Havertys Reports Operating Results for Third Quarter 2024

Rhea-AI Summary

Havertys reported Q3 2024 results showing significant declines, with consolidated sales decreasing 20.2% to $175.9 million and comparable-store sales down 20.5%. Diluted earnings per share fell to $0.29 from $1.02 year-over-year. Gross profit margin slightly decreased to 60.2% from 60.8%. The company continued its expansion plans, aiming to end 2024 with 129 locations after opening one store in Q3 with three more planned for Q4. Despite challenging market conditions affecting big-ticket purchases, Havertys maintains a strong balance sheet with $127.4 million in cash and no debt, while focusing on store growth, merchandising, and marketing strategies.

Positive

• Strong balance sheet with $127.4 million in cash and no debt
• Store expansion continuing with 5 new net stores planned for 2024
• Generated $42.0 million in cash from operating activities
• Average ticket rose slightly to $3,365 from $3,284

Negative

• Q3 sales decreased 20.2% to $175.9 million
• Comparable-store sales declined 20.5%
• Diluted EPS dropped 71.6% to $0.29 from $1.02
• Gross profit margin decreased to 60.2% from 60.8%
• SG&A expenses increased to 57.4% of sales from 51.1%

Insights

Financial Analyst

The Q3 2024 results show significant challenges for Havertys, with concerning declines across key metrics. Sales dropped 20.2% to $175.9 million, while earnings per share plummeted to $0.29 from $1.02 year-over-year. The 60.2% gross margin slightly contracted from 60.8%.

Despite these headwinds, the company maintains a strong balance sheet with $127.4 million in cash and zero debt. The planned expansion to 129 locations and $33 million capital expenditure commitment demonstrates confidence in long-term growth. However, rising SG&A expenses as a percentage of sales (57.4% vs 51.1%) signals operational inefficiencies that need addressing.

The housing market slowdown and cautious consumer spending on big-ticket items present ongoing challenges, though slight improvements in traffic and average ticket size ($3,365 vs $3,284) offer minor positives.

ATLANTA, GA / ACCESSWIRE / October 30, 2024 / HAVERTYS (NYSE:HVT and HVT.A), today reported operating results for the third quarter ended September 30, 2024.

Third quarter 2024 versus third quarter 2023:

• Diluted earnings per common share ("EPS") of $0.29 versus $1.02.

• Consolidated sales decreased 20.2% to $175.9 million. Comparable-store sales decreased 20.5%.

• Gross profit margin was 60.2% compared to 60.8%.

Clarence H. Smith, Chairman and CEO said, "Our earnings for the quarter reflect the impact of below plan sales including the Labor Day holiday written results which mirrored the quarterly sales declines. We did begin to see improvement in traffic during the quarter and average ticket rose slightly.

"We opened a new store in the third quarter and three additional locations are expected to open in the fourth quarter, meeting our expansion goal of five new net stores and ending 2024 with 129 locations. Our merchandising team's new experienced members will keep our product offerings on-trend and employ data analytics to further strengthen our brand and earnings. We continue to refine our marketing and sharpen our focus on customer engagement.

The consumer remains cautious on making big-ticket postponeable purchases and the lack of housing turnover has additionally dampened demand. We believe our strategies on store growth, merchandising, and marketing geared towards our target customer are key to Havertys' long term success. Our strong balance sheet and financial strength enable us to execute on these strategies in the current economic environment."

Third Quarter ended September 30, 2024 Compared to Same Period of 2023

• Total sales down 20.2%, comp-store sales down 20.5% for the quarter. Total written business was down 15.3% and comp-store written business declined 16.3% for the quarter.

• Design consultants accounted for 34.5% of written business in 2024 and 29.0% in 2023.

• Gross profit margins decreased to 60.2% in 2024 from 60.8% 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 $2.3 million in 2023.

• SG&A expenses were 57.4% of sales versus 51.1% and decreased $11.8 million. The primary drivers of this change are:

  • decrease of $6.2 million in selling expenses as these are predominantly variable costs tied to commissioned-based compensation expense and third-party creditor costs.

