Havertys Reports Operating Results for Third Quarter

November 3, 2024  by Karen Parrish in Business Strategy, Industry   

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

Conference Call Information

A replay of the conference call will be available on the day of the conference call at the website at approximately 1:00 p.m. ET.