Business Overview: A Storied History of Adaptation and Growth
Haverty Furniture Companies, Inc. (HVT) is a remarkable success story, having weathered the ups and downs of the retail industry for an impressive 140 years. Founded in 1885 in Atlanta, Georgia, this full-service home furnishings retailer has established a strong presence across the Southern and Midwestern regions of the United States, boasting 130 showrooms in 17 states as of the end of 2024.
Haverty Furniture's journey began in 1885 as a small retail furniture business in Atlanta, Georgia. Over the decades, the company has grown to become a leading retailer of residential furniture in the middle to upper-middle price ranges. Throughout its history, Haverty Furniture has demonstrated remarkable resilience, overcoming significant challenges such as the Great Depression in the 1930s.
A significant milestone in the company's history occurred in 1935 when Haverty Furniture began paying an annual cash dividend to its shareholders, a practice it has maintained for nearly 90 years. This commitment to shareholder value underscores the company's financial strength and stability, even during turbulent economic times.
As consumer preferences and shopping habits evolved, Haverty Furniture adapted its business model accordingly. In the late 1990s, the company launched its first website, marking its entry into the digital realm and complementing its brick-and-mortar retail operations. This move laid the foundation for the company's future omni-channel strategy.
Haverty Furniture has consistently focused on enhancing the in-store experience for its customers. One notable initiative has been the expansion of its design consultation services, which has become an increasingly important aspect of the company's value proposition.
Throughout its long history, Haverty Furniture has faced and overcome various industry-wide challenges, including the housing market downturn in the late 2000s. Despite these obstacles, the company has maintained its position as a respected and trusted home furnishings retailer, thanks to its unwavering commitment to quality products and exceptional customer service.
Financial Performance: Weathering the Storm
Haverty Furniture's financial performance has been a testament to its resilience. As of the end of 2024, the company reported annual revenue of $722.9 million, a 16.1% decrease from the previous year. This decline can be attributed to the broader macroeconomic headwinds, including higher mortgage rates, inflationary pressures, and uncertainty in the housing market.
Despite these challenges, Haverty Furniture has maintained a strong financial position, ending the year with zero funded debt and over $120 million in cash on its balance sheet. The company's gross profit margin remained relatively stable at 60.7% for the full year of 2024, reflecting its ability to navigate changing market conditions and maintain pricing discipline.
For the third quarter of 2024, Haverty Furniture reported revenue of $184,353,000 and net income of $8,195,000. Operating cash flow for the quarter was $24,447,000, while free cash flow stood at $16,114,000. These figures represent a decrease compared to the same quarter in the prior year, reflecting the challenging market conditions.
Liquidity: A Strong Foundation
Haverty Furniture's liquidity position remains robust, providing a solid foundation for navigating economic uncertainties. With zero funded debt and a substantial cash reserve of $121,160,000 as of the end of Q3 2024, the company possesses significant financial flexibility. Additionally, Haverty Furniture has access to an $80 million revolving credit facility, with $121.7 million in the borrowing base and $80 million in net availability as of Q3 2024. This strong liquidity position enables Haverty Furniture to weather potential downturns, invest in strategic initiatives, and capitalize on growth opportunities as they arise.
Operational Highlights: Adapting to Evolving Consumer Preferences
Haverty Furniture's operational performance during 2024 highlights its ability to adapt to shifting consumer preferences and market dynamics. The company reported a 13.7% decrease in comparable store sales for the fourth quarter, as the housing market continued to face headwinds. However, the company saw a positive trend in traffic patterns, with the fourth quarter marking the first year-over-year gain in low single digits.
One area of particular focus for Haverty Furniture has been its design services business, which accounted for approximately 32% of the company's total business in the fourth quarter of 2024. The average ticket for design-related sales grew by over 8% during the quarter, reflecting the strong appeal of this value-added offering among Haverty Furniture's customer base.
The company also continued to execute on its store expansion strategy, opening three new locations in 2024, including stores in St. Petersburg, Florida, Greenwood, Indiana, and Houston, Texas. These new additions brought Haverty Furniture's total store count to 129 at the end of the year, with plans to further expand its footprint in the coming years.
Product Segments: Navigating Challenges Across Categories
Haverty Furniture operates within a single reportable segment as a retailer of residential furniture in the middle to upper-middle price ranges. The company's product offerings are divided into four main categories:
1. Case Goods: This segment includes bedroom furniture, dining room furniture, and occasional furniture such as end tables and coffee tables. For the third quarter of 2024, case goods accounted for 33.10% of Haverty Furniture's total net sales. During the nine months ended September 30, 2024, case goods sales totaled $175.69 million, down from $228.73 million in the same period of 2023, reflecting a 23.20% year-over-year decrease.
2. Upholstery: The upholstery segment, which includes sofas, loveseats, chairs, and other upholstered items, represented 44.40% of Haverty Furniture's total net sales in the first nine months of 2024. Upholstery sales amounted to $238.95 million, down from $275.98 million in the same period of the prior year, a 13.40% decrease.
3. Mattresses: Mattress sales accounted for 9.30% of Haverty Furniture's total net sales in the first nine months of 2024, totaling $50.33 million, a decrease from $57.80 million in the same period of 2023. The 12.90% year-over-year decline in mattress sales was also impacted by the softening in consumer demand for home furnishings.
4. Accessories and Other: This category, which includes delivery charges and product protection, contributed 13.70% to Haverty Furniture's total net sales in the first nine months of 2024, amounting to $73.57 million, down from $88.88 million in the same period of the prior year, a 17.20% decrease.
The decline across all product categories was primarily driven by reduced consumer demand amid macroeconomic headwinds, including high interest rates and inflationary pressures.
Guidance and Future Outlook
Looking ahead to 2025, Haverty Furniture has provided guidance on several key financial metrics. The company expects its gross profit margins to be between 60% and 60.5%. Fixed and discretionary SG&A expenses for 2025 are projected to be in the $291 to $293 million range, an increase over the prior year due to store growth and inflation. Variable SG&A costs are expected to be in the range of 19% to 19.3% of sales.
Haverty Furniture has allocated $27.1 million for planned capital expenditures in 2025, with $22.7 million specifically earmarked for new and replacement stores, remodels, and expansions. This investment underscores the company's commitment to enhancing its retail footprint and improving the customer experience.
The company anticipates an effective tax rate of 26.5% for 2025, providing clarity on its expected tax obligations for the coming year.
Navigating Challenges and Seizing Opportunities
Haverty Furniture's 140-year history is a testament to its ability to adapt and thrive in the face of changing market conditions. As the company navigates the current macroeconomic headwinds, it remains focused on leveraging its strengths to drive growth and enhance its competitive position.
The company's strong balance sheet, with zero funded debt and ample cash reserves, provides it with the financial flexibility to weather the storm and capitalize on emerging opportunities. Haverty Furniture's continued investment in its design services and e-commerce capabilities positions it well to cater to the evolving preferences of today's consumers.
Looking ahead, Haverty Furniture's management team has outlined a clear strategy for navigating the challenges and seizing the opportunities that lie ahead. With a steadfast commitment to its core values, a focus on operational excellence, and a willingness to innovate, Haverty Furniture is poised to build upon its rich legacy and solidify its position as a leading player in the home furnishings industry.
The global furniture market is expected to grow at a CAGR of 5.25% from 2025 to 2030, reaching $866.59 billion by 2030. While North America remains the largest furniture market, the Asia Pacific region is experiencing the fastest growth. As Haverty Furniture continues to operate primarily within the United States, it will need to navigate these global trends and potentially explore opportunities for expansion to capitalize on emerging markets.