Havertys Reports Earnings for Second Quarter 2018
July 31 2018 - 04:40PM
HAVERTYS (NYSE: HVT and HVT.A) reports earnings per share of $0.29
for the second quarter ended June 30, 2018 compared to $0.29 for
the same period of 2017. The earnings per share for the six months
ended June 30, 2018 is $0.58 compared to $0.56 for the same period
in 2017.
Clarence H. Smith, chairman, president and chief
executive officer, said, “We are encouraged by the performance of
several of our new product lines, particularly in the bedroom
category. This bodes well as customers begin to refresh more areas
of their homes and we add more new groups in the second half of
2018. Promotions and markdowns in addition to higher freight costs
pressured our gross margins for the second quarter.
“The U.S. recently proposed a 10% tariff on
furniture, accessories, and components used in the manufacturing of
furniture imported into the U.S. from China. We imported
approximately $100 million of products in 2017 that were
manufactured in China. We were the importer of record on
approximately 12% of that amount and the remainder was purchased
from vendors. The impact of the proposed tariffs, should they be
imposed, would result in price negotiations with manufacturers and
suppliers, the possible shifting of sourcing, and potential retail
price increases. Given the waterfall effect of tariffs on cost
inputs and retail pricing, the complete effect of a tariff
imposition is not quantifiable.
“We look forward to beginning operations in our
expanded western distribution facility. This investment will
improve our daily product handling and increase efficiencies. The
additional warehouse space provides supply chain options and
additional opportunity for expanding region specific merchandise
offerings.
“A new marketing campaign to amplify our brand
message begins in the third quarter. We believe this will
build on our progress as website sessions increased 36% in the
second quarter over last year. Our focus remains on engaging
and personalizing the customer’s Havertys experience and allowing
her to move seamlessly between the website and store. We believe
that our omnichannel capabilities is one of Havertys’ competitive
advantages over those furniture retailers operating as part of a
dealer network.”
Financial Highlights
Second Quarter 2018 Compared to Second Quarter
2017
- As previously announced, net sales
increased 1.0% to $198.8 million. Comparable store sales increased
1.3%.
- Total written sales for the second
quarter of 2018 were up 1.1% and written comparable store sales
were up 1.5%.
- Average written ticket increased
3.4% and custom upholstery sales were up 3.0%.
- Gross profit margins were 54.2% in
2018 versus 54.4% in 2017 due to increases in freight costs and
merchandise pricing and mix.
- SG&A costs as a percent of
sales were 49.7% in 2018 and 49.2% in 2017. Total SG&A dollars
were $1.9 million higher in 2018. Third-party credit costs rose as
usage of longer term credit promotions increased and group medical
insurance costs were higher than in the prior year.
- We repurchased 280,196 shares of
common stock for $5.8 million during the second quarter of
2018.
Six Months ended June 30, 2018 Compared to Same Period
of 2017
- Net sales increased 0.2% to $398.2 million. Comparable store
sales increased 0.1%.
- Average ticket increased 2.5% and
custom upholstery sales rose 9.0%.
- Gross profit margins were 54.4%
compared to 54.6%.
- SG&A costs as a percent of
sales was 50.2% in 2018 and 49.6% in 2017. Total SG&A dollars
increased $2.5 million. Fixed and discretionary expenses were
$125.7 million in 2018 versus $124.8 million in 2017. The variable
type costs were 18.6% of sales compared to 18.2% in 2017.
Expectations and Other
- Total written sales for the third
quarter to date of 2018 are up approximately 0.5% and written
comparable store sales are up 2.0% over the same period last
year. Total delivered sales for the third quarter to date of
2018 are down approximately 0.7% from the same period last year and
comparable store sales are up 1.1%.
- We expect that gross profit margins
for the full year 2018 will be approximately 54.5%. Second half
2018 gross margins are expected to be approximately 20 basis points
higher than the full year margin and 30 basis points higher for the
fourth quarter.
- Our estimate for fixed and
discretionary type SG&A expenses for 2018 is in the $257.0 to
$259.0 million range, compared to $253.2 million for these same
costs in 2017. The variable type costs within SG&A for the
full year of 2018 are expected to be 18.5% compared to 18.2% in
2017.
- We expect selling square footage
will decrease 2.3% in 2018 due to store closures and the timing of
new store openings in 2019. Total capital expenditures are
estimated to be approximately $20.0 million in 2018. The expansion
of our western distribution facility will be completed in the third
quarter.
- We have $10.7 million remaining
from current board authorization for common stock repurchases.