  • decrease in warehouse and delivery costs of $3.6 million primarily from reduced labor costs and lower expenditures for supplies and fuel.

  • decrease in administrative expenses of $2.9 million largely due to lower incentive and stock compensation costs.

  • increase in occupancy costs of $1.8 million primarily due to a reduction in rent expense in 2023 for a $1.3 million lease incentive payment.

Balance Sheet and Cash Flow for the Nine Months Ended September 30, 2024

• Cash, cash equivalents, and restricted cash equivalents at September 30, 2024 are $127.4 million.

• Generated $42.0 million in cash from operating activities primarily from earnings and changes in working capital including a $5.3 million reduction in inventories, $8.1 million increase in customer deposits, and a $7.1 million decrease in accrued liabilities and vendor repayments.

• Invested $24.3 million in capital expenditures.

• Paid $15.3 million in quarterly cash dividends.

• No debt outstanding at September 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 $279.0 to $281.0 million range, a $3.0 million reduction in our previous guidance, primarily due to reduced costs for incentive compensation and professional fees offset by an increase in advertising expense. Variable SG&A expenses for the full year of 2024 are anticipated to be in the 19.6% to 19.9% range, a decrease of 10 basis points from our previous guidance driven by third-party credit expense.

• Our effective tax rate for 2024 is expected to be 28.0%, excluding the impact from discrete items and any new tax legislation, an increase from our previous guidance of 27.5%.

• 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.

• We had no significant damage to any of our locations from the recent hurricanes.

Key Results
(amounts in millions, except per share amounts)

Results of Operations
		Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Sales		$	175.9			$	220.3			$	538.5			$	651.4
Gross Profit			105.9				134.0				324.9				391.7
Gross profit as a % of sales			60.2	%			60.8	%			60.3	%			60.1	%
SGA
Variable			33.2				42.3				104.9				128.2
Fixed			67.7				70.4				208.5				212.9
Total			100.9				112.7				313.4				341.1
SGA as a % of sales
Variable			18.9	%			19.2	%			19.5	%			19.7	%
Fixed			38.5	%			31.9	%			38.7	%			32.7	%
Total			57.4	%			51.1	%			58.2	%			52.4	%
Pre-tax income			6.9				22.9				16.5				54.2
Pre-tax income as a % of sales			3.9	%			10.4	%			3.1	%			8.3	%
Net income			4.9				17.2				11.8				41.3
Net income as a % of sales			2.8	%			7.8	%			2.2	%			6.3	%
Diluted earnings per share ("EPS")		$	0.29			$	1.02			$	0.70			$	2.46

Other Financial and Operations Data

		Nine Months Ended September 30,
		2024				2023
EBITDA (in millions)(1)		$	27.7			$	64.3
Sales per square foot		$	164			$	199
Average ticket		$	3,365			$	3,284

Liquidity Measures

		Nine Months Ended September 30,									Nine Months Ended September 30,
Free Cash Flow		2024				2023			Cash Returns to Shareholders		2024				2023
Operating cash flow		$	42.0			$	79.4		Share repurchases		$	-			$	3.2
									Dividends			15.3				14.3
Capital expenditures			(24.3	)			(46.4	)	Cash returns to shareholders		$	15.3			$	17.5
Free cash flow		$	17.7			$	33.0
Cash at period end		$	127.4			$	141.4

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

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

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands, except per share data)		2024				2023				2024				2023
Net sales		$	175,913			$	220,347			$	538,546			$	651,389
Cost of goods sold			69,995				86,349				213,625				259,712
Gross profit			105,918				133,998				324,921				391,677
Expenses:
Selling, general and administrative			100,940				112,729				313,395				341,106
Other (income) expense, net			(333	)			55				(412	)			64
Total expenses			100,607				112,784				312,983				341,170
Income before interest and income taxes			5,311				21,214				11,938				50,507
Interest income, net			1,560				1,719				4,581				3,701
Income before income taxes			6,871				22,933				16,519				54,208
Income tax expense			1,943				5,779				4,760				12,891
Net income		$	4,928			$	17,154			$	11,759			$	41,317
Basic earnings per share:
Common Stock		$	0.30			$	1.05			$	0.73			$	2.55
Class A Common Stock		$	0.28			$	1.00			$	0.67			$	2.41
Diluted earnings per share:
Common Stock		$	0.29			$	1.02			$	0.70			$	2.46
Class A Common Stock		$	0.28			$	0.98			$	0.67			$	2.36
Cash dividends per share:
Common Stock		$	0.32			$	0.30			$	0.94			$	0.88
Class A Common Stock		$	0.30			$	0.28			$	0.88			$	0.82

