Company Overview
Haverty Furniture Companies, Inc. (HVT) is a retailer of a broad line of residential furniture in the middle to upper-middle price ranges, operating all of its stores under the Haverty's brand. Established in 1885, Haverty's has weathered numerous economic challenges over its 139-year history, emerging as a resilient and adaptable player in the furniture industry.
Historical Background
Haverty's origins can be traced back to 1885, when James Joseph Haverty opened a small furniture store in Atlanta, Georgia. Over the decades, the company gradually expanded its footprint, opening additional locations throughout the Southern and Midwestern United States. By the mid-20th century, Haverty's had established itself as a leading regional furniture retailer, known for its quality merchandise and exceptional customer service.
In the latter half of the 20th century, Haverty's continued to grow, both organically and through strategic acquisitions. The company went public in 1929, marking an important milestone in its history. Later, in 1983, Haverty's was listed on the New York Stock Exchange, further solidifying its position as a publicly traded entity and providing additional capital for expansion.
Throughout the 1980s and 1990s, Haverty's maintained its focus on providing a superior shopping experience, investing in its physical stores and expanding its product offerings to meet the evolving needs of its customer base. This period also saw the company diversify its revenue streams, with the introduction of design services and a growing e-commerce presence.
Resilience and Adaptation
One of the most significant challenges in Haverty's history came during the Great Depression in the early 20th century. Despite the economic hardships, the company managed to persevere and continue its operations. This resilience would be tested again during the Great Recession of 2008-2009, where Haverty's demonstrated its ability to adapt by focusing on cost-cutting, inventory management, and strategic store openings. The company's efforts allowed it to maintain profitability during this difficult period and emerge from the recession in a stronger position.
In the years since the recession, Haverty's has continued to evolve, embracing technological advancements and adapting to changing consumer preferences. The company's omnichannel strategy, which seamlessly integrates its physical stores with a robust online presence, has been a key driver of its success in recent years.
Current Operations
As of 2024, Haverty's operates 127 showrooms across 17 states, primarily in the Southern and Midwestern regions of the United States. The company's product portfolio spans a wide range of furniture categories, including case goods, upholstery, mattresses, and accessories, catering to a diverse customer base.
Financials
Haverty's financial performance has been a mixed bag in recent years. The company reported net income of $56.32 million and revenue of $862.13 million in 2023, reflecting a year-over-year decrease of 4.7% and 6.1%, respectively. This decline can be attributed to the ongoing challenges in the housing market and broader economic uncertainty.
In 2024, the company reported net income of $11.76 million and revenue of $538.55 million for the first nine months of the year, a decrease of 71.5% and 17.3%, respectively, compared to the same period in 2023. Despite these challenging results, Haverty's has remained focused on controlling costs, optimizing its inventory, and enhancing its customer experience.
For the most recent quarter (Q3 2024), Haverty's reported revenue of $175.91 million, down 20.2% year-over-year. Net income for the quarter was $4.93 million. Operating cash flow (OCF) was $24.45 million, and free cash flow (FCF) was $16.11 million. The decrease in revenue and earnings was attributed to a cautious consumer environment, high interest rates, and the impact of two hurricanes in the company's markets.
Product Segments
Haverty's operates in four main product segments:
1. Case Goods: This segment includes bedroom furniture, dining room furniture, and occasional furniture. In the third quarter of 2024, case goods accounted for 33.1% of total net sales. For the first nine months of 2024, case goods made up 32.6% of total net sales.
2. Upholstery: The largest product category, including sofas, loveseats, chairs, and recliners. Upholstery accounted for 44.4% of total net sales in the first nine months of 2024 and 44.2% in the third quarter of 2024.
3. Mattresses: This segment made up 9.3% of total net sales in the first nine months of 2024 and 9.7% in the third quarter of 2024.
4. Accessories and Other: Including items like lamps, rugs, and wall decor, this segment represented 13.7% of total net sales in the first nine months of 2024 and 13.0% in the third quarter of 2024.
Liquidity
Haverty's maintains a strong financial position with a debt-to-equity ratio of 0.12. As of Q3 2024, the company had $121.16 million in cash and cash equivalents. Haverty's also has access to an $80 million revolving credit facility, with $121.7 million in borrowing base and $80 million in net availability. The company's current ratio stands at 1.82, while its quick ratio is 1.17, indicating a healthy liquidity position.
Geographic Performance
Haverty's operates all of its stores under the Havertys brand and does not franchise its concept. The company's operations are solely within the United States, primarily focused on the Southern and Midwestern regions.
Financial Outlook and Guidance
For fiscal year 2024, Haverty's expects gross margins to be between 60.0% and 60.5%. The company anticipates fixed and discretionary SG&A expenses for 2024 to be in the $279 million to $281 million range, which is a reduction from their previous estimate. Variable SG&A costs for 2024 are expected to be in the range of 19.6% to 19.9% of sales.
Planned capital expenditures for 2024 are $33 million, with $28 million allocated for new or replacement stores, remodels and expansions. The company expects an effective tax rate of 28% for fiscal year 2024.
Future Outlook
Looking ahead, Haverty's is poised to continue its legacy of innovation and resilience. The company has outlined plans to open five new stores in 2024, expanding its footprint and positioning itself for future growth. Additionally, Haverty's has made strategic investments in its merchandising team, bringing in new talent to drive product innovation and better cater to evolving consumer preferences.
The furniture industry, however, is not without its risks. Haverty's faces ongoing competition from both traditional and e-commerce retailers, as well as potential headwinds from macroeconomic factors, such as rising interest rates and inflation. The home furnishings industry has seen volatility recently due to high inflation, rising interest rates, and an unaffordable housing market. The company's ability to navigate these challenges and capitalize on emerging trends will be crucial to its long-term success.
Conclusion
Overall, Haverty Furniture Companies, Inc. (HVT) is a well-established player in the furniture industry, with a rich history of adaptability and a commitment to delivering exceptional customer experiences. Despite facing challenges in the current economic environment, the company remains focused on store growth, managing expenses, and maintaining a strong balance sheet with no debt. As Haverty's navigates the current market environment, investors will be closely watching its ability to maintain its market position and drive sustainable growth in the years to come.