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Havertys Reports Earnings for First Quarter 2018

/EIN News/ -- ATLANTA, May 01, 2018 (GLOBE NEWSWIRE) -- HAVERTYS  (NYSE:HVT) and (NYSE:HVT.A) reports earnings per share for the first quarter ended March 31, 2018 of $0.29 compared to $0.28 for the same period of 2017.

Clarence H. Smith, chairman, president and CEO, said, “First quarter earnings were in line with our expectations based on previously released sales results. Promotions in addition to markdowns related to store closures and remodels resulted in slightly lower gross margins for the quarter.

“We continue to separate Havertys from the promotional furniture stores with our quality products, exceptional customer service, and omni-channel capabilities. Our average ticket continues to increase and in-home designer associated sales exceeded 21% of total quarterly sales. Online engagement has grown with increases in website sessions, conversions, and sales volume.

“Our ongoing market and store rationalization is evidenced with the March completion of the market repositioning in Columbia, SC and our upcoming exit from the Sherman, TX market. Total sales in Columbia have increased after we closed two stores and opened a new beautifully located store. We opened in Sherman over 30 years ago and our merchandising shift over the past decade does not align with this market. We will be closing a few additional stores during 2018 and entering the Chattanooga, TN market.  The productivity of our store base is a strategic priority as we work to generate better returns for our stockholders."

Financial Highlights

First Quarter 2018 Compared to First Quarter 2017

  • As previously announced, net sales for the first quarter of 2018 decreased 0.5% to $199.4 million.  Comparable store sales were down 1.1%.
  • Total written sales for the first quarter of 2018 were down 2.0% and written comparable store sales decreased 2.6% over last year’s first quarter. Average written ticket increased 1.8%.
  • Gross profit margins decreased 10 basis points to 54.6%. 
  • SG&A costs as a percent of sales were 50.6% in 2018 and 50.1% in 2017. Total SG&A increased $0.6 million due to higher occupancy costs, delivery and selling expenses partly offset by reductions in administrative and employee benefits costs.
  • Other income in 2018 includes $0.9 million in gains from real estate sales and insurance recoveries for damaged property and $1.2 million in 2017 from insurance recoveries.
  • Purchase of 171,671 shares of common stock for $3.5 million with $6.5 million remaining under current authorization.
  • Increased quarterly dividend 20% to $0.18 per common share in February 2018 following a 25% increase in August 2017 to $0.15 from $0.12 per common share.

Expectations and Other

  • Total delivered sales for the second quarter to date of 2018 are down approximately 1.3% and comparable store sales are down 1.9%. Total written sales are up 0.1% and written comparable store sales decreased approximately 0.3%.
  • We expect that gross profit margins for the full year 2018 will be approximately 54.5% compared to 54.3% in 2017.  We are revising our previous 2018 estimate due to anticipated increases in our LIFO charge driven by higher freight costs.
  • Our estimate for fixed and discretionary type SG&A expenses for 2018 are in the $258 to $260 million range, compared to $253 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% percent of sales compared to the 18.2% rate in 2017.
  • Our selling square footage is expected to decrease approximately 1.6% in 2018. We plan to close two stores in Texas in the second quarter. One location is reaching the end of its lease term and the Sherman store will be sold as we exit that market. We expect to enter the Chattanooga, TN market with a single store in the fourth quarter.
  • Total capital expenditures are estimated to be approximately $20 million in 2018.

HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data – Unaudited)


  Three Months Ended
March 31,
 
    2018       2017  
             
Net sales  $ 199,442      $ 200,427  
Cost of goods sold   90,535       90,831  
  Gross profit   108,907       109,596  
Credit service charges   32       45  
    Gross profit and other revenue   108,939       109,641  
             
Expenses:            
  Selling, general and administrative   101,004       100,374  
  Provision for doubtful accounts   2       102  
  Other (income) expense, net   (995 )     (1,158 )
    Total expenses   100,011       99,318  
             
Income before interest and income taxes   8,928       10,323  
Interest expense, net   471       583  
             
Income before income taxes   8,457       9,740  
Income tax expense   2,144       3,754  
    Net income  $ 6,313      $ 5,986  
             
Diluted earnings per share:            
  Common Stock  $ 0.29      $ 0.28  
  Class A Common Stock  $ 0.28      $ 0.27  
             