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

(In thousands)		September 30, 2024				December 31, 2023				September 30, 2023
Assets
Current assets
Cash and cash equivalents		$	121,160			$	120,635			$	134,303
Restricted cash and cash equivalents			6,205				7,142				7,049
Inventories			88,688				93,956				102,334
Prepaid expenses			16,553				17,067				12,782
Other current assets			17,506				12,793				14,463
Total current assets			250,112				251,593				270,931
Property and equipment, net			179,570				171,588				170,263
Right-of-use lease assets			199,724				202,306				205,257
Deferred income taxes			16,037				15,641				17,886
Other assets			13,859				13,005				12,344
Total assets		$	659,302			$	654,133			$	676,681
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable		$	18,208			$	18,781			$	21,121
Customer deposits			43,940				35,837				46,308
Accrued liabilities			39,454				46,289				45,596
Current lease liabilities			36,196				37,357				38,381
Total current liabilities			137,798				138,264				151,406
Noncurrent lease liabilities			186,005				180,397				182,298
Other liabilities			27,699				27,106				26,561
Total liabilities			351,502				345,767				360,265
Stockholders' equity			307,800				308,366				316,416
Total liabilities and stockholders' equity		$	659,302			$	654,133			$	676,681

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

(In thousands)		Nine Months Ended September 30,
		2024				2023
Cash Flows from Operating Activities:
Net income		$	11,759			$	41,317
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			15,728				13,827
Share-based compensation expense			5,128				6,199
Other			523				(1,337	)
Changes in operating assets and liabilities:
Inventories			5,268				15,999
Customer deposits			8,103				(1,661	)
Other assets and liabilities			2,569				10,546
Accounts payable and accrued liabilities			(7,089	)			(5,516	)
Net cash provided by operating activities			41,989				79,374
Cash Flows from Investing Activities:
Capital expenditures			(24,285	)			(46,428	)
Proceeds from sale of land, property and equipment			461				53
Net cash used in investing activities			(23,824	)			(46,375	)
Cash Flows from Financing Activities:
Dividends paid			(15,295	)			(14,301	)
Common stock repurchased			-				(3,194	)
Taxes on vested restricted shares			(3,282	)			(4,082	)
Net cash used in financing activities			(18,577	)			(21,577	)
Change in cash, cash equivalents and restricted cash equivalents during the period			(412	)			11,422
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		$	127,365			$	141,352

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

		Nine Months Ended September 30,
(in thousands)		2024				2023
Income before income taxes, as reported		$	16,519			$	54,208
Interest income, net			(4,581	)			(3,701	)
Depreciation			15,728				13,827
EBITDA		$	27,666			$	64,334

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 October 31, 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 126 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: Haverty Furniture Companies, Inc.

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FAQ

What was Havertys (HVT) earnings per share in Q3 2024?

Havertys reported diluted earnings per share of $0.29 in Q3 2024, down from $1.02 in Q3 2023.

How much did Havertys (HVT) sales decline in Q3 2024?

Havertys' consolidated sales decreased 20.2% to $175.9 million in Q3 2024 compared to the same period in 2023.

What is Havertys (HVT) cash position as of September 30, 2024?

Havertys had $127.4 million in cash, cash equivalents, and restricted cash equivalents as of September 30, 2024.

How many new stores is Havertys (HVT) planning to open in 2024?

Havertys plans to open five net new stores in 2024, with one opened in Q3 and three more planned for Q4, ending the year with 129 locations.