Havertys Reports Operating Results for Second Quarter 2024

Rhea-AI Summary

Havertys (NYSE: HVT) reported its Q2 2024 operating results, showing a 13.4% decrease in consolidated sales to $178.6 million and a 13.6% decline in comparable-store sales compared to Q2 2023. The company's diluted EPS dropped to $0.27 from $0.70 in the same period last year, while the gross profit margin slightly decreased to 60.4% from 60.5%.

Despite the challenging demand cycle, Havertys is focusing on top-line growth, operating efficiencies, and cost reductions. The company announced plans to open a second store in the Indianapolis market, located in Greenwood, Indiana, expected to launch in Q4 2024. Havertys aims to open a net of five new stores in 2024 and 2025, leveraging its strong financial position to invest during market downturns.

Positive

• Gross profit margin remains relatively stable at 60.4%
• Plans to open a net of five new stores in 2024 and 2025
• Strong financial position allowing for investments during market downturns

Negative

• Consolidated sales decreased 13.4% to $178.6 million
• Comparable-store sales decreased 13.6%
• Diluted EPS dropped to $0.27 from $0.70 year-over-year

Insights

Financial Analyst

Havertys' Q2 2024 results paint a challenging picture for the furniture retailer. The 13.4% decrease in consolidated sales to $178.6 million and a 13.6% drop in comparable-store sales indicate significant headwinds in the furniture market. This decline is further emphasized by the sharp reduction in EPS from $0.70 to $0.27, a 61.4% decrease year-over-year.

Despite the sales slump, Havertys has managed to maintain its gross profit margin at 60.4%, nearly unchanged from the previous year's 60.5%. This suggests that the company has been able to control costs and pricing effectively, even in a challenging demand environment.

The company's expansion plans, including the addition of a second store in the Indianapolis market and a net increase of five new stores over 2024 and 2025, demonstrate a long-term growth strategy. This approach of investing during a downturn could position Havertys favorably when market conditions improve, potentially gaining market share as competitors retrench.

However, investors should be cautious. The continued decline in sales and earnings suggests that the furniture market remains under pressure, likely due to macroeconomic factors such as inflation and interest rates affecting consumer spending on big-ticket items. The company's ability to navigate this downturn while maintaining its expansion plans will be important for its long-term performance.

Market Research Analyst

The furniture retail sector is clearly experiencing a significant downturn, as evidenced by Havertys' Q2 results. The 13.6% decrease in comparable-store sales is a stark indicator of weakening consumer demand for home furnishings. This trend likely reflects broader economic pressures on household discretionary spending.

Interestingly, Havertys' decision to expand its store footprint during this challenging period is a bold move. The planned opening of a second store in the Indianapolis market, specifically in a former Bed, Bath, & Beyond location, suggests an opportunistic approach to real estate acquisition. This strategy could yield long-term benefits if executed well, allowing Havertys to secure prime locations at potentially favorable terms.

The company's commitment to opening a net of five new stores over 2024 and 2025 indicates confidence in its long-term prospects. However, this expansion amid declining sales raises questions about the balance between growth investments and managing current market challenges. It will be important to monitor how these new stores perform and whether they can help offset the declining sales in existing locations.

Havertys' ability to maintain its gross profit margin in this environment is commendable and suggests effective inventory management and pricing strategies. However, the significant drop in EPS indicates that these efforts have not been sufficient to counteract the impact of declining sales on overall profitability.

ATLANTA, GA / ACCESSWIRE / July 31, 2024 / HAVERTYS (NYSE:HVT and HVTA), today reported operating results for the second quarter ended June 30, 2024.

Second quarter 2024 versus second quarter 2023:

• Diluted earnings per common share ("EPS") of $0.27 versus $0.70.

• Consolidated sales decreased 13.4% to $178.6 million. Comparable-store sales decreased 13.6%.

• Gross profit margin was 60.4% compared to 60.5%.

Clarence H. Smith, Chairman and CEO said, "Our teams are continuing to evaluate all aspects of our business from top-line growth to operating efficiencies and cost reductions during this period in the demand cycle. Our experience informs these decisions and we are mindful of measures taken in the near-term and their potential impact on the Havertys brand.

"We are pleased to announce the addition of a second store serving the Indianapolis market. The former Bed, Bath, & Beyond store located in Greenwood, Indiana, is expected to open in the fourth quarter of this year. Our store growth strategy is on track with plans to open a net of five new stores in 2024 and 2025.

"Havertys' strong financial position enables us to make important investments during demand downturns as others retrench. These forward-looking preparations enhance our opportunities for greater success when the economic cycle improves."

