8-K: Havertys Reports Declining Earnings and Sales for Fourth Quarter and Full Year 2024

Havertys reports a decrease in both fourth-quarter and full-year earnings and sales compared to the previous year, while maintaining a strong balance sheet.

Summary

• Havertys reported its operating results for the fourth quarter ended December 31, 2024.
• Fourth quarter diluted earnings per common share (EPS) decreased to $0.49 compared to $0.90 in the same period of 2023.
• Consolidated sales for the fourth quarter decreased by 12.5% to $184.4 million, and comparable store sales decreased by 13.7%.
• The gross profit margin for the fourth quarter was 61.9% versus 62.4% in the prior year.
• For the full year 2024, diluted earnings per common share (EPS) decreased to $1.19 compared to $3.36 in 2023.
• Consolidated sales for the full year decreased by 16.1% to $722.9 million, and comparable store sales decreased by 16.7%.
• The gross profit margin for the full year was 60.7%, consistent with 2023.
• Pre-tax income for the full year was $26.2 million versus $72.7 million in the prior year.
• The company opened five net new stores in 2024, including a return to the Houston, TX market.
• Havertys returned $25.5 million of capital to shareholders in 2024 through share repurchases and dividends.
• Cash, cash equivalents, and restricted cash equivalents at December 31, 2024, totaled $126.3 million.
• The company has no debt outstanding and credit availability of $80.0 million.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company reports declining sales and earnings, it emphasizes its strong balance sheet, store growth, and commitment to shareholder value. The outlook is cautious but not overly negative.

Positives

• Havertys opened five net new stores in 2024, expanding its market presence.
• The company returned $25.5 million to shareholders through dividends and share repurchases, demonstrating a commitment to shareholder value.
• Havertys maintains a strong balance sheet with $126.3 million in cash and no debt.
• Credit availability of $80.0 million provides financial flexibility.
• Design consultants accounted for 31.8% of written business in 2024, up from 29.2% in 2023.

Negatives

• Diluted EPS decreased significantly in both the fourth quarter and full year compared to the previous year.
• Consolidated sales decreased in both the fourth quarter and full year, indicating a slowdown in business activity.
• Comparable store sales also decreased, reflecting weaker performance in existing stores.
• Pre-tax income decreased substantially for the full year.
• Sales per square foot decreased from $197 to $164.

Risks

• The housing slowdown is impacting Havertys' business performance.
• The company faces risks related to the state of the economy and consumer spending environment.
• Competition in the home furnishings market could further impact sales and profitability.
• Inflationary pressures may increase variable SG&A expenses.
• The company's future performance is subject to various economic and market factors beyond its control.

Future Outlook

Havertys expects gross profit margins for 2025 to be between 60.0% and 60.5%. Fixed and discretionary expenses within SG&A for the full year of 2025 are expected to be in the $291.0 to $293.0 million range. Variable SG&A expenses for the full year of 2025 are anticipated to be in the 19.0% to 19.3% range. Planned capital expenditures are approximately $27.1 million in 2025.

Management Comments

• Steven G. Burdette, President and CEO, said that the team remained disciplined in managing operations and executing growth strategies amidst the housing slowdown.
• He noted the achievement of opening five net new stores in 2024, including a return to the Houston, TX market.
• He emphasized the company's prudent capital management and dedication to delivering value to shareholders.
• He highlighted the company's focus on strategies for store growth, merchandising, and marketing for long-term success.
• He stated that the strong balance sheet and financial stability provide a solid foundation for continued growth investment.

Industry Context

The results reflect the challenges faced by the home furnishings industry due to the housing market slowdown and changing consumer spending patterns. Competitors are likely experiencing similar pressures on sales and earnings. Havertys' focus on store growth and capital management aligns with strategies to navigate the current economic environment.

Comparison to Industry Standards

• Comparing Havertys' performance to industry peers such as Ethan Allen Interiors Inc. and La-Z-Boy Incorporated, it's evident that the entire sector is facing headwinds.
• Ethan Allen reported a decrease in written orders, indicating a similar slowdown in demand.
• La-Z-Boy has also been focusing on cost management and supply chain optimization to mitigate the impact of lower sales volumes.
• Havertys' gross margin of around 60% is fairly standard for the industry, but the decline in sales per square foot suggests a need to improve store productivity.
• The company's strong balance sheet and cash position are a positive differentiator compared to companies with higher debt levels.

Stakeholder Impact

• Shareholders will be impacted by the decrease in earnings and sales, but the company's commitment to dividends and share repurchases may provide some support.
• Employees may be affected by cost management measures and changes in compensation.
• Customers may experience changes in product offerings and store layouts as the company adapts to market conditions.
• Suppliers and vendors may face pressure on pricing and order volumes.

Next Steps

• The company will hold a conference call on February 25, 2025, to discuss the results.
• Havertys will continue to focus on its strategies for store growth, merchandising, and marketing.
• The company will monitor economic conditions and adjust its operations accordingly.

Key Dates