HAVERTY FURNITURE COMPANIES INC Q1 FY2025 earnings call

• Q1 sales were $181.6 million, down 1.3% with comps down 4.8%. Gross margins were 61.2%, up from 60.3%. Pre-tax profits were $5.3 million. - Impacted by winter storms, presidential inauguration, and disappointing President's Day sales, but saw bounce back in written sales after President's Day. - Traffic softened but remained positive in low single digits. Conversion rates stabilized with improvement. Average ticket rose ~4% to over $3,300. - Design business improved to ~33% of total, design average ticket up over 9%. New products pushed by merchandising team. - New point of purchase and tagging program to roll out later this quarter to improve customer experience. - Addressed tariff issues, with some products from Vietnam, Cambodia, etc., seeing price increases, but Mexico products exempt from tariffs. - Inventories rose ~$5 million since year-end 2024, expected to rise another $3-$5 million in Q2. - 140th anniversary promotion generated over $8 million in revenue. - Plan to open five new stores a year, closing two stores, with Houston store plans including third store in Q3. - Distribution, home delivery, and customer service teams performing well.

In the first quarter of 2025, Havertys reported net sales of $181.6 million, a 1.3% decrease from the prior year quarter. Comparable store sales were down 4.8%. Gross profit margin increased to 61.2% from 60.3% due to product selection and merchandise mix. SG&A expenses decreased $2.2 million or 1.9% to $107.2 million, accounting for 59% of sales, down from 59.4% in the prior year quarter. Income before income taxes increased $2.1 million to $5.3 million. Net income was $3.8 million or $0.23 per diluted share compared to $2.4 million or $0.14 per share in the prior year quarter. Inventories were $88.7 million, up $5.3 million from December 31, 2024. Customer deposits were $42.8 million, up $2 million from the prior year quarter. Cash and cash equivalents were $111.9 million with no funded debt. CapEx was $6.1 million, and $5.2 million in dividends were paid. $2 million of common shares were repurchased. Design business accounted for approximately 33% of the business, with design average ticket growing to over $7,400, up over 9%. Dining and occasional categories showed weakness.

• 2025 gross margins expected to be between 60% and 60.5%. - Fixed and discretionary SG&A expenses expected to be in the $291 million to $293 million range. - Variable type costs within SG&A for 2025 expected to be in the range of 18.6% to 19%. - Planned CapEx for 2025 reduced to $24 million, with $19.6 million for new or replacement stores, remodels and expansions, $1.8 million for distribution network, and $2.6 million for information technology. - Anticipated effective tax rate for 2025 is expected to be 26.5%, excluding impact from vesting of stock awards and new tax legislation.

• Housing market affordability issues, high interest rates, tariffs, market volatility, inflation concerns, and recession fears. - Winter storms disrupted business in several markets. - Uncertainty regarding tariffs beyond the 90-day reprieve, causing supply chain disruption concerns. - Risks associated with store closures and new store openings based on lease expirations and profitability.

Q: Any way to put a number as far as the impact of the winter storms? And just also curious whether you saw any notable changes in terms of the geographic composition of your written comps?

A: Richard said January was down almost 2% in written business, February down about 5% on same day of the week basis, and March was flat. Steve added there were inordinate storms impacting stores but no exact quantification.

Q: Given the increased tariffs, have you guys implemented any price increases so far this quarter in response to that?

A: Steven said they're going to get in front of that, it will be targeted, with minimal price increases as suppliers have worked with them.

Q: Thinking about what's going on here as of late here. Have you seen any notable changes from the competition in your markets just in response to everything that's going on with concerns about the economy and also tariffs?

A: Steven said they've seen some marketing where people were trying to take advantage of tariffs, but President's Day was a typical aggressive promotion month.

Q: On the tariff, I just want to confirm on the guidance that what you're assuming on the gross margin is that the tariffs that are in place now as of yesterday are in place for the full year. Is that what you're assuming that the 10% tariff on Vietnam and a lot of the Asian countries gets extended and stays that way?

A: Richard said that's correct, and Steven said they feel comfortable with that guidance.

Q: On the piece that's out of China, that 15% that you're currently pausing, I guess, at what point do you need to make a decision whether to ship that out to other countries or place some orders just to not have big holes in your assortment as we move through the year?

A: Steven said vendors have already been working on it, moving production to Vietnam, Cambodia, or Mexico, and inventories were increased ahead of time to mitigate impact.

Q: I wanted to go back to the performance on some of the big weekends. President’s Day weekend this year seems like there was a weather impact as well. But more broadly, as you look at some of the big events and weekends over the past year, we've definitely seen some weakness on some of the prior ones. I know a lot of players are getting very competitive and promotional in those weekends. So do you feel like it's the consumer or perhaps that Haverty is not being as promotional as others are on those weekends and that's leading to some share losses?

A: Steven said he doesn't think it's the promotional activity, citing varying performance in different holidays.

Q: My last question is on the new store openings last year. It seems like they're doing well based on the spread between total written orders and the comp orders. So can you talk more about how those stores are ramping up? What kind of benefit you're seeing?

A: Steven said they've been pleased with new stores, leveraging distribution, initial traffic good in Houston, and looking forward to third store in Houston and relocation of Daytona store.