Haverty Furniture Companies, Inc. Q4 FY2024 earnings call

• Fourth quarter sales down 12.5%, full-year down 16.1% but gross margins remained strong. - Traffic improved post-elections, conversion rates stabilized, average ticket up ~4%. - Design business at 32% of total, designer average ticket up over 8%. - New merchandising team collaborating, new point of purchase/tagging program to roll out in Q2. - Marketing team improved website performance with Adobe tech, saw double-digit lift in organic traffic. - New media partner Carmichael Lynch contributed to traffic pattern changes. - Opened new stores in 2024, ended with 129 stores; plan to open 5 stores in 2025. - Supply chain reduced inventories by over 11% in 2024, expects inventories to rise 5%-10% in next few quarters. - Facing tariff issues with China, Canada, and Mexico.

Fourth quarter sales were $184.4 million, a 12.5% decrease; full-year sales were $722.9 million, a 16.1% decrease. Gross margins were 61.9% for the quarter and 60.7% for the year. Pre-tax profit for the quarter was $9.6 million (5.2% operating margin) and for the year was $26.2 million (3.6% operating margin). The design business was approximately 32% of total business, with the designer average ticket over $7,200, up over 8%.

• Gross profit margins for 2025 expected to be between 60% and 60.5%. - Fixed and discretionary SG&A expenses for 2025 expected in $291 to $293 million range, variable SG&A in 19% to 19.3% range. - Planned CapEx for 2025 is $27.1 million, with $22.7 million for new/replacement stores, remodels, expansions. - Anticipated effective tax rate in 2025 is 26.5%. - Plan to open 5 stores in 2025.

• Tariff issues with China, Canada, and Mexico; tariffs already in place with China, others to begin in March. - Mortgage rates rose despite interest rate cuts, impacting housing market affordability.

Q: Could you provide more details on monthly traffic trends for written or delivered sales?

A: Delivered sales were down low teens in October, November, December; written sales were down low teens in October, mid-single digits in November, almost flat in December.

Q: Has positive momentum carried over into Q1 or comments on Presidents' Day holiday?

A: Steve Burdette stated they don't comment on current quarter, will maintain stance on not discussing Q1.

Q: Any regional differences in fourth quarter performance?

A: Florida up through Georgia and central part stronger, west and east a bit weaker but not huge difference.

Q: Expand on gross margin guidance and potential impact from tariffs?

A: Will mitigate tariff impact by working with vendors, adjusting retail pricing if needed; feel product and freight costs will be stable in 2025, margins maintained flat guidance.

Q: Thoughts on demand environment in 2025?

A: Steve Burdette said it'll still be tough due to housing struggles, tariffs; hope Fed cuts and mortgage rates ease later in year.

Q: Biggest challenge capitalizing on traffic increase?

A: Steve Burdette said conversion is the opportunity, working with teams to test ways to move the needle.

Q: Details on fixed SG&A guidance increase and store openings in 2025?

A: Goal to open 5 stores in 2025; fixed SG&A in $291-$293 million range, half due to inflation, half occupancy costs; variable SG&A expected 19%-19.3%