by Expanding store network aims to tap into major markets — and design-driven business that continues to fuel higher tickets
ATLANTA — As seen by its latest financial results, HNN 125 retailer Havertys faces many of the same challenges as everyone else in the industry, namely reduced consumer spending.
For the second quarter ended June 30, it reported an 18.5% decrease in consolidated sales and 15.2% decline in written same-store sales. And as the company noted in its last conference call in May, and alluded to in its latest call this week, current business conditions ultimately led to a reduction of more than 200 positions through normal attrition by the end of the second quarter.
But if the company’s plans for the future hold true, it likely will need to start building back up in the near future.
As part of its earnings statement and follow-up Aug. 2 conference call, the company outlined some aggressive plans to expand its store network. This includes the planned opening of three new stores later this year in Concord, North Carolina (its third store in the Charlotte area), a new store in Dayton, Ohio, to be served by its Cincinnati Home Delivery Center, and an outlet store in Richmond, Virginia.
But these developments just hint at the company’s planned expansion, which will carry over into next year. Always there to seize on the opportunity that exists in the marketplace, the retailer has also acquired the leases of four former Bed Bath & Beyond stores as part of its recent bankruptcy. It plans to open these as Havertys stores during the first half of 2024.
The company noted that three of these stores are in important Florida locations — Pembroke Pines near Miami, St. Petersburg near Tampa, and Destin — which company Chairman and CEO Clarence Smith said “allow us to reach new areas and leverage our marketing and distribution in those fast-growing markets.” Already the retailer’s strongest market, Florida is thus about to get even stronger with 33 locations in the Sunshine State.
Smith noted that the company’s fourth store will be located in South Haven, Mississippi, making it the 17th state in the company’s retail footprint.
And based on the company’s existing distribution footprint, which includes a recently leased distribution center in Lakeland, Florida, that it bought this past May, the company plans to open five stores a year, with the intent on growing market share in new and existing markets.
So what’s driving the optimism during a notably slow time in the industry overall? For Havertys, it has to do with the average size of the ticket, which the company said reached an all-time high this past quarter, driving the average sale to more than $3,000. While some of that can be attributed to typical sales by category, it’s being largely driven by the success of the company’s business with the design trade.
As the company’s business began to pick up this past spring, “We saw a very nice increase in our average sales driven by increase in special orders and custom-oriented design sales,” Smith noted during the conference call. “We continue to gain recognition for our quality products, service and free design.”
He noted that its brick-and-mortar presence — which is obviously expanding to meet that type of demand — becomes more critical as it allows customers to experience their selections in person and gain first-hand knowledge from an experienced store associate.
President Steve Burdette noted during the call that during the second quarter alone, special order business was up more than 50% over last year and represented nearly a third of its upholstery business for the quarter.
“These increases have continued to be driven by our design business, which grew to over 28% of our business for the quarter, with the average ticket growing close to 6% over last year,” he said. “Also, we are encouraged by the increase in the number of customers that have engaged with design and the opportunity to expose our design services to more customers in the future.”
Others too, from Ethan Allen, which has expanded its own in-store design focus, to Hooker Furnishings, which saw a huge increase in traffic — notably designers — in its newly opened showroom at Showplace this past April, are reaping the rewards from design-driven business. It’s something that many manufacturers may have scoffed at in the past as these didn’t represent huge volume orders. Today the acceptance is much greater as designers tend to buy higher ticket items that also fuel higher margins.
In the case of Havertys, the company is investing not only in its infrastructure, but also the customer experience with new and refurbished locations in different markets. As CEO Richard Hare noted during the call, the company’s planned capex for 2023 has risen to $57 million. He said that in addition to its current spending it plans to spend an incremental $3 million on refurbishing and reformatting the four former Bed Bath & Beyond stores. He added that overall, anticipated or new replacement stores, remodels and expansions account for $19.9 million, while investments in its distribution network supporting these and other locations are projected at $34.3 million.
Other positive developments execs mentioned during the call included enhancements to the company’s website and its upcoming Labor Day promotion in a few weeks.
“The new products that our merchandising teams brought in earlier this year are starting to gain traction with our sales and design teams,” Burdette said.
Smith added that this is the right time to pursue growth opportunities, including the additional stores in key growth areas.
“While we experienced a falloff from the post-Covid surge in the first half, we’re encouraged by recent improvements in incoming orders, customers’ reactions to new product introduction and the new growth opportunities that we are tackling,” he said. “We are drilling to help our customers’ vision of their home come to life. As we deliver on that commitment, we will gain share and build on our returns for our shareholders. This is an exciting time to extend Havertys’ reach.”
