Havertys Report Second Quarter Financial Results

August 1, 2024  by Karen Parrish in Business Strategy, Industry   

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."

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:

o   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.

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. If you cannot listen live, a replay of the conference call will be available at the website, , ir.havertys.com.