by Outlook remains positive as company has strong cash balance and has secured 4 former Bed Bath & Beyond locations that it plans to open as Havertys in Tennessee, Florida markets
ATLANTA — HNN 125 retailer Havertys reported a decline in second-quarter and first-half revenues and net income as consumers continued to reduce their spending on durable goods such as furniture.
However the retailer’s gross profit rose both in the second quarter and first half, because of declines in freight and product costs.
Consolidated sales for the quarter ended June 30 totaled $206.3 million, down 18.5% from the $253.2 million reported the same period last year. For the full first half, consolidated sales totaled $431 million, down 12.4% from the $492.2 million reported for the same period last year.
For the quarter, total net income was $11.8 million, or 70 cents per share, compared to $21.7 million, or $1.27 per share for the same period last year. For the full first half, net income totaled $24.2 million, or $1.44 per share, compared to $41.1 million, or $2.37 per share the same period last year.
The company’s gross profit margin during the quarter rose to 60.5% from 57.9% last year.
“The impact of inflation and rising interest rates have caused some consumers to pull back on discretionary home-related spending,” said Clarence Smith, chairman and CEO. “Our second-quarter sales reflected this challenge, particularly early in the quarter.”
He added that the average ticket during the second quarter reached an all-time high, which he said was aided by “our free in-home design service involvement in 28.6% of sales. Gross profit margin also reached a historic high as freight and product costs declined. Operationally, we are identifying processes for improvement and cost reductions to further improve our efficiency and performance.”
He added that the company has secured four new store locations from the Bed Bath & Beyond bankruptcy. They are expected to open as Havertys stores in the first half of next year, and Smith said they will allow the company to reach more consumers in the Memphis, Tennessee, and Destin, Florida, markets as well as in southeast Florida near Miami and in the St. Petersburg market in the Tampa Bay area, which he described as “one of the hottest markets in the country.”
“The sites are within our current footprint, enabling us to further leverage our investment in a best-in-class distribution network,” Smith added.
Other highlights of the quarterly report were as follows:
+ Comp-store sales were down 19.1% for the quarter. Total written sales were down 14.7%, and written comp-store sales were down 15.2%.
+ SG&A expenses, which decreased by $8.1 million, were 53.3% of sales during the quarter compared to 46.7% the same period last year. This was driven by a $3 million decrease in selling expenses due to lower commission-based compensation expenses, offset partially by third-party credit costs. It also was driven by a $1.4 million decrease in occupancy costs driven by decreased rent expenses, largely from a $1.8 million lease incentive payment. Other factors included a $1.9 million decrease in warehouse and delivery costs due to lower compensation and fuel costs, demurrage fees and a reduction in the use of temporary labor; and a $1.1 million decrease in advertising expenses due to lower television ad costs.
+ The company reported cash and cash equivalents of $116.1 million by the end of the second quarter. It generated $40.1 million in cash from operating activities including solid earnings performance and changes in working capital including $10.1 million in vendor repayments and accrued liabilities and an $11.6 million increase in other assets and liabilities.
+ Havertys invested $40.5 million in capital expenditures, including $28.2 million for the purchase of its Lakeland, Florida, distribution center from its landlord in May.
+ It paid $9.4 million in quarterly cash dividends during the six months ended June 30 and had no debt outstanding and a credit availability of $80 million, also by June 30.
Looking forward, Havertys expects gross profit margins for 2023 to be between 59.5% and 60%, while fixed discretionary expenses for 2023 are expected to range from $286 million to $289 million. This is a reduction from its previous guidance related to advertising and warehouse/delivery costs. Variable SG&A expenses for 2023 are expected to range from 19.5% to 19.7%.
Also, planned capital expenditures for the year are expected to be $57 million and retail square footage will increase 1.6% this year, compared to 2022 with the opening of four new stores and closure of one during the year.
“We are carefully watching the economic green shoots in the housing market as we enter the second half of the year,” Smith added. “Our financial strength and experienced teams position us to capitalize on the opportunities ahead.”
