular month over the corresponding month in the prior year. Stores are considered non-comparable if they were not open during the corresponding month or if the selling square footage has been changed significantly.

Cost of Goods Sold and SG&A Expense 

We include substantially all our occupancy and home delivery costs in SG&A expense as well as a portion of our warehousing expenses.  Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold. 

We classify our SG&A expenses as either variable or fixed and discretionary.  Our variable expenses are comprised of selling and delivery costs.  Selling expenses are primarily compensation and related benefits for our commission-based sales associates, the discount we pay for third party financing of customer sales and transaction fees for credit card usage.  We do not outsource delivery, so these costs include personnel, fuel, and other expenses related to this function.  Fixed and discretionary expenses are comprised of rent, depreciation and amortization and other occupancy costs for stores, warehouses and offices, and all advertising and administrative costs. 

Conference Call Information

The company invites interested parties to listen to the live webcast of the conference call on May 2, 2024 at 10:00 a.m. ET at its website, ir.havertys.com. If you cannot listen live, a replay will be available on the day of the conference call at the website at approximately 1:00 p.m. ET.

About Havertys

Havertys (NYSE:HVT and HVT.A), established in 1885, is a full-service home furnishings retailer with 124 showrooms in 17 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges. Additional information is available on the Company's website havertys.com. 

Safe Harbor 

This press release contains, and the conference call may contain forward-looking statements subject to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are subject to risks and uncertainties and change based on various important factors, many of which are beyond our control.

All statements in the future tense and all statements accompanied by words such as "expect," "likely," "outlook," "forecast," "preliminary," "would," "could," "should," "position," "will," "project," "intend," "plan," "on track," "anticipate," "to come," "may," "possible," "assume," and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, our expectations for retail and operating margins, selling square footage and capital expenditures for 2024, our liquidity position to continue to fund our growth plans, and our efforts and initiatives to execute our strategic plan.

We caution that our forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information you are cautioned not to place undue reliance on our forward-looking statements, and they should not be relied upon as a prediction of actual results. Factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements include, but are not limited to: disruptions in our suppliers' operations; changes in national and international legislation or government regulations or policies, including changes to import tariffs and the unpredictability of such changes; failure of vendors to meet our quality control standards or to react to changes in legislative or regulatory frameworks; disruptions in our distribution centers; changes in general economic conditions, including unemployment, inflation (including the impact of tariffs); labor shortages and the Company's ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; disruptions caused by a failure or breach of the Company's information systems and information technology infrastructure, as well as other risks and uncertainties discussed in the Company's Annual Report on Form 10-K for 2023 and from time to time in the Company's subsequent filings with the SEC.

Forward-looking statements describe our expectations only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-K, 10-Q, 8-K, and other reports filed with the SEC. 

Contact:

Havertys 404-443-2900
Jenny Hill Parker
SVP, Finance, and Corporate Secretary

SOURCE: Havertys

View the original press release on accesswire.com

FAQ

What was the change in quarterly dividend announced by Havertys?

Havertys declared a 6.7% increase in the quarterly dividend, from $0.30 to $0.32 per share for common stock, and from $0.28 to $0.30 per share for Class A common stock.

How did first quarter 2024 results compare to first quarter 2023 for Havertys?

In the first quarter of 2024, Havertys reported diluted EPS of $0.14 compared to $0.74 in the first quarter of 2023. Sales decreased by 18.1%, and comparable-store sales dropped by 18.5%.

What is the gross profit margin for Havertys in the first quarter of 2024?

Havertys' gross profit margin increased to 60.3% in the first quarter of 2024, up from 59.1% in the same period in 2023.

What are the company's plans for store expansion in 2024?

Havertys plans to open five new stores in 2024 and an additional five stores in 2025. They are entering the Houston, TX market in late 2024 and early 2025.

How have SG&A expenses changed for Havertys in the first quarter of 2024 compared to 2023?

In the first quarter of 2024, SG&A expenses were 59.4% of sales for Havertys, up from 52.7% in the same period in 2023. The decrease of $9.0 million in expenses was primarily driven by reductions in various costs.