Haverty Furniture Companies, Inc. (HVT) Reports Quarterly Results for the Three and Six Months Ended June 30, 2024

Press release·08/07/2024 01:33:17

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Haverty Furniture Companies, Inc. (HVT) reported its quarterly financial results for the period ended June 30, 2024. The company’s net sales increased by 4.5% to $243.1 million, driven by a 3.5% increase in same-store sales and a 1.0% increase in sales from new stores. Gross profit margin decreased by 10 basis points to 54.4%, primarily due to higher costs associated with inventory management and supply chain disruptions. Operating income decreased by 12.1% to $14.1 million, primarily due to higher operating expenses and lower gross profit margin. Net income decreased by 15.1% to $8.5 million, or $0.56 per diluted share. The company’s cash and cash equivalents decreased by $10.1 million to $43.4 million, and its long-term debt increased by $5.0 million to $143.5 million.

Summary and Analysis of Key Points

Overview of the Company’s Financial Performance

The company’s financial report for the second quarter and first half of 2024 shows a decline in sales and profitability compared to the same periods in 2023. Some key points:

Total sales for Q2 2024 decreased 13.4% to $178.6 million, while comp-store sales declined 13.6% compared to Q2 2023.
For the first half of 2024, total sales decreased 15.9% to $362.6 million, and comp-store sales were down 16.2% versus the same period in 2023.
Gross profit margin for Q2 2024 was 60.4%, down 10 basis points from 60.5% in Q2 2023. For the first half, gross margin was 60.4% compared to 59.8% in the prior year period.
SG&A expenses as a percentage of sales increased to 57.7% in Q2 2024 from 53.3% in Q2 2023, and to 58.6% in the first half of 2024 from 53.0% in the prior year period.

Revenue and Profit Trends

The company has experienced a significant decline in sales and profitability over the past year. A few key factors contributing to this trend:

Demand for home furnishings has weakened as the COVID-driven surge in consumer spending on home goods has subsided and economic uncertainty has dampened discretionary spending.
Rising interest rates have negatively impacted the housing market, further reducing demand for furniture.
Written business (customer orders prior to delivery) was down 15.2% in Q2 2024 compared to Q2 2023, and written comp-store sales declined 15.8%.

The company’s gross profit margins have held relatively steady, but the significant drop in sales has led to a disproportionate increase in SG&A expenses as a percentage of sales, putting pressure on profitability.

Strengths and Weaknesses

Strengths:

The company’s free in-home design service is being used by more customers, helping to drive 35.8% of total written business in Q2 2024 compared to 28.6% in the prior year period.
Gross profit margins, excluding the impact of LIFO, have improved due to product selection and merchandising mix.

Weaknesses:

Significant decline in sales and comp-store sales, driven by weakening demand for home furnishings and the impact of rising interest rates on the housing market.
Inability to fully offset the drop in sales with reductions in SG&A expenses, leading to a disproportionate increase in SG&A as a percentage of sales.

Outlook for the Future

The company expects the challenging market conditions to continue, forecasting:

Annual gross profit margins for 2024 in the range of 60.0% to 60.5%
Variable SG&A expenses as a percentage of sales to be 19.7% to 20.0% for the full year 2024, a 20 basis point decrease
Fixed and discretionary SG&A expenses of approximately $282.0 to $284.0 million for 2024, an $8.0 million decrease from previous guidance

Overall, the company faces a difficult operating environment in the near term, with weakening demand and the impact of rising interest rates on the housing market. While the company has taken steps to manage costs, the significant drop in sales has put pressure on profitability. The company’s ability to navigate these challenges and position itself for future growth will be crucial in the coming years.