HAVERTY FURNITURE COMPANIES INC Q4 FY2024 earnings call

• Fourth quarter sales and annual sales showed year-over-year declines, but gross margins remained strong.
• Traffic improved post-elections with first positive year-over-year gain in low single digits for the quarter. Conversion rates stabilized, and average ticket rose ~4% to under $3,400.
• Design business was ~32% of total business, with designer average ticket up over 8%. New merchandising team collaborating to shore up lineups.
• Upholstery performed well, with lift in bedrooms and mattresses. Rollout of new point of purchase and tagging program starting Q2, a two to three-year project.
• Marketing team implemented Adobe technology on website, seeing double-digit lift in organic traffic. New media partner Carmichael Lynch contributed to traffic changes.
• Opened new stores in 2024, ending with 129 stores. Plans for more stores in 2025-2026. Supply chain reduced inventories 11% year, expect to rise 5-10% in next quarters.
• Avoided port disruptions but dealing with tariffs from China, Canada, Mexico.

Fourth quarter sales were $184.4 million, down 12.5% with comps down 13.7%. Total written sales were down 6.7% with comps down 8.7%. Annual sales were $722.9 million, down 16.1% with comps down 16.7%. Gross margins were 61.9% for the quarter and 60.7% for the year. Pre-tax profit for the quarter was $9.6 million (5.2% operating margin) and for the year was $26.2 million (3.6% operating margin). The company ended the year with zero funded debt and over $120 million in cash.

• Gross profit margins for 2025 expected to be between 60% and 60.5%.
• Fixed and discretionary SG&A expenses for 2025 in range of $291-$293 million, an increase due to store growth and inflation. Variable SG&A costs expected to be 19%-19.3% in 2025.
• Planned CapEx for 2025 $27.1 million, with $22.7 million for new/replacement stores, remodels, expansions. Anticipated effective tax rate in 2025 is 26.5%.

• Mortgage rates rising, impacting housing affordability.
• Tariffs from China, Canada, Mexico, with Mexico having a bigger impact.
• Uncertainty around economic and competitive conditions.

Q: Could you provide more details on monthly traffic trends for written or delivered sales?

A: On delivered side, down low teens in Oct, Nov, Dec; average 12.5% for quarter. On written business, down low teens in Oct, mid-single digits in Nov, almost flat in Dec.

Q: Has positive momentum carried over into Q1?

A: We don't comment on current quarter.

Q: Any regional variation in fourth quarter?

A: Florida up through Georgia and central part stronger, west and east a bit weaker but not huge difference.

Q: Thoughts on gross margin guidance and tariffs?

A: Will mitigate tariff impact by working with vendors, retail pricing adjustments; feel margins will be stable in 2025.

Q: Expectations for demand environment in 2025?

A: Still tough due to housing struggles, tariffs; hope Fed cuts and mortgage rates ease later in year.

Q: Biggest challenge capitalizing on traffic increase?

A: Conversion is opportunity, working with teams to test ways to move needle.

Q: Fixed SG&A guidance increase, what's driving it?

A: Half due to general inflation, half due to occupancy cost; goal to open 5 stores in 2025.