Haverty Furniture Companies, Inc. Q2 FY2024 earnings call

• Total sales were $178.6 million, down 13.4% from last year but an improvement over the first quarter's decline. Pretax profit was $6.5 million. Gross margins were strong at 60.4%. Cash position remained over $100 million.
• Announced addition of second store in Indianapolis, with five new stores planned for 2024, including locations in Florida (Pembroke Pines, St. Petersburg) and Texas (Woodlands). Expanded distribution centers in Lakeland, FL and Dallas, TX.
• Design business accounted for 35% of sales, with new merchandise moving quickly to best sellers. Enhanced special order and custom products contributed to this.
• Focus on opening stores in key markets like Houston, TX, with plans to have 22 Texas stores by year-end and strengthen brand position in Greater Houston.

In the second quarter of 2024, net sales were $178.6 million, a 13.4% decrease from the prior year quarter. Comparable store sales were down 13.6% over the prior year period. Gross profit margin was 60.4%, a 10 basis point decrease from the prior year. Selling, general and administrative expenses decreased $6.9 million or 6.3% to $103.1 million. Net income for the second quarter was $4.4 million or $0.27 per diluted share compared to net income of $11.8 million or $0.70 per share in the comparable quarter last year. Inventories were $92.4 million at the end of the second quarter, down from prior periods. Cash and cash equivalents were $109.9 million, and there was no funded debt.

• Anticipates gross margins for 2024 to be between 60.0% and 60.5%.
• Fixed and discretionary SG&A expenses expected to be in the $282 million to $284 million range, a reduction from previous estimates. Variable-type costs within SG&A expected to be 19.7% to 20%.
• Planned CapEx for 2024 is $33 million, with $28 million for new/replacement stores, remodels, and expansions. $2.5 million for distribution network and $2.5 million for IT.
• Anticipated effective tax rate in 2024 is 27.5%, excluding impact of stock awards and new tax legislation.

• Cyclical industry tied to housing and interest rates, which can impact sales. Potential impact of tariffs on goods from China, but merchants are working with suppliers to find alternative production in countries like Cambodia, Vietnam, Mexico. Election could affect broadcast TV ads in swing states, potentially limiting advertising reach.

Q: Could you comment on sales trends throughout the quarter, including Memorial Day?

A: In April, written business was down ~14%, May (Memorial Day) down ~18%, June down ~8%. Deliveries: April down ~12%, May ~6%, June ~20%.

Q: Can you talk about the new media firm and approach, and its impact for the back half of the year?

A: Introduced Carmichael Lynch in April. Seeing some improvement in traffic, with changes in TV advertising (streaming/OTT and broadcast in bigger markets) and search direction to drive store traffic. Optimistic about third quarter trends.

Q: How are you managing the upcoming election affecting broadcast TV ads?

A: Election may cut off broadcast TV ads in swing states, but marketing team will monitor and manage, with focus on states like Georgia, North Carolina, Virginia where Haverty's has a footprint.

Q: Talk about recent store openings and their performance relative to expectations?

A: South Haven, MS and Destin, FL stores exceeded expectations. Dayton, OH and Concord, NC stores also performing well. Looking forward to new stores in Pembrooke Pines, FL and St. Pete, FL.