HAVERTY FURNITURE COMPANIES, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
(In
Thousands, except per share data – Unaudited) |
|
|
|
Three Months
EndedJune 30, |
|
Six Months
EndedJune 30, |
|
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
198,775 |
|
$ |
196,829 |
|
$ |
398,218 |
|
$ |
397,257 |
|
Cost of
goods sold |
|
|
90,978 |
|
|
89,710 |
|
|
181,514 |
|
|
180,542 |
|
Gross profit |
|
|
107,797 |
|
|
107,119 |
|
|
216,704 |
|
|
216,715 |
|
Credit
service charges |
|
|
25 |
|
|
42 |
|
|
57 |
|
|
87 |
|
Gross profit and other revenue |
|
|
107,822 |
|
|
107,161 |
|
|
216,761 |
|
|
216,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
98,753 |
|
|
96,837 |
|
|
199,756 |
|
|
197,212 |
|
Provision for doubtful accounts |
|
|
22 |
|
|
61 |
|
|
24 |
|
|
163 |
|
Other expense (income), net |
|
|
183 |
|
|
4 |
|
|
(811 |
) |
|
(1,155 |
) |
Total expenses |
|
|
98,958 |
|
|
96,902 |
|
|
198,969 |
|
|
196,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before interest and income taxes |
|
|
8,864 |
|
|
10,259 |
|
|
17,792 |
|
|
20,582 |
|
Interest
expense, net |
|
|
454 |
|
|
565 |
|
|
925 |
|
|
1,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes |
|
|
8,410 |
|
|
9,694 |
|
|
16,867 |
|
|
19,434 |
|
Income tax
expense |
|
|
2,196 |
|
|
3,509 |
|
|
4,340 |
|
|
7,263 |
|
Net income |
|
$ |
6,214 |
|
$ |
6,185 |
|
$ |
12,527 |
|
$ |
12.171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
$ |
0.29 |
|
$ |
0.29 |
|
$ |
0.58 |
|
$ |
0.56 |
|
Class A Common Stock |
|
$ |
0.28 |
|
$ |
0.27 |
|
$ |
0.56 |
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
21,391 |
|
|
21,596 |
|
|
21,498 |
|
|
21,568 |
|
Class A Common Stock |
|
|
1,766 |
|
|
1,801 |
|
|
1,767 |
|
|
1,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
$ |
0.1800 |
|
$ |
0.1200 |
|
$ |
0.360 |
|
$ |
0.240 |
|
Class A Common Stock |
|
$ |
0.1700 |
|
$ |
0.1125 |
|
$ |
0.340 |
|
$ |
0.225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HAVERTY FURNITURE COMPANIES, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In
Thousands - Unaudited) |
|
|
|
June
30,2018 |
|
December
31,2017 |
|
June
30,2017 |
|
|
|
(Unaudited) |
|
|
|
(Unaudited) |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
74,643 |
|
$ |
79,491 |
|
$ |
65,858 |
|
|
Restricted cash and cash equivalents |
|
|
8,179 |
|
|
8,115 |
|
|
8,065 |
|
|
Accounts receivable |
|
|
1,918 |
|
|
2,408 |
|
|
2,915 |
|
|
Inventories |
|
|
107,482 |
|
|
103,437 |
|
|
103,822 |
|
|
Prepaid expenses |
|
|
12,167 |
|
|
11,314 |
|
|
10,296 |
|
|
Other current assets |
|
|
6,266 |
|
|
5,922 |
|
|
4,934 |
|
|
|
Total
current assets |
|
|
210,655 |
|
|
210,687 |
|
|
195,890 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, long-term |
|
|
210 |
|
|
254 |
|
|
352 |
|
Property and equipment |
|
|
226,120 |
|
|
229,215 |
|
|
229,221 |
|
Deferred income taxes |
|
|
12,648 |
|
|
12,375 |
|
|
20,148 |
|
Other assets |
|
|
9,232 |
|
|
8,798 |
|
|
8,707 |
|
|
|
Total
assets |
|
$ |
458,865 |
|
$ |
461,329 |
|
$ |
454,318 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
22,055 |
|
$ |
20,501 |
|
$ |
20,770 |
|
|
Customer deposits |
|
|
29,352 |
|
|
27,813 |
|
|
28,481 |
|
|
Accrued liabilities |
|
|
36,570 |
|
|
37,582 |
|
|
33,469 |
|
|
Current portion of lease obligations |
|
|
3,883 |
|
|
3,788 |
|
|
3,624 |
|
|
|
Total
current liabilities |
|
|
91,860 |
|
|
89,684 |
|
|
86,344 |
|
|
|
|
|
|
|
|
|
|
|
|
Lease obligations, less current portion |
|
|
48,836 |
|
|
50,803 |
|
|
51,151 |
|
Other liabilities |
|
|
26,391 |
|
|
26,700 |
|
|
26,532 |
|
|
|
Total
liabilities |
|
|
167,087 |
|
|
167,187 |
|
|
164,027 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
291,778 |
|
|
294,142 |
|
|
290,291 |
|
|
|
Total
liabilities and stockholders’ equity |
|
$ |
458,865 |
|
$ |
461,329 |
|
$ |
454,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HAVERTY FURNITURE COMPANIES, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In
Thousands – Unaudited) |
|
|
|
Six Months
EndedJune 30, |
|
|
|
2018 |
|
2017 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
12,527 |
|
$ |
12,171 |
|
|
Adjustments to reconcile net income to net cash provided
by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
15,061 |
|
|
15,201 |
|
|
|
Share-based compensation expense |
|
|
2,557 |
|
|
2,175 |
|
|
|
Deferred income taxes |
|
|
(335 |
) |
|
(1,790 |
) |
|
|
Gain on insurance recovery |
|
|
(307 |
) |
|
(1,170 |
) |
|
|
Proceeds from insurance recovery |
|
|
266 |
|
|
311 |
|
|
|
Provision for doubtful accounts |
|
|
24 |
|
|
163 |
|
|
|
Other |
|
|
18 |
|
|
629 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
510 |
|
|
1,276 |
|
|
|
Inventories |
|
|
(4,044 |
) |
|
(1,802 |
) |
|
|
Customer deposits |
|
|
1,539 |
|
|
3,558 |
|
|
|
Other assets and liabilities |
|
|
(484 |
) |
|
2,558 |
|
|
|
Accounts payable and accrued liabilities |
