Haverty Furniture Companies, Inc. (NYSE:HVT) is a leading retailer of a broad line of residential furniture in the middle to upper-middle price ranges. The company has a long and storied history, having been in operation for over 139 years, and has consistently gained market share, even in difficult times.

Financials

In the first quarter of 2024, Haverty's faced headwinds as the company's net sales declined 18.1% to $183,997,000, with comparable store sales down 18.5%. This decline was primarily driven by the continued falloff in furniture demand following the dramatic sales increases during the COVID-19 pandemic. The industry struggled to supply timely furniture deliveries during the "gangbuster" years, but once that backlog cleared up, the company experienced a significant negative impact.

The company's annual net income for the fiscal year 2023 was $56,319,000, with annual revenue of $862,133,000. Haverty's annual operating cash flow was $97,203,000, and its annual free cash flow was $44,088,000. In the first quarter of 2024, the company reported net income of $2,393,000.

Business Overview

Despite the challenging market conditions, Haverty's has remained focused on strategic initiatives to position the company for long-term success. The company is investing in store growth, upgrading its store and operating systems, and expanding its design services to better serve its customers. Haverty's plans to open 5 new stores in 2024 and an additional 5 in 2025, with a focus on high-growth markets.

One of the company's key strategic moves is its re-entry into the Houston, Texas market, which is the largest market in Haverty's footprint where it does not currently have a presence. The company plans to open its first store in the Woodlands area later this year, followed by a store in Baybrook Village in the first quarter of 2025. Haverty's believes that it will be well-positioned and well-received in Houston, further strengthening its position in the state of Texas, which is currently its second-largest market with 22 stores.

Haverty's has also been focused on improving its merchandising and marketing efforts. The company recently made a change in its media planning and buying partner, bringing in Carmichael Lynch Media to overhaul its paid media approach. This new partnership is expected to result in better targeting and greater efficiencies, leading to a higher return on the company's media investments.

In terms of product categories, Haverty's has seen strength in its upholstery and special order businesses, with the special order business up 13.5% in the first quarter of 2024. The company has also introduced new outdoor furniture offerings, which have seen positive early results in the stores where they have been introduced.

Liquidity

Haverty's balance sheet remains strong, with $111,818,000 in cash and cash equivalents as of March 31, 2024, and no funded debt. This financial flexibility allows the company to continue investing in its growth initiatives, as well as return capital to shareholders through its dividend program. The company recently announced a 6.7% increase in its quarterly dividend, marking the 12th consecutive year of consistent dividend increases.

Outlook

Looking ahead, Haverty's has provided guidance for the full year of 2024. The company expects its gross profit margins to be between 60.0% and 60.5%, an increase from its previous estimate. The company also expects its fixed and discretionary SG&A expenses to be in the range of $290 million to $292 million, with variable-type costs within SG&A expected to be between 19.9% and 20.2%. Haverty's planned capital expenditures for 2024 remain at $32 million, with a focus on new and replacement stores, remodels, and investments in its distribution network and information technology.

Conclusion

Despite the challenges facing the furniture industry, Haverty's remains well-positioned to navigate the current environment and continue its growth trajectory. The company's strong balance sheet, strategic initiatives, and focus on customer experience position it as a leader in the middle to upper-middle price range of the residential furniture market.