HAVERTY FURNITURE COMPANIES INC Q3 FY2024 earnings call

• Consolidated sales were $175.9 million, down 20.2% from last year; earnings per common share were $0.29 vs $1.02. - Saw a cautious consumer and was impacted by hurricanes, but store traffic improved over the last month. - Opened new Pembroke Pines store, expects to open three additional stores this year and end the year with 129 stores; top priority is Houston market. - Fed cutting interest rates and election conclusion expected to lift business environment. - Hurricane Helene and Milton caused minimal damage to stores but some closures; team members safe. - Website modified for personalization, navigation, etc.; added augmented reality. - Decor and upholstery categories best performing; design business grew over 19% as percentage of business, average ticket ~$7,300. - Supply chain navigated port strike; inventories down 4% from Q2 and ~13% from Q3 2023; debt-free with over $100 million cash in bank.

In the third quarter of 2024, Haverty's reported net sales of $175.9 million, a 20.2% decrease from the prior year quarter. Comparable store sales were down 20.5% year-over-year. Gross profit margin decreased 60 basis points to 60.2% from 60.8%, with the decrease driven by the change in the LIFO reserve. Excluding the LIFO reserve impact, gross margins increased over 50 basis points year-over-year. SG&A expenses decreased $11.8 million or 10.4% to $100.9 million, accounting for 57.4% of sales compared to 51.1% in the prior year quarter. Net income for the third quarter was $4.9 million or $0.29 per diluted share, down from $17.2 million or $1.02 per share in the comparable quarter last year.

• Expect gross margins for 2024 to be between 60.0% and 60.5%. - Fixed and discretionary SG&A expenses for 2024 expected to be in $279 million to $281 million range. - Variable type SG&A costs for 2024 expected to be in range of 19.6% to 19.9%. - Planned CapEx for 2024 is $33 million, with ~$28 million for new or replacement stores remodels and expansions. - Anticipated effective tax rate for 2024 is 28%.

• Economic and competitive conditions uncertainties. - Impact of hurricanes and other natural disasters on store operations and consumer sentiment.

Q: Michael Legg asked about the impact of hurricanes on longer-term demand and store growth in weak consumer environment.

A: Steve Burdette said expected demand from hurricane rebuilding to be 3-6 months out, and Clarence Smith said plan to open five stores annually remains, with focus on Houston.

Q: Anthony Lebiedzinski asked about monthly trends, regional sales differences, inventory reduction, and marketing changes.

A: Richard Hare provided sales numbers; Steve Burdette commented on regional differences and inventory; Steve Burdette said marketing strategy with digital, broadcast, etc. is working.

Q: Cristina Fernández asked about traffic trends, merchandise team enhancement, Labor Day weekend, and Houston market store potential.

A: Clarence Smith and Steve Burdette discussed traffic improvement, merchandise team enhancements, Labor Day learnings, and Houston store target.