Havertys Reports Sales Decline Amid Cautious Consumer Climate in Q3

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Havertys Reports Sales Decline Amid Cautious Consumer Climate in Q3

In the 2024 Third Quarter Earnings Call, leading home furniture retailer Havertys (NYSE: HVT) reported declines in sales and earnings per share. The company's consolidated sales reached $175.9 million, a decrease of 20.2% compared to the previous year, while earnings per share fell from $1.02 to $0.29. Despite challenging conditions such as the impact of hurricanes and a cautious consumer environment, Havertys demonstrated resilience through its expansion plans and signs of recovery in store traffic.

Key Points:

  • Consolidated sales decreased by 20.2% to $175.9 million, and earnings per share fell to $0.29.
  • Hurricanes impacted operations in Florida, Georgia, and the Carolinas, leading to cautious consumer spending.
  • Store traffic is recovering, and new store openings are planned, including a significant expansion in Houston, Texas.
  • The company’s design segment grew by over 19%, with the average ticket size rising to approximately $3,500.
  • Havertys reported a gross profit margin of 60.2% and reduced SG&A expenses by 10.4%.
  • The company has a strong balance sheet with $121.2 million in cash and no debt.
  • Planned CapEx for 2024 is $33 million, focusing on new stores, distribution networks, and IT.
  • Sales trends show a consistent decline; however, the company reported strong credit metrics and inventory management.

Company Outlook:

  • Gross margins for 2024 are expected to be between 60.0% and 60.5%.
  • Capital expenditures of $33 million are planned, with a focus on new or renovated stores, distribution, and IT.
  • The effective tax rate for 2024 is anticipated to be around 28%, excluding certain impacts.
  • Demand recovery from hurricane effects is expected to occur within 3-6 months, with a faster rebound anticipated in Florida.
  • The company aims to open five new stores annually, potentially increasing to six, focusing on the Houston market.

Negative Highlights:

  • High interest rates and housing affordability issues continue to impact sales.
  • Written orders and deliveries decreased by 15.3% and 20.2%, respectively.

Positive Highlights:

  • The design segment experienced over 19% growth.
  • Average ticket size increased by 3%.
  • Despite market challenges, the company reported strong credit metrics and inventory management.

Shortcomings:

  • Sales and earnings per share saw significant declines compared to the previous year.
  • The company experienced operational disruptions in key markets due to hurricanes.

Q&A Highlights:

  • The company is not raising discount rates and is maintaining its current promotional strategies.
  • Demand for credit offers remains low, but credit metrics are strong.
  • The design segment represents over 34% of sales and is performing well.
  • Havertys plans to establish a strong presence in the Houston market with five stores.

In summary, Havertys is progressing in a challenging retail environment by focusing on strategic store expansions while maintaining service quality without aggressive discounting. The company's solid balance sheet and targeted investments towards growth areas demonstrate its determination to navigate current market challenges. As Havertys continues to adapt to consumer spending trends and external factors such as natural disasters, it remains a key player in the home furnishings sector. The company is expected to discuss the fourth-quarter results in the future and pay tribute to industry veterans shaping the market.

InvestingPro Insights: The recent financial performance highlighted in Havertys’ earnings call is further illuminated by data from InvestingPro. Despite reported declines in sales and earnings, InvestingPro Insights indicate that Havertys has maintained impressive gross profit margins, consistent with the reported 60.2% gross margin in the third quarter. This strength in margins is crucial for advancing in the current challenging retail environment.

The company's commitment to shareholder returns is clearly evidenced by InvestingPro data showing a substantial dividend yield of 10.29%. This is particularly noteworthy considering Havertys has paid uninterrupted dividends for 50 years, underscoring its financial stability and commitment to shareholder value despite market challenges.

InvestingPro data also reveals that Havertys has a P/E ratio of 14.1, suggesting that the stock may be reasonably valued relative to its earnings. This could be attractive to value investors, especially given the stock is trading near its 52-week low, as noted in another InvestingPro Insight.

While the article discusses a decline in sales, InvestingPro data quantifies this with a 19.6% revenue growth over the past twelve months. Nonetheless, despite these challenges, InvestingPro Insights indicate that analysts are predicting the company will remain profitable this year.

For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional insights on Havertys, providing a deeper understanding of the company’s financial health and market position. These insights could be particularly valuable in assessing Havertys' recovery and long-term growth potential in the home furnishings sector.