Havertys Reports Earnings for First Quarter 2017


ATLANTA, May 01, 2017 (GLOBE NEWSWIRE) -- HAVERTYS  (NYSE:HVT) (NYSE:HVT.A) reports earnings per share for the first quarter ended March 31, 2017 was $0.28 compared to $0.21 for the same period of 2016.

Clarence H. Smith, chairman, president and CEO, said, “We are pleased with the first quarter sales and earnings given the choppy retail environment.  Our merchandising team has developed a great assortment of products to meet the discerning tastes of the on-trend consumer.  The upholstery category continues to drive our business with strong sales and favorable margins, and we had good results from the mattress and accessory groups.

“We are glad to have exited a temporary space in Lubbock, Texas and now serve customers in a newly constructed showroom on the site of the store destroyed a year ago.  We expanded into the Greensboro, N.C. market opening a new store this week, and with our long-term presence in Winston-Salem, the Havertys brand is already favorably recognized in the Piedmont Triad area.

“As gratifying as new store openings are, our primary focus is on improving the profitability of our current store base. Adjustments to our media mix, localized marketing, enhancements to our website, and associate training have yielded higher in-store closing rates. Our product mix, in-home design service, and suggested complimentary merchandise has resulted in ten straight quarters of increases in average ticket over comparable periods. We believe our customer centered focus and strategies will further separate us from our competition and create better returns for our stockholders.”

Financial Highlights
First Quarter 2017 Compared to First Quarter 2016

  • As previously announced, net sales increased 3.0% to $200.4 million.  Comparable store sales were up 1.6%.
  • Total written sales for the first quarter of 2017 were up 2.5% and written comparable store sales increased 1.0% over last year’s first quarter. Since 2016 was a leap year, this year’s quarter contained one less day, a Saturday.  This calendar change reduced the reported written sales increase by approximately 1.9%.  Havertys stores are closed for Easter and the positive first quarter impact on written sales from the holiday occurring in April this year versus March last year is estimated to be approximately 1.2%.
  • Average written ticket was up 2.9% and custom upholstery written business rose 10.3%.
  • Gross profit margins increased 100 basis points to 54.7%.  Lower inbound freight costs on imported products and merchandise pricing and mix contributed approximately 80 basis points of this improvement and the remainder was primarily from reduced product markdowns.
  • SG&A costs as a percent of sales were 50.1% in 2017 and 49.5% in 2016. Total SG&A dollars increased $4.0 million due to increases in administrative costs of $1.1 million (largely due to compensation costs), selling expenses of $0.8 million, occupancy costs of $0.8 million, advertising and marketing expenses of $0.8 million, warehouse and delivery expenses of $0.5 million.
  • Other income includes a $1.2 million gain from the insurance recovery related to the destruction of our Lubbock, Texas location at the end of 2015.
  • The new store in Lubbock opened in early March.

Expectations and Other

  • Total delivered sales for the second quarter to date of 2017 are up 2.2% and comparable store sales increased 1.3%. Total written sales for the last week of March plus April are up approximately 2.0% over the same day of week period last year and written comparable store sales increased approximately 0.9%. We are using this period for comparison as it negates the impact of Easter occurring in late March last year and April this year.
  • We expect that gross profit margins for the full year 2017 will be approximately 53.9%, increased from the 53.6% prior guidance due to better pricing and product mix in the first half.  Second half 2017 gross margins are expected to be approximately 40 to 50 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 are now $259.0 million, a $1.0 million reduction of our previous estimate, 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 18.1% percent of sales compared to the 18.2% rate in 2016.
  • We will open a store in Greensboro, N.C. in early May and a replacement store in Columbia, S.C. in September.
  • We expect to increase standard selling square footage approximately 0.3% in 2017. Total capital expenditures are estimated to be approximately $27.0 million in 2017.


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except per share data – Unaudited)
 
  Three Months Ended
March 31,
   2017  2016 
        
Net sales  $200,427  $194,511 
Cost of goods sold  90,831  90,092 
 Gross profit  109,596  104,419 
Credit service charges  45  65 
  Gross profit and other revenue  109,641  104,484 
        
Expenses:       
 Selling, general and administrative  100,374  96,353 
 Provision for doubtful accounts  102  104 
 Other (income) expense, net  (1,158) (182)
  Total expenses  99,318  96,275 
        
Income before interest and income taxes  10,323  8,209 
Interest expense, net  583  622 
        
Income before income taxes  9,740  7,587 
Income tax expense  3,754  2,918 
  Net income  $5,986  $4,669 
        