|
|
1,525 |
|
|
(13,183 |
) |
|
|
|
Net cash
provided by operating activities |
|
|
28,857 |
|
|
20,097 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(14,642 |
) |
|
(10,457 |
) |
|
Proceeds from sale of property and equipment |
|
|
846 |
|
|
79 |
|
|
Proceeds from insurance destroyed property and equipment |
|
|
55 |
|
|
989 |
|
|
|
|
Net cash
used in investing activities |
|
|
(13,741 |
) |
|
(9,389 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payments on lease obligations |
|
|
(1,872 |
) |
|
(1,708 |
) |
|
Taxes on vested restricted shares |
|
|
(1,162 |
) |
|
(1,539 |
) |
|
Dividends paid |
|
|
(7,585 |
) |
|
(5,053 |
) |
|
Common stock purchased |
|
|
(9,281 |
) |
|
- |
|
|
|
|
Net cash
used in financing activities |
|
|
(19,900 |
) |
|
(8,300 |
) |
Increase (decrease) in cash, cash equivalents and restricted
cash during the period |
|
|
(4,784 |
) |
|
2,408 |
|
Cash, cash equivalents and restricted cash at beginning of
period |
|
|
87,606 |
|
|
71,515 |
|
Cash, cash equivalents and restricted cash at end of
period |
|
$ |
82,822 |
|
$ |
73,923 |
|
|
|
|
|
|
|
|
|
SG&A Expense
Classification
We classify our SG&A expenses as either
variable or fixed and discretionary. Our variable expenses
are comprised of selling and delivery costs. Selling expenses
are primarily compensation and related benefits for our commission
based sales associates, the discount we pay for third party
financing of customer sales and transaction fees for credit card
usage. We do not outsource delivery so these costs include
personnel, fuel, and other expenses related to this function.
Fixed and discretionary expenses are comprised of rent,
depreciation and amortization and other occupancy costs for stores,
warehouses and offices, and all advertising and administrative
costs.
Conference Call Information
The company invites interested parties to listen
to the live audiocast of the conference call on August 1, 2018 at
10:00 a.m. ET at its website, havertys.com under the investor
relations section. If you cannot listen live, a replay will be
available on the day of the conference call at the website or via
telephone at approximately 1:00 p.m. ET through, August 8. The
number to access the telephone playback is 1‑888‑203‑1112 (replay
passcode: 2195751).
About Havertys
Havertys (NYSE: HVT and HVT.A), established in
1885, is a full-service home furnishings retailer with 121
showrooms in 16 states in the Southern and Midwestern regions
providing its customers with a wide selection of quality
merchandise in middle to upper-middle price ranges. Additional
information is available on the company’s website,
havertys.com.
Safe Harbor
This press release includes statements that
constitute forward-looking statements within the meaning of the
federal securities laws. Generally, the words "believe,"
"expect," "intend," "estimate," "anticipate," "project," "will" and
similar expressions identify forward-looking statements, which are
not historical in nature. We intend for all forward-looking
statements contained herein or on our website, and all subsequent
written and oral forward-looking statements attributable to us or
persons acting on our behalf, to be covered by the safe harbor
provisions for forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and the provisions
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 (which Sections were adopted as
part of the Private Securities Litigation Reform Act of 1995).
Forward-looking statements may relate to, for example, future
operations, financial condition, economic performance (including
gross profit margins and expenses), capital expenditures, and
demand for our products. The Company cautions that its
forward-looking statements involve risks and uncertainties, and
while we believe that our expectations for the future are
reasonable in view of currently available information, you are
cautioned not to place undue reliance on our forward-looking
statements. Actual results or events may differ materially
from those indicated as a result of various important
factors. Such factors may include, among other
things, the state of the economy; state of the residential
construction and housing markets; the consumer spending environment
for big ticket items; effects of competition; management of
relationships with our suppliers and vendors and disruptions
in their operations; the imposition of tariffs and other trade
barriers and the effect of retaliatory trade measures; new
regulations or taxation plans, as well as other risks and
uncertainties discussed in the Company's Annual Report on Form 10-K
and from time to time in the Company's filings with the SEC.
Contact:Haverty Furniture Companies, Inc., 404-443-2900Richard
B. Hare EVP & CFOJenny Hill Parker SVP,
Finance, Secretary and Treasurer
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