Diluted weighted average shares outstanding:            
  Common Stock   21,605       21,540  
  Class A Common Stock   1,767       1,813  
             
Cash Dividends per share:            
  Common Stock  $ 0.18      $ 0.1200  
  Class A Common Stock  $ 0.17      $ 0.1125  


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands – Unaudited)


    March 31,
2018
  December 31,
2017
  March 31,
2017
 
    (Unaudited)        (Unaudited)  
ASSETS                
Current assets                    
  Cash and cash equivalents    $ 72,093    $ 79,491    $ 61,495  
  Restricted cash equivalents     8,141     8,115     8,047  
  Accounts receivable, net     2,101     2,408     3,421  
  Inventories     109,024     103,437     108,258  
  Prepaid expenses     9,058     11,314     10,581  
  Other current assets     5,981     5,922     4,926  
    Total current assets     206,398     210,687     196,728  
                     
Accounts receivable, long-term, net     212     254     385  
Property and equipment     226,995     229,215     231,584  
Deferred income taxes     13,095     12,375     18,367  
Other assets     9,089     8,798     8,556  
    Total assets    $ 455,789    $ 461,329    $ 455,620  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Current liabilities                    
  Accounts payable    $ 19,598    $ 20,501    $ 23,354  
  Customer deposits     28,313     27,813     27,263  
  Accrued liabilities     33,020     37,582     37,704  
  Current portion of lease obligations     3,835     3,788     3,568  
    Total current liabilities     84,766     89,684     91,889  
                     
Lease obligations, less current portion     49,826     50,803     52,066  
Other liabilities     26,675     26,700     25,198  
    Total liabilities     161,267     167,187     169,153  
                     
Stockholders’ equity     294,522     294,142     286,467  
    Total liabilities and stockholders’ equity    $ 455,789    $ 461,329    $ 455,620  


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands – Unaudited)


  Three Months Ended
March 31,
 
  2018   2017  
             
CASH FLOWS FROM OPERATING ACTIVITIES            
Net income  $ 6,313    $ 5,986  
  Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
           
  Depreciation and amortization   7,535     7,582  
  Stock-based compensation expense   1,571     1,316  
  Gain on insurance recovery   (307 )   (1,170 )
  Proceeds from insurance recovery   266     311  
  Other   (762 )   115  
Changes in operating assets and liabilities:            
  Accounts receivable   347     798  
  Inventories   (5,587 )   (6,238 )
  Customer deposits   500     2,340  
  Other assets and liabilities   2,688     1,068  
  Accounts payable and accrued liabilities   (4,270 )   (6,349 )
    Net cash provided by operating activities   8,294     5,759  
             
CASH FLOWS FROM INVESTING ACTIVITIES            
Capital expenditures   (7,128 )   (5,182 )
Proceeds from insurance for destroyed property and equipment   55     989  
Other   -     32  
  Net cash used in investing activities   (7,073 )   (4,161 )
             
CASH FLOWS FROM FINANCING ACTIVITIES            
Payments on lease obligations   (930 )   (849 )
Dividends paid   (3,792 )   (2,521 )
Common stock repurchased   (3,524 )   -  
Other   (347 )   (201 )
  Net cash used in financing activities   (8,593 )   (3,571 )
             
Decrease in cash, cash equivalents and restricted cash equivalents
 during the period
  (7,372 )   (1,973 )
Cash, cash equivalents and restricted cash equivalents at
 beginning of period
  87,606     71,515  
             
Cash, cash equivalents and restricted cash equivalents at end of period  $ 80,234    $ 69,542  
 

Cost of Goods Sold and SG&A Expense

We include substantially all our occupancy and home delivery costs in SG&A expense as well as a portion of our warehousing expenses.  Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold.

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 May 2 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 May 9. The number to access the telephone playback is 1-888-203-1112 (access code:  9552976).

About Havertys

Havertys (NYSE:HVT) and (NYSE:HVT.A), established in 1885, is a full-service home furnishings retailer with 123 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 statement 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; 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., 404-443-2900
Richard B. Hare
   EVP & CFO
Jenny Hill Parker
   SVP, Finance, Secretary and Treasurer

SOURCE:  Havertys

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