Havertys Reports Earnings for Second Quarter 2018
ATLANTA, July 31, 2018 (GLOBE NEWSWIRE) -- 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