Other comprehensive income       
 Adjustments related to retirement plans; net of tax expense
 of $9 and $11
  $16  $19 
        
 Comprehensive income  $6,002  $4,688 
        
Basic earnings per share:       
 Common Stock  $0.28  $0.21 
 Class A Common Stock  $0.27  $0.20 
        
Diluted earnings per share:       
 Common Stock  $0.28  $0.21 
 Class A Common Stock  $0.27  $0.20 
        
Basic weighted average shares outstanding:       
 Common Stock  19,297  20,021 
 Class A Common Stock  1,813  2,031 
        
Diluted weighted average shares outstanding:       
 Common Stock  21,540  22,496 
 Class A Common Stock  1,813  2,031 
        
Cash Dividends per share:       
 Common Stock  $0.1200  $0.100 
 Class A Common Stock  $0.1125  $0.095 


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands – Unaudited)
 
  March 31,
2017
 December 31,
2016
 March 31,
2016
 
  (Unaudited)    (Unaudited) 
ASSETS        
Current assets          
 Cash and cash equivalents  $61,495  $63,481  $53,733 
 Investments  -  -  12,740 
 Restricted cash and cash equivalents  8,047  8,034  8,010 
 Accounts receivable  3,421  4,244  4,857 
 Inventories  108,258  102,020  110,200 
 Prepaid expenses  10,581  8,836  10,411 
 Other current assets  4,926  7,500  5,317 
  Total current assets  196,728  194,115  205,268 
           
Accounts receivable, long-term  385  462  546 
Property and equipment  231,584  233,667  236,587 
Deferred income taxes  18,367  18,376  17,234 
Other assets  8,556  7,885  6,038 
  Total assets  $455,620  $454,505  $465,673 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
 Accounts payable  $23,354  $25,662  $24,172 
 Customer deposits  27,263  24,923  23,782 
 Accrued liabilities  37,704  41,904  30,541 
 Current portion of lease obligations  3,568  3,461  3,239 
  Total current liabilities  91,889  95,950  81,734 
           
Lease obligations, less current portion  52,066  52,013  53,038 
Other liabilities  25,198  24,671  25,864 
  Total liabilities  169,153  172,634  160,636 
           
Stockholders’ equity  286,467  281,871  305,037 
  Total liabilities and stockholders’ equity  $455,620  $454,505  $465,673 


HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands – Unaudited)
 
 Three Months Ended
March 31,
 
 2017 2016 
        
CASH FLOW FROM OPERATING ACTIVITIES       
Net income  $5,986  $4,669 
 Adjustments to reconcile net income to net cash provided by
 (used in) operating activities:
       
 Depreciation and amortization  7,582  6,792 
 Gain on insurance recovery  (1,170) - 
 Proceeds from insurance recovery received for business interruption  311  - 
 Share-based compensation expense  1,316  1,050 
 Provision for doubtful accounts  102  104 
 Other  13  (24)
Changes in operating assets and liabilities:       
 Accounts receivable  798  1,096 
 Inventories  (6,238) (1,304)
 Customer deposits  2,340  2,746 
 Other assets and liabilities  1,068  (3,512)
 Accounts payable and accrued liabilities  (6,349) (16,380)
  Net cash provided by (used in) operating activities  5,759  (4,763)
        
CASH FLOWS FROM INVESTING ACTIVITIES       
Capital expenditures  (5,182) (8,979)
Proceeds from insurance for destroyed property and equipment  989  - 
Other  19  4 
 Net cash used in investing activities  (4,174) (8,975)
        
CASH FLOWS FROM FINANCING ACTIVITIES       
Payments on lease obligations  (849) (748)
Dividends paid  (2,521) (2,205)
Common stock purchased  -  (235)
Other  (201) - 
 Net cash used in financing activities  (3,571) (3,188)
        
Decrease in cash and cash equivalents during the period  (1,986) (16,926)
Cash and cash equivalents at beginning of period  63,481  70,659 
        
Cash and cash equivalents at end of period  $61,495  $53,733 

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 May 2 at 10:00 a.m. ET at its website, havertys.com under the investor relations section. If you can not 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:  8093159).

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.

About Havertys

Havertys (NYSE:HVT) (NYSE: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.

News releases include forward-looking statements, which are subject to risks and uncertainties. Factors that might cause actual results to differ materially from future results expressed or implied by such forward-looking statements include, but are not limited to, general economic conditions, the consumer spending environment for large ticket items, competition in the retail furniture industry and other uncertainties detailed from time to time in the company’s reports filed with the SEC.


            

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