Haverty Furniture Companies, Inc. Q2 FY2025 earnings call

• Sales: Q2 sales were $181 million, with total written sales up 0.4% and comps down 2.1%. Traffic was positive in mid-single digits. Average ticket was just under $3,400, with designer average ticket growing ~5% to over $7,600, but overall design and special order business was down mid-single digits.
• Tariffs: Suspended special orders from China vendors in early April due to 145% tariffs, but tariffs were reduced to 30% in mid-May; supply chain and merchandising teams are realigning production out of China, expecting full operation in Q3 to resume special order business.
• Marketing: Used AI in digital ads, saw 15.6% increase in organic traffic and 8.4% web sales growth. Loyalty email campaign generated ~$17 million in Q2. Invested $1.1 million in promoting 60 months no interest.
• Store activity: Opened 2 stores in 2025, closing 2; finalized leases for 2026 openings, including a store in St. Louis Fenton area in Q1 2026, a store in Nashville Mount Juliet area in Q2 2026, and two in Houston; aiming for 5 store openings in 2026.
• Digital: Converted product, listing, and homepage traffic to Adobe's Edge delivery service, resulting in 15.6% increase in organic traffic.

In Q2 2025, net sales were $181 million, up 1.3% year-over-year with comps down 2.3%. Gross margin was 60.8%, up 40 basis points from 60.4% in Q2 2024. Pretax profits were $4.3 million (2.4% operating margin) vs $6.5 million (3.6% operating margin) in Q2 2024. EPS was $0.16 vs $0.27. From a category perspective, 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.

• Gross margins for 2025 are expected to be between 60% and 60.5%.
• Fixed and discretionary SG&A expenses for 2025 are expected to be in the $291 million to $293 million range, with variable type costs in SG&A expected to be 18.5% to 18.8%.
• Planned CapEx for 2025 is $24 million, with $19.6 million for new or replacement stores, remodels, and expansions; $1.8 million for distribution network; $2.6 million for information technology.
• Anticipated effective tax rate in 2025 is 26.5% (excluding impact from vesting of stock awards and new tax legislation).

• Struggling housing market with high interest rates and rising home prices.
• Uncertainty around tariffs, causing potential price changes and operational disruptions.
• Geopolitical issues, inflation concerns, and low consumer confidence.
• Potential labor shortages in Vietnam affecting production.

Q: Can you speak to the cadence of your written sales throughout the quarter and notable regional differences?

A: High level, written business was down ~2% in April, up slightly almost 1% in May, and up ~2.5% in June. Delivered business was up ~5% in April, ~2% in May, and ~3% down in June. It's pretty much across the board in all districts, with some regions performing a bit better but 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. It impacted the design business as to the number of customers and percent of business, but we haven't been able to exactly quantify the overall impact. We were focusing on core items on the floor and paused special items, expecting to be back on track with all vendors 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 in early May with the initial 10% tariffs. We're poised and ready to go based on final tariff decisions, waiting on the final answer. We're prepared to adjust pricing accordingly based on what the tariffs end up being.

Q: As it relates to real estate, are some store openings pushed to 2026, and are you confident in real estate plans?

A: Yes, some store openings are pushed to 2026. Rents haven't gone down. We had put some things on hold earlier but have gotten back into it. We feel good about the boxes being converted for existing stores and are confident in our plans to get back to five store openings a year.