Key Results

(amounts in millions, except per share amounts)

Results of Operations
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Sales		$	178.6			$	206.3			$	362.6			$	431.0
Gross Profit			108.0				124.9				219.0				257.7
Gross profit as a % of sales			60.4	%			60.5	%			60.4	%			59.8	%
SGA
Variable			34.7				41.0				71.8				85.9
Fixed			68.4				69.0				140.7				142.5
Total			103.1				110.0				212.5				228.4
SGA as a % of sales
Variable			19.4	%			19.9	%			19.8	%			19.9	%
Fixed			38.3	%			33.4	%			38.8	%			33.1	%
Total			57.7	%			53.3	%			58.6	%			53.0	%
Pre-tax income			6.5				15.8				9.6				31.3
Pre-tax income as a % of sales			3.6	%			7.7	%			2.6	%			7.3	%
Net income			4.4				11.8				6.8				24.2
Net income as a % of sales			2.5	%			5.7	%			1.9	%			5.6	%
Diluted earnings per share ("EPS")		$	0.27			$	0.70			$	0.41			$	1.44

Other Financial and Operations Data
		Six Months Ended June 30,
		2024				2023
EBITDA (in millions)(1)		$	16.8			$	38.3
Sales per square foot		$	166			$	199
Average ticket		$	3,332			$	3,250

Liquidity Measures
		Six Months Ended June 30,									Six Months Ended June 30,
Free Cash Flow		2024				2023			Cash Returns to Shareholders		2024				2023
Operating cash flow		$	17.5			$	40.1		Share repurchases		$	-			$	-
									Dividends			10.1				9.4
Capital expenditures			(16.0	)			(40.5	)	Cash returns to shareholders		$	10.1			$	9.4
Free cash flow		$	1.5			$	(0.4	)
Cash at period end		$	116.1			$	116.1

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

Second Quarter ended June 30, 2024 Compared to Same Period of 2023

• Total sales down 13.4%, comp-store sales down 13.6% for the quarter. Total written sales were down 15.2% and written comp-store sales declined 15.8% for the quarter.

• Gross profit margins decreased to 60.4% in 2024 from 60.5% in 2023. The decrease is driven by the change in the LIFO reserve which generated an immaterial impact on gross profit in 2024 compared to a positive impact of $3.4 million in 2023.

• SG&A expenses were 57.7% of sales versus 53.3% and decreased $6.9 million. The primary drivers of this change are:

  • decrease in warehouse and delivery costs of $3.5 million primarily from reduced labor costs and lower expenditures for supplies and fuel.

• decrease of $3.3 million in selling expenses as these are predominantly variable costs tied to commissioned-based compensation expense and third-party creditor costs.

• decrease in administrative expenses of $1.6 million largely due to lower stock compensation costs.

• decrease of $1.3 million in advertising expenses driven by reduced spending on television and interactive marketing.

• increase in occupancy costs of $2.8 million primarily due to a reduction in rent expense in 2023 for a $1.8 million lease incentive payment.

Balance Sheet and Cash Flow for the Six Months ended June 30, 2024

• Cash, cash equivalents, and restricted cash equivalents at June 30, 2024 are $116.1 million.

• Generated $17.5 million in cash from operating activities primarily from earnings and changes in working capital including a $1.6 million reduction in inventories, $2.9 million increase in customer deposits, and a $10.2 million decrease in accrued liabilities and vendor repayments.

• Invested $16.0 million in capital expenditures.

• Paid $10.1 million in quarterly cash dividends.

• No debt outstanding at June 30, 2024 and credit availability of $80.0 million.

Expectations and Other

• Our expectations for gross profit margins for 2024 are unchanged from our prior guidance and are between 60.0% to 60.5%. 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 $282.0 to $284.0 million range, an $8.0 million reduction in our previous guidance, primarily due to reduced costs for advertising, incentive compensation, and professional fees. Variable SG&A expenses for the full year of 2024 are anticipated to be in the 19.7% to 20.0% range, a decrease of 20 basis points in our previous guidance driven by third party credit expense and delivery costs.

• Our effective tax rate for 2024 is expected to be 27.5%, excluding the impact from discrete items and any new tax legislation, an increase from our previous guidance of 26.5%.

