Haverty Furniture Companies, Inc. Q2 FY2025 earnings call

• Sales for Q2 were $181 million, up 1.3% with comps down 2.3%; total written sales up 0.4% with comps down 2.1%.
• Gross margin at 60.8% compared to 60.4% last year. Pretax profits $4.3 million, operating margin 2.4% vs 3.6% last year.
• Impact of struggling housing market, high interest rates, tariffs, inflation, and geopolitical issues; consumer remained resilient with mid-single digit traffic growth.
• Memorial Day sales increased over 3% in 2-week period and over 14% in 4-day period; traffic up double digits, average ticket ~$4,000, conversion rates consistent with last year.
• Marketing efforts using AI algorithms, converted traffic to Adobe's Edge delivery service, saw 15.6% increase in organic traffic and 8.4% web sales growth.
• Merchandising team moved production out of China, expecting full operationality in Q3; new point of purchase and tagging program to roll out in Q3.
• Store openings: 2025 will open 2 in Houston, 1 relocation; close 2; 2026 to open 5 stores including in St. Louis, Nashville, and Houston areas.

In the second quarter of 2025, Haverty's reported net sales of $181 million, a 1.3% increase from the prior year quarter. Comparable store sales were down 2.3%. Gross margin was 60.8%, up 40 basis points from 60.4% in the prior year. Pretax profits were $4.3 million (2.4% operating margin) compared to $6.5 million (3.6% operating margin) in Q2 2024. EPS was $0.16 vs $0.27 in the prior year. By category, upholstery and bedroom had positive sales in the low to mid-single digits, bedding and occasional were down low single digits, and dining room and decor were down high single digits. Revenue contribution percentages weren't explicitly stated but key categories are mentioned.

• Gross margins for 2025 expected between 60% and 60.5%.
• Fixed and discretionary SG&A expenses for 2025 expected $291M-$293M, unchanged from previous guidance.
• Variable SG&A for 2025 expected 18.5%-18.8%.
• CapEx for 2025 remains at $24M, with $19.6M for stores, remodels, expansions; $1.8M for distribution; $2.6M for IT.
• Anticipated effective tax rate in 2025 is 26.5% (excluding vesting of stock awards and new tax legislation).

• Tariffs creating uncertainty in the industry, potential price changes once tariffs finalized.
• Labor shortages and wage challenges in Vietnam due to increased production demands.
• Struggling housing market, high interest rates, rising home prices, low consumer confidence as ongoing risks.

Q: Can you speak to the cadence of your written sales throughout the quarter and whether there are notable regional differences in performance?

A: High level, written business down ~2% in April, up ~1% in May, ~2.5% in June; delivered business up ~5% in April, ~2% in May, ~3% down in June. Regional performance was pretty much across the board in all districts, with some regions performing slightly better but all trending in the same direction.

Q: How much impact did suspending some special orders from China have on same-store business?

A: Hard to quantify exactly, but it impacted the design business and ability to serve customers with special orders; production is being moved and expected to be back on track in Q3.

Q: Have you taken any pricing actions due to tariffs, and how are you thinking about pricing in the back half?

A: Took some pricing actions in early May; merchants are prepared to adjust pricing based on final tariff policies; gross margin guidance is comfortable with a buffer for potential price changes.

Q: Thoughts on the promotional environment, using promotions to drive traffic without depressing margins or changing brand perception?

A: Will continue to be more aggressive with promotions, including 60 months no interest; Memorial Day and Labor Day promotions planned; consumer hasn't shown pushback yet, and unit sales are trending with overall sales.

Q: Are store openings getting pushed to 2026 from 2025, and are you confident in real estate environment for openings?

A: Yes, some store openings pushed to 2026; rents haven't gone down; feel good about converting existing boxes and looking at new markets, aiming to get back to 5 stores a year eventually.