Haverty Furniture Companies, Inc. Q3 FY2024 earnings call

• Opened new stores like Pembroke Pines, with plans to open 3 additional stores this year in St. Petersburg, Florida and Greenwood, Indiana, and returned to Houston after 43 years.
• Impacted by hurricanes Helene and Milton, with minimal damage to stores but some closures; team members safe.
• Store traffic improving, design business grew over 19% of total business, average ticket rising.
• Inventories at $88.7 million, down from prior periods; cash and cash equivalents at $121.2 million with no funded debt.

In the third quarter of 2024, Haverty's reported net sales of $175.9 million, a 20.2% decrease from the prior year. Comparable store sales were down 20.5% year-over-year. Gross profit margin decreased 60 basis points to 60.2% due to changes in the LIFO reserve; excluding this, gross margins increased over 50 basis points year-over-year. SG&A expenses decreased $11.8 million (10.4%) to $100.9 million, accounting for 57.4% of sales compared to 51.1% in the prior year quarter. Net income for the quarter was $4.9 million or $0.29 per diluted share, down from $17.2 million or $1.02 per share in the comparable quarter last year.

• Expect gross margins for 2024 to be between 60.0% and 60.5%.
• SG&A expenses for 2024 expected in the $279 million to $281 million range, with variable costs 19.6% to 19.9%.
• 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 information technology.
• Anticipated effective tax rate for 2024 is 28%.

• Economic and competitive conditions that could impact results.
• Impact of hurricanes causing store closures, distractions, and burden on team members and customers.
• High interest rates and unaffordable housing market affecting consumer spending.

Q: What is the anticipated longer-term demand impact from hurricane rebuilding?

A: Steve Burdette expects a lift, with anticipation of 3-6 months out, varying by region (Asheville longer-term, Florida quicker).

Q: How does the weak consumer position Haverty's for continued five store growth?

A: Clarence Smith states the plan to continue five-store growth, with focus on Houston as a priority.

Q: Share monthly trends and regional sales differences?

A: Richard Hare notes written business down 15.3% q-o-q, deliveries down 20.2% q-o-q; Steve Burdette mentions Midwest/Central districts outperforming Florida/West due to storm impact.

Q: Can inventories be further reduced and updates on marketing?

A: Steve Burdette says inventories not expected to drop further, marketing strategy using digital, broadcast, etc., working with improved traffic.

Q: Traffic trend in October and Houston market potential?

A: Clarence Smith says traffic improving, Cristina Fernandez asked about Houston market potential, with target of 5+ stores in Houston.