Haverty Furniture Companies, Inc. Q1 FY2025 earnings call

• Sales: Q1 sales were $181.6 million, down 1.3%, with comps down 4.8%. Written sales down 2.6%, comps down 6.3%. Gross margin 61.2% vs 60.3% in Q1 2024.
• Business disruptions: Impacted by winter storms, presidential inauguration, and disappointing President's Day sales, but saw improvement post-President's Day with written sales roughly flat by end of March.
• Key metrics: Conversion rates stabilizing, average ticket up ~4% to over $3,300. Design average ticket up over 9% to over $7,400, accounting for ~33% of business.
• Merchandising: Introducing new products like motion furniture with zero gravity recline, stationary upholstery with color options, and contemporary designs. Rolling out new point of purchase and tagging program later quarter.
• Tariffs: 90-day reprieve helpful, price increases on products from certain countries with minimal impact due to supplier support. Most Mexico products exempt from tariffs.
• Inventory: Inventories up ~$5 million since year-end 2024, expect to rise another $3M-$5M in Q2.
• Store updates: Relocating Daytona store, planning third Houston store, closing two stores (Buckhead, Waco).
• Credit and promotions: Credit costs controlled, promotional strategies enhanced.

In the first quarter of 2025, Havertys reported net sales of $181.6 million, a 1.3% decrease from the prior year. Comparable store sales were down 4.8%. Gross profit margin increased to 61.2% from 60.3% in the prior year quarter. SG&A expenses decreased $2.2 million or 1.9% to $107.2 million. Net income was $3.8 million or $0.23 per diluted share. The design business accounted for approximately 33% of the total business. Upholstery bedroom and mattress categories performed in line, while dining and occasional categories showed weakness.

• Gross margins for 2025 expected to be between 60% and 60.5%.
• SG&A expenses for 2025 projected $291 million to $293 million, variable costs 18.6% to 19%.
• CapEx for 2025 reduced to $24 million, with $19.6 million for new/replacement stores, remodels, etc.
• Effective tax rate for 2025 expected to be 26.5%.

• Housing market challenges including affordability issues, high interest rates, and declining consumer confidence.
• Tariff uncertainties beyond the 90-day reprieve, potential supply chain disruptions as vendors move production from China to other countries.
• Market volatility, inflation concerns, and recession fears.

Q: Any way to put a number as far as the impact of the winter storms? And any notable changes in geographic composition of written comps?

A: January written business down almost 2%, February down ~5% on same day of the week basis, March flat. Winter storms impacted by four to five different storms, no exact quantifiable number.

Q: Given the increased tariffs, have you guys implemented any price increases so far this quarter in response to that?

A: We're going to get in front of that targeted, with price increases going into effect immediately, minimal impact due to supplier support.

Q: Have you seen any notable changes from the competition in your markets just in response to everything that's going on with concerns about the economy and also tariffs?

A: Saw some marketing where people were trying to take advantage of tariffs, but President's Day promotions were aggressive from competitors.

Q: As far as the reduction in CapEx guidance, what exactly is that for?

A: Took out about $3 million for CapEx due to tariff uncertainty, holding back until dust settles.

Q: On the tariff, what are you assuming for the full year? And on the piece out of China, when do you need to make decisions?

A: Assuming current tariffs in place for full year. Vendors already moving production to Vietnam, Cambodia, or Mexico, already ahead in first quarter moving inventory.

Q: As you look at some of the big events and weekends over the past year, do you feel like it's the consumer or perhaps Haverty is not being as promotional as others are on those weekends and that's leading to some share losses?

A: Don't think it's the promotional activity, but looking to test more aggressive promotions moving forward, especially for Memorial Day.

Q: Can you talk more about how new stores are ramping up?

A: New stores leveraging current distribution, initial traffic good. Pleased with Houston stores, looking forward to third Houston store opening in third quarter and Daytona relocation.