Havertys Reports Earnings for Second Quarter 2017

8/1/17

ATLANTA, July 31, 2017 (GLOBE NEWSWIRE) -- HAVERTYS (NYSE:HVT) (NYSE:HVT.A) reports earnings per share of $0.29 for the second quarter ended June 30, 2017 compared to $0.24 for the same period of 2016. The earnings per share for the six months ended June 30, 2017 is $0.56 compared to $0.45 for the same period in 2016.

Clarence H. Smith, chairman, president and chief executive officer, said, “We are pleased with the second quarter earnings results. The improvement in gross margin was achieved by working with suppliers to develop great products and improve quality control, sales increases in items with higher margins, and our team’s commitment to convey the Havertys merchandise value message.

“We remain focused on improving the profitability of our current store base and the second quarter’s EBITDA as a percentage of sales grew to 9.1% for this year compared to 8.5% in 2016. Our diligence concerning spending is yielding reductions in certain areas of operations and we shifted a portion of our marketing spend from the second to the third quarter given the timing of our Fourth of July holiday sale event which also contributed to this improvement.”

Financial Highlights

Second Quarter 2017 Compared to Second Quarter 2016

  • As previously announced, net sales increased 1.1% to $196.8 million. Comparable store sales were down 0.2%.
  • Havertys’ stores are closed for Easter with the holiday occurring in April this year versus March last year and the negative impact on second quarter written sales is estimated at 1.2%. After adjusting for the Easter shift, total written sales for the second quarter of 2017 were up 0.6% and written comparable store sales were down 0.7%.
  • Average written ticket was up 3.1% and custom upholstery sales grew 6.2%.
  • Gross profit margins were up 90 basis points to 54.4%.
  • SG&A costs as a percent of sales were 49.2% in 2017 and 49.6% in 2016. Total SG&A dollars were relatively flat compared to 2016. Increases in occupancy costs of $1.1 million due to higher depreciation and other store costs were offset by planned reductions in advertising and marketing costs of $0.9 million and lower administrative expense of $0.7 million primarily from reductions in our costs for group medical benefits.
  • Other income in 2016 includes a $1.9 million gain from the insurance recovery for inventory and the minimum liquidated value of the building destroyed by the storm at our Lubbock, Texas location.
  • We repurchased 1,149,042 shares of common stock for $21.0 million during the second quarter of 2016.

Six Months ended June 30, 2017 Compared to Same Period of 2016

  • Net sales increased 2.1% to $397.3 million. Comparable store sales were up 0.7%.
  • Average ticket rose 2.9% and custom upholstery orders increased 8.2%.
  • Gross profit margins expanded 100 basis points to 54.6% compared to 53.6%.
  • SG&A costs as a percent of sales was 49.6% in both periods. Total SG&A dollars increased $4.1 million as a result of rising occupancy costs of $1.9 million due to higher depreciation, increases in selling expenses of $1.1 million, greater warehouse and delivery expenses of $0.8 million, and a rise in administrative costs of $0.4 million due to higher compensation and technology costs partly offset by lower group medical benefit costs. Fixed and discretionary expenses were $124.8 million in 2017 versus $122.5 million in 2016. The variable type costs were 18.2% of sales compared to 18.1% in 2016.
  • Other income includes insurance gains related to the Lubbock, Texas store of $1.2 million in 2017 and $1.9 million in 2016.

Expectations and Other

  • Total delivered sales for the third quarter to date of 2017 are 0.6% lower than the same period last year and comparable store sales are down 1.1%. Total written sales for the third quarter to date of 2017 are 2.6% lower than the same period last year and written comparable store sales decreased 3.1%.
  • We expect that gross profit margins for the full year 2017 will be approximately 54.2%, increased from the 53.9% prior guidance due to better pricing and product mix in the first half. Second half 2017 gross margins are expected to be approximately 20 to 30 basis points lower than the full year average due to anticipated inbound ocean freight increases and a related negative LIFO impact.
  • Our estimate for fixed and discretionary type SG&A expenses for 2017 remains at $259.0 million, compared to $250.0 million for these same costs in 2016. The variable type costs within SG&A for the full year of 2017 are expected to be 18.3%, increased from the prior guidance of 18.1%, compared to the 18.2% rate in 2016.
  • Our store in Wichita, Kan. was closed on July 14, 2017 due to flooding caused by the rupture of water pipe below its foundation. The assessment of the damage and timeline for repairs is ongoing and this leased location may be closed until mid-November.
  • We plan to open a store in Columbia, S.C. in October to replace an older showroom closed in March.
  • We expect to increase selling square footage approximately 0.3% in 2017. Total capital expenditures are estimated to be approximately $28.0 million in 2017.

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.

About Havertys

Havertys (NYSE: HVT and HVT.A), established in 1885, is a full-service home furnishings retailer with 124 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.

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