Overview of Financial Performance

Havertys, a leading retailer of home furnishings, reported a challenging year in 2024 with a 16.1% decrease in net sales compared to 2023. The housing recession, inflationary pressures, and cautious consumer spending due to economic uncertainty contributed to the sales decline. Despite the drop in revenue, the company maintained its gross profit margin at 60.7% in both 2024 and 2023.

Revenue and Profit Trends

Havertys’ net sales in 2024 were $722.9 million, down from $862.1 million in 2023. This 16.1% decrease was driven by a 16.7% drop in comparable store sales. The company saw sales declines across all quarters, with the largest drop of 24.9% in Q4 2024 compared to the prior year period.

While net sales declined, Havertys was able to maintain its gross profit margin at 60.7% in both 2024 and 2023. The positive impact from changes in the LIFO reserve decreased by $8.6 million to $0.8 million in 2024. Excluding the LIFO impact, gross profit margins increased 100 basis points due to improved product selection and merchandising mix.

On the expense side, Havertys’ selling, general and administrative (SG&A) costs as a percentage of net sales increased from 52.9% in 2023 to 58.0% in 2024. SG&A dollars decreased by $36.6 million, or 8.0%, driven by reductions in variable costs like commissioned-based compensation, transportation, and advertising. However, the company was not able to fully leverage its fixed and discretionary costs amid the lower sales volume.

Net income in 2024 was $19.9 million, down from $56.3 million in 2023. Diluted earnings per common share decreased from $3.36 in 2023 to $1.19 in 2024.

Strengths and Weaknesses

One of Havertys’ key strengths is its focus on providing high-quality, fashionable products and exceptional customer service. The company has a commissioned sales team that receives extensive product training, and it also employs over 120 in-home designers to assist customers. This high-touch service model helps differentiate Havertys in the market.

Additionally, the company has maintained a strong financial position, with no funded debt and $120.0 million in cash and cash equivalents as of the end of 2024. Havertys’ credit agreement provides $80.0 million in available borrowing capacity, giving it financial flexibility.

However, the company’s reliance on the housing and consumer discretionary sectors makes it vulnerable to macroeconomic headwinds. The 16.1% decline in net sales in 2024 demonstrates Havertys’ sensitivity to factors like the housing recession, inflation, and economic uncertainty. The company’s inability to fully leverage its fixed costs during the sales downturn also contributed to the significant drop in profitability.

Outlook and Future Prospects

Looking ahead, Havertys’ management is focused on capturing more market share and improving profitability. The company’s growth strategy includes expanding its retail footprint within its distribution network. On the profitability front, Havertys plans to increase sales volume, maintain strong gross margins, implement targeted marketing initiatives, improve productivity and processes, and adopt efficiency and cost-saving measures.

However, the near-term outlook remains uncertain, as the housing and consumer environments are expected to remain challenging. Havertys will need to navigate these headwinds while continuing to invest in its customer-centric strategy and operational improvements.

Overall, Havertys is a well-established home furnishings retailer with a reputation for quality products and service. While the company faced significant sales and profit declines in 2024 due to macroeconomic factors, its strong financial position and strategic initiatives provide a foundation for potential future growth and profitability as economic conditions improve.