8-K: Havertys Announces Dividend Increase Despite Sales Decline in Q1 2024

Havertys increased its quarterly dividend by 6.7% despite reporting an 18.1% decrease in consolidated sales for the first quarter of 2024.

Summary

• Havertys reported a 6.7% increase in its quarterly dividend, raising it to $0.32 per share for common stock and $0.30 per share for Class A common stock.
• The company's consolidated sales decreased by 18.1% to $184.0 million in the first quarter of 2024 compared to $224.8 million in the same period last year.
• Comparable-store sales also saw a decline of 18.5%.
• Despite the sales decrease, the gross profit margin improved to 60.3% from 59.1%.
• Diluted earnings per share (EPS) were $0.14, down from $0.74 in the first quarter of 2023.
• The company is planning to open five new stores in 2024 and another five in 2025, including expansion into the Houston, TX market.
• Havertys expects gross profit margins for 2024 to be between 60.0% and 60.5%.
• Fixed and discretionary SG&A expenses for 2024 are projected to be between $290.0 and $292.0 million, while variable SG&A expenses are expected to be between 19.9% and 20.2%.
• Capital expenditures for 2024 are estimated to be approximately $32.0 million.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant sales decline and reduced earnings, despite the positive dividend increase and cost management efforts. The weak housing market is a major concern.

Positives

• The company increased its quarterly dividend, demonstrating confidence in its financial position.
• Gross profit margins improved year-over-year, indicating effective cost management.
• Havertys is actively expanding its retail presence with new store openings planned for 2024 and 2025.
• The company is making strategic investments in its stores and online platform.
• The free in-home design service is growing and contributing significantly to written business.
• SG&A expenses were reduced, showing effective cost control measures.
• The company has no debt and a strong credit availability.

Negatives

• Consolidated sales decreased by 18.1% compared to the same quarter last year.
• Comparable-store sales declined by 18.5%.
• Diluted earnings per share (EPS) significantly decreased to $0.14 from $0.74 year-over-year.
• Total written sales were down 12.6% and written comp-store sales declined 13.0% for the quarter.
• Operating cash flow decreased to $3.1 million from $11.1 million year-over-year.
• Free cash flow was negative $3.3 million compared to positive $4.4 million year-over-year.

Risks

• The company faces challenges from the ongoing weak housing market, impacting sales.
• There are risks associated with disruptions in suppliers' operations and changes in government regulations.
• The company is exposed to competitive pressures and macroeconomic conditions.
• There are risks related to the company's information systems and technology infrastructure.
• The company's sales are down significantly and may continue to be impacted by the weak housing market.

Future Outlook

Havertys expects gross profit margins for 2024 to be between 60.0% and 60.5%, fixed and discretionary SG&A expenses to be between $290.0 and $292.0 million, variable SG&A expenses to be between 19.9% and 20.2%, and capital expenditures to be approximately $32.0 million. The company also plans to increase retail square footage by approximately 3.4% in 2024.

Management Comments

• Our sales reflect the challenges from the ongoing weak housing market.
• The decline in demand requires exceptional customer engagement and operational flexibility.
• Our teams generated another quarter of excellent gross margins of 60.3% and the prudent reductions in operating costs generated positive results for the quarter.
• We are investing capital to expand our business and are on track to open five new stores this year and five in 2025.
• The board's decision to increase the quarterly dividend reflects our strong financial position and long-term outlook as we invest in our business and return capital to our stockholders.

Industry Context

The furniture retail industry is currently facing headwinds due to a weak housing market, which is impacting sales for companies like Havertys. The company's focus on customer engagement, operational flexibility, and strategic investments in new stores and online presence is a common approach in the industry to navigate these challenges.

Comparison to Industry Standards

• While Havertys' gross margin of 60.3% is strong, the significant sales decline of 18.1% is concerning compared to industry averages. Companies like Ethan Allen and Williams-Sonoma, while not direct comparables, have shown more resilience in sales during similar economic conditions.
• Havertys' focus on expanding its physical footprint with new stores is a strategy that contrasts with some competitors who are focusing more on e-commerce. For example, Wayfair has a strong online presence and is less reliant on physical stores.
• The dividend increase is a positive sign for investors, but the overall financial performance is weaker than some of its peers. For example, companies like RH (Restoration Hardware) have maintained stronger profitability despite market challenges.

Stakeholder Impact

• Shareholders will benefit from the increased dividend, but may be concerned about the sales decline and reduced earnings.
• Employees may be impacted by cost-cutting measures, but also benefit from the company's expansion plans.
• Customers will have access to new stores and online services.
• Suppliers may be affected by changes in the company's purchasing patterns.
• Creditors will be reassured by the company's strong financial position and credit availability.

Next Steps

• The company plans to open five new stores in 2024 and five in 2025.
• Havertys will continue to invest in its stores and online presence.
• The company will monitor the housing market and adjust its strategies accordingly.
• The company will host a conference call on May 2, 2024, to discuss the results.

Key Dates

Keywords

dividend, sales, retail, furniture, earnings, gross profit, store expansion, SG&A, housing market