by Success of various initiatives will depend partly on a turnaround of the housing market
ATLANTA — As seen by its latest results, Havertys has not been immune to the overall challenges relating to a slow housing market and a tepid consumer appetite for furniture, particularly when compared to the breakneck pace of demand during the pandemic.
As previously reported, Q4 net sales of $210.7 million were down 24.9% compared to the same period last year and comparable store sales were down 25.5% over the prior year period. For the full year, overall sales declined 17.7% to $861.2 million and comparable store sales were down 18.4%.
That said, the company remains profitable with $15 million in net income for the quarter and $56.1 million for the full year. It also reports a strong balance sheet with estimated cash and cash equivalents of $127.8 million as of Dec. 31. In addition, it generated $97.2 million in cash from operating activities achieved by what it described as solid earnings performance and a $24.4 million reduction in inventories.
Other expense controls, including a reduction in headcount from 3,500 associates since before the pandemic to 2,500 today, also have helped create savings that have kept the company profitable.
“We’re continuing to evaluate all areas of our business for opportunities to consolidate and add productivity,” said company CEO Clarence Smith during its recent conference call with analysts.
But Smith noted that the company also remains committed to growth areas of the business including its design services, custom and special order products and upgrading its product lines.
“All these areas will continue to separate us from the more promotional players in our markets,” Smith said.
Design services and special order business, in particular, are increasingly important parts of the business. During the call, President Steve Burdette noted that the special order business rose more than 31% in the fourth quarter and more than 40% for the year.
Thus, he added, it remains a significant percentage of overall business.
“Our design business continues to be a big driver of our business as it continued to grow to over 31% of our total business during the quarter and approximately 29% of our business for the year,” Burdette noted, adding that the average ticket continues to grow at high single digits. “We are encouraged that we’ve been able to grow the number of customers that are engaging with our designers by 15% in Q4 and by 8% for the year.”
He added that an enhanced marketing campaign — focusing on choices, quality, design and service — reflects not only this type of engagement but also the company’s 138-year history of fulfilling customer needs for a lifetime as opposed to just a one-time sale.
“We believe in our products, our team members, our systems and our execution,” he said, noting that the company continues to accomplish this in a streamlined environment that matches staffing levels to current business conditions through attrition in “all areas of the business.”
That said, the company also appears to be positioning itself for an eventual rebound in the housing market through capital investments of $32 million in the current fiscal year. The bulk of this — $27 million — is earmarked for new or replacement stores, remodels and expansions, with another $2.5 million planned for investments in its distribution network and another $2.5 million of investments in information technology.
Smith noted that five new stores are planned per year in 2024 and 2025, including at several former Bed Bath & Beyond locations. In the first half of this year alone, he noted, the company will occupy four of the Bed Bath & Beyond locations — three in Florida and one outside of Memphis, in Southaven, Mississippi — and is now training staff for spring and early summer openings.
By expanding its store footprint, the company will not only grow its overall top-line sales, but also expand its reputation as a destination for the growing designer business.
“We continue to focus on helping our customers’ vision of their homes come to life,” Smith said. “We have a long history of gaining market share and building on our strength in difficult times. We believe that we’re especially well positioned to grow our business in many of the fastest growing markets in the country in the near term and in the future.”
