Lower Traffic, Tax Changes Hamper Havertys Sales, Profits

February 21, 2018  by Larry Thomas in Business Strategy, Economic News, Industry   

The retailer said sales fell 2.6% to $215 million, even though the average ticket was up 2.2% over the previous year’s fourth quarter and custom upholstery written business rose 11.5%.

Profits tumbled to $2.92 million or 13 cents per share from $10.9 million, or 51 cents per share in the 2016 fourth quarter. The company said the most recent quarter included a one-time charge of 27 cents per share for a reduction in the value of its deferred tax assets under the recently-enacted Tax Cuts and Jobs Act.

“Our earnings for the fourth quarter reflect the impact of below plan sales and the Tax Act,” said Clarence Smith, chairman, president and CEO. “Our sales and in-home designer teams have increased our average ticket for the 13^th straight quarter, however, generating store traffic remains challenging.”

Smith said he believes the long-term effects of the tax bill will be positive for individuals and corporations, noting that Havertys effective tax rate will fall to an estimated 25% in 2018 from 38% in 2017.

He said the retailer will use some of the tax savings to increase the company’s matching contribution to its 401(k) plan, boost employees’ flexible spending accounts and increase its starting hourly wage.

For the 2017 calendar year, sales fell 0.2% to $819.9 million, including a comparable-store sales decrease of 1.3%.

Full year earnings totaled $21.1 million or 98 cents per share, down from $28.4 million or $1.30 per share in 2016.

The company didn’t issue sales and earnings projections for the year, but said delivered sales are down 1.7% thus far in the first quarter, and comparable-store sales are down 2.4%. Total written sales, which include merchandise sold but not delivered, are up 1.7% for the same period.

Havertys said one new store will be opened in the fourth quarter of this year, but an undisclosed number of stores also will be closed throughout the year. Those actions will result in a 1.4% drop in retail square footage.