Haverty Furniture Companies, Inc. Q3 FY2025 earnings call

• Sales growth: Q3 sales up 10.6%, comps up 7.1%; total written sales up 10%, comps up 8%.
• Labor Day event: Largest event of the year, 13.6% written increase, mid-single digit traffic, average ticket over $4,000, design average over $8,000.
• Tariffs: New tariffs on upholstered wood products from Oct 14, 25% then 30% from Jan 2026; adjusted pricing strategically.
• Marketing: Invested $2.8M, including direct mail campaign, saw double-digit web traffic growth, e-commerce up 13.6%.
• Store expansion: Opened third Houston store, finalized 4 leases for 2026 openings, plan to invest in stores in 2026.
• Supply chain: Moved production out of China, worked with vendors on pricing.

Net sales for Q3 were $194.5 million, up 10.6% with comps up 7.1%. Total written sales were up 10% with comps up 8%. Gross margins were 60.3% compared to 60.2% in Q3 2024. Pretax profits were $6.4 million (3.3% operating margin) vs. $6.9 million (3.9% operating margin) in Q3 2024. EPS was $0.28 vs. $0.29. The design business accounted for 34.2% of sales, driven by a 7.1% increase in upholstery special orders. Traffic was positive in mid-single digits, average ticket increased 6.1% to $3,668, design average ticket rose 11.9% to $7,986. Written e-commerce sales grew 13.6%, web traffic increased double digits. Closed Waco store, opened third Houston store, ending the year with 129 stores; plan to open 5 stores in 2026.

• Gross margins: Expected 60.4% to 60.7% in 2025.
• SG&A expenses: Fixed and discretionary SG&A expected $296M-$298M, variable costs 18.6%-18.8%.
• CapEx: Planned $24M, with $19.6M for stores, $1.8M for distribution, $2.6M for IT.
• Tax rate: Anticipated 26.5% in 2025, excluding stock awards and new tax legislation.

• Industry challenges: High interest rates, rising home prices, tariffs, geopolitical tensions, falling consumer confidence, government shutdown.
• Tariffs impact: LIFO expense expected to increase due to tariffs, affecting gross margins.

Q: Comment on monthly trends and regional differences in Q3.

A: Richard: Written up 10.6% in July, 10.9% in August, ~8% in September; deliveries 11.6% in July, 7% in August, 13.1% in September. Steven: Midwest, Georgia, Central, Florida, Texas strong; East lighter, but all districts positive.

Q: Impact of tariffs on the quarter.

A: Steven: Adjusted pricing strategically, no direct dollar impact. Richard: LIFO expense will increase due to tariffs, with LIFO expense up in 2025.

Q: Expense guidance and leverage of SG&A.

A: Richard: Historically, over $800M sales leads to SG&A leverage. Steven: Marketing expense expected flat in 2026, providing leverage as sales grow.