• Planned capital expenditures for the full year of 2024 are approximately $33.0 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 June 30,								Six Months Ended June 30,
(In thousands, except per share data)		2024				2023				2024				2023
Net sales		$	178,636			$	206,289			$	362,633			$	431,042
Cost of goods sold			70,652				81,394				143,630				173,363
Gross profit			107,984				124,895				219,003				257,679
Expenses:
Selling, general and administrative			103,099				110,016				212,455				228,377
Other expense (income), net			(101	)			14				(78	)			9
Total expenses			102,998				110,030				212,377				228,386
Income before interest and income taxes			4,986				14,865				6,626				29,293
Interest income, net			1,467				973				3,022				1,983
Income before income taxes			6,453				15,838				9,648				31,276
Income tax expense			2,015				4,046				2,817				7,112
Net income		$	4,438			$	11,792			$	6,831			$	24,164
Basic earnings per share:
Common Stock		$	0.27			$	0.73			$	0.42			$	1.49
Class A Common Stock		$	0.25			$	0.68			$	0.39			$	1.41
Diluted earnings per share:
Common Stock		$	0.27			$	0.70			$	0.41			$	1.44
Class A Common Stock		$	0.25			$	0.67			$	0.39			$	1.38
Cash dividends per share:
Common Stock		$	0.32			$	0.30			$	0.62			$	0.58
Class A Common Stock		$	0.30			$	0.28			$	0.58			$	0.54

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

(In thousands)		June 30, 2024				December 31, 2023				June 30, 2023
Assets
Current assets
Cash and cash equivalents		$	109,942			$	120,635			$	109,143
Restricted cash and cash equivalents			6,125				7,142				6,959
Inventories			92,401				93,956				114,722
Prepaid expenses			16,445				17,067				11,734
Other current assets			15,497				12,793				14,914
Total current assets			240,410				251,593				257,472
Property and equipment, net			177,449				171,588				169,091
Right-of-use lease assets			195,000				202,306				199,698
Deferred income taxes			15,478				15,641				16,829
Other assets			13,768				13,005				13,100
Total assets		$	642,105			$	654,133			$	656,190
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable		$	18,058			$	18,781			$	20,289
Customer deposits			38,731				35,837				45,589
Accrued liabilities			37,090				46,289				41,798
Current lease liabilities			36,561				37,357				36,799
Total current liabilities			130,440				138,264				144,475
Noncurrent lease liabilities			176,940				180,397				178,835
Other liabilities			27,627				27,106				27,297
Total liabilities			335,007				345,767				350,607
Stockholders' equity			307,098				308,366				305,583
Total liabilities and stockholders' equity		$	642,105			$	654,133			$	656,190

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

(In thousands)		Six Months Ended June 30,
		2024				2023
Cash Flows from Operating Activities:
Net income		$	6,831			$	24,164
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			10,147				9,017
Share-based compensation expense			4,130				4,439
Other			1,314				(256	)
Changes in operating assets and liabilities:
Inventories			1,555				3,611
Customer deposits			2,894				(2,380	)
Other assets and liabilities			916				11,637
Accounts payable and accrued liabilities			(10,245	)			(10,104	)
Net cash provided by operating activities			17,542				40,128
Cash Flows from Investing Activities:
Capital expenditures			(15,952	)			(40,482	)
Proceeds from sale of land, property and equipment			52				23
Net cash used in investing activities			(15,900	)			(40,459	)
Cash Flows from Financing Activities:
Dividends paid			(10,070	)			(9,414	)
Taxes on vested restricted shares			(3,282	)			(4,083	)
Net cash used in financing activities			(13,352	)			(13,497	)
Decrease in cash, cash equivalents and restricted cash equivalents during the period			(11,710	)			(13,828	)
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		$	116,067			$	116,102

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

		Six Months Ended June 30,
(in thousands)		2024				2023
Income before income taxes, as reported		$	9,648			$	31,276
Interest income, net			(3,022	)			(1,983	)
Depreciation			10,147				9,017
EBITDA		$	16,773			$	38,310

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 August 1, 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 125 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

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FAQ

What were Havertys' (HVT) Q2 2024 earnings per share?

Havertys reported diluted earnings per share (EPS) of $0.27 for Q2 2024, compared to $0.70 in Q2 2023.

How did Havertys' (HVT) sales perform in Q2 2024?

Havertys' consolidated sales decreased 13.4% to $178.6 million in Q2 2024 compared to the same period in 2023. Comparable-store sales also declined by 13.6%.

What is Havertys' (HVT) store expansion plan for 2024-2025?

Havertys plans to open a net of five new stores in 2024 and 2025, including a second store in the Indianapolis market expected to open in Q4 2024.

How did Havertys' (HVT) gross profit margin change in Q2 2024?

Havertys' gross profit margin slightly decreased to 60.4% in Q2 2024 from 60.5% in Q2 2023.