Haverty Furniture Companies, Inc. (HVT) Earnings

Management highlights

- Financial Performance Summary: Second quarter 2026 net sales reached $194.9 million, a 7.7% year-over-year increase. Comparable store sales rose 8%, while total written sales increased 12.6% with 12.3% comparable growth. Gross margin expanded 60 basis points to 61.4% year-over-year. Pre-tax income grew to $7.4 million (3.8% of sales) from $4.3 million (2.4% of sales) in the prior year quarter. Earnings per share doubled to 32 cents from 16 cents year-over-year. Net income totaled $5.3 million, up from $2.7 million in Q2 2025. Ending inventory was reduced to $100.5 million from $106.9 million at the end of Q1 2026. The company held $104.3 million in cash with no funded debt and $100 million in available credit capacity after amending its revolving credit facility. Year-to-date 2026, the company repurchased 723,000 common shares for $16.6 million, with $1.8 million remaining in buyback authorization. It paid $10.6 million in dividends year-to-date, with $13.1 million in capital expenditure spent in the first half. - Customer and Sales Momentum: The quarter marked the fourth consecutive quarter of positive written and delivered comparable sales, with double-digit written sales growth every month. The Memorial Day promotion grew 9.7% over the 4-day event and 14.1% over the 2-week promotional period. Traffic turned slightly positive after a weather-impacted negative first quarter, closing percentages held steady, and average ticket rose 14% to over $3,800 driven by growth in the higher-value design segment. New customers spend 50% more than repeat customers, so marketing prioritizes both new customer acquisition and repeat customer loyalty. Organic website traffic growth supported double-digit e-commerce written sales growth. The upper-income consumer segment remains resilient, with growth broad-based across all price points, and higher-end design and custom products outperforming. - Operational and Strategic Initiatives: The company strengthened partnerships with key suppliers in Vietnam via a leadership visit, and the expanded in-country Haverty's quality team is viewed as a core competitive advantage. AI adoption has expanded beyond marketing, supply chain, and IT to customer-facing and operational areas including home delivery, customer chat, and designer-customer communication, expected to improve service and execution. The company ended the quarter with 129 stores, after opening two new locations that are exceeding traffic and volume expectations. It closed one underperforming location and will close a second in August 2026, with ongoing portfolio optimization to reinvest capital for maximum shareholder return. The refresh of mattress departments and in-store design centers is on track to be half complete by the end of 2026, with all work finished in 2027.

Guidance

- Full-year 2026 gross margin is maintained at 60.5% to 61% (excluding any future indirect tariff refunds), with management confident in this range after receiving the finalized new Section 301 tariff schedule in July 2026. - Fixed and discretionary SG&A expense is maintained at $307 million to $309 million for 2026, while variable SG&A is expected to come in between 18.7% and 18.9%, with a step-up in SG&A in the second half of 2026 driven by rent and occupancy costs for new store openings. - Q3 2026 ending inventory is expected to reach the $95 million range, with a 5% swing possible based on product flow and sales performance. - 2026 planned capital expenditure is approximately $34 million, with $27.7 million allocated to new/replacement stores and remodels, $3.2 million to distribution network investments, and $3.1 million to information technology investments. - The 2026 anticipated effective tax rate is 26%, excluding impacts from stock award vesting and potential new tax legislation. - The company expects to end 2026 with 133 stores after opening six new locations (one relocation) in the second half of 2026, including entry into its 18th state (Pennsylvania).

Segment performance

All merchandise categories posted positive sales growth for the quarter. Upholstery, Bedroom, Dining, and Occasional furniture all achieved double-digit sales increases. Mattresses and Decor posted mid-single-digit growth. The design segment, which drives custom special order business, grew average ticket 15.7% to over $8,800, and accounted for 36.5% of total business. Custom special order business overall grew 23.6% year-over-year. E-commerce written sales grew double digits year-over-year, contributing to total sales growth.

Risks & headwinds

- Ongoing geopolitical pressures keeping diesel fuel above $5 per gallon are driving three material cost pressures that will impact margins and expenses through the end of 2026: a 25% to 30% increase in container rates starting mid-August 2026, higher transportation and delivery fuel expenses, and increased product input costs. - The cost of 60-month no-interest promotional financing continues to rise, increasing the company's third-party credit costs. - Future actual results may differ materially from forward-looking statements due to broader economic conditions, competitive pressures, and other unforeseen factors disclosed in SEC filings. - Indirect tariff refunds from third-party suppliers are still in negotiation, with no guarantee of the final amount due to shared legal fees and multi-party negotiations.

Analyst Q&A

• Q: Can you break down monthly delivered comparable sales growth for the quarter, and were there notable regional differences in performance? /

  A: Delivered comparable sales growth accelerated throughout the quarter, reaching 4% in April, 8% in May, and 11% in June. Performance was positive across all 12 of the company's districts, with consistent strength across the Midwest, Eastern District, Florida, and Texas even against challenging prior year comparisons. Average ticket growth is driven by both modest unit growth per sale and price increases, with significant upside remaining for the high-margin design segment as only a subset of current customers use design services.

• Q: What cost pressures are driving the increase in variable SG&A guidance? /

  A: Higher variable SG&A is primarily driven by increased costs for third-party promotional financing programs, which are slightly more expensive this year than in 2025, even as customer usage of these promotional offerings remains consistent with last year.

• Q: How did traffic trends change in Q2 after the weather-impacted first quarter, and is sales growth concentrated at higher price points? /

  A: Traffic rebounded to slightly positive in Q2 after being negative in Q1 due to poor weather and early-year geopolitical disruption, with consistent positive traffic throughout the quarter. Growth is broad-based across all the company's good, better, best price points, but the higher-end design and custom special order segment, which serves affluent customers, is performing exceptionally well.

• Q: How much additional tariff refund can be expected from indirectly sourced products, after the direct import refunds already received? /

  A: All expected direct import tariff refunds have already been received. Additional refunds from indirectly sourced products are still in negotiation with multiple third parties, and vendor legal fees will reduce the final total. Management expects the total indirect refund amount to be roughly $1 to $1.5 billion, similar to the direct refund received in Q2, and hopes to receive these funds in the 2026 calendar year.