HAVERTY FURNITURE COMPANIES, INC. reported fourth quarter and full year 2012 results. Pre-tax income for the fourth quarter of 2012 increased to $10.1 million versus $6.1 million for the same period of 2011. Pre-tax income for the full year of 2012 increased to $23.5 million compared to $4.6 million for 2011. The earnings per share for the fourth quarter of 2012 were $0.30 compared to $0.76 for the same period of 2011. The earnings per share for the full year 2012 were $0.67 compared to $0.70 for 2011. The results of both periods of 2011 included a favorable non-cash special item of $14.1 million, or $0.64 in per share earnings, for the release of almost all of the valuation allowance against the company`s net deferred tax assets.
As previously reported, net sales for the fourth quarter were 8.4% higher than in the same period of 2011 and 7.9% ahead for the full year 2012. Written sales for the fourth quarter of 2012 increased 12.7% over the same quarter of 2011.
Clarence H. Smith, chairman, president and CEO, said, "We are very pleased with these results and look forward to the opportunities in 2013. The initiatives towards attracting the "on trend" customer are gaining traction. This customer wants to express herself and we convey this in our successful "discover something you" advertising campaign. To meet her desire for unique and personally styled products, we expanded and simplified our custom and special order upholstery programs which in 2012 were up almost 18% over 2011. Our store improvements and stylish accessories better showcase all of our merchandise and the appeal of our higher price point products resulted in a 7.8% increase in average ticket and improved gross profit margins for 2012 compared to 2011.
"The higher sales volume enabled us to better leverage our fixed and discretionary costs. We will manage these and our variable costs closely to ensure profitable sales growth. Our positive cash flow enabled us to meet our working capital requirements, planned capital expenditures, and make a special $22.0 million cash dividend without drawing on our credit facility.
"We will be adjusting our square footage during 2013, closing stores in certain markets and expanding showrooms in desirable locations. Our merchandising and customer centric focus distinguishes us in the marketplace and gives us an edge over our competitors. The improving housing and overall economic data bode well for Havertys as we are prepared operationally and financially to exploit shifts in demand."
Fourth Quarter 2012 Compared to Fourth Quarter 2011
Twelve Months ended December 31, 2012 Compared to Same Period of 2011
- Net sales were up $14.0 million or 8.4% to $182.3 million and comparable store sales increased 6.0%.
- Gross profit margins were 52.8% as a percent of sales compared to 52.3%, a 50 basis point improvement.
- Selling, general and administrative costs increased $4.5 million and declined 1.3% as a percent of sales.
- Pre-tax income for 2012 increased 66.5% to $10.1 million or 5.5% of sales versus $6.1 million or 3.6% of sales.
- Income tax expense in 2012 included a decrease in our reserve for uncertain tax positions of $0.7 million, compared to a decrease in 2011 in the valuation allowance of $14.1 million.
- Our retail store count at December 31, 2012 was 122 versus 119 at the end of 2011.
Expectations and Other
- Net sales increased $49.2 million and comparable store sales increased 6.8%.
- Gross profit margins increased by 0.8% to 52.5% as a percent of sales due to shifts in our merchandising and successful new product introductions.
- Selling, general and administrative costs increased $13.0 million and declined 1.8% as a percent of sales.
- Pre-tax income for 2012 increased 410.9% to $23.5 million or 3.5% of sales versus $4.6 million or 0.7% of sales.
- Income tax expense in 2012 included a decrease in our reserve for uncertain tax positions of $0.7 compared to a decrease in 2011 of $14.1 million in the valuation allowance.
Both total written business and delivered sales for the first quarter to date of 2013 are up approximately 14% over the same period last year. Comparisons for the remainder of the quarter will be more difficult given last year`s strong March, one less day in February this year, and Easter weekend, which is slow for furniture sales, falls in March this year versus April last year.
We plan to continue our merchandising approach in 2013 and use promotional pricing selectively during traditional holiday and other sales events. We expect that our annual gross profit margins for 2013 will be similar to or slightly ahead of the annual 2012 level.
SG&A expenses in 2013 should be leveraged with continuing sales growth since we have considerable additional capacity in our store and distribution infrastructure. We do expect some increases in our period costs due to additional advertising and personnel expense and believe our fixed/discretionary costs will be $220 to $222 million, up approximately 4.5% over those same costs in 2012. These costs are expected to be incurred evenly on a quarterly basis in 2013 versus prior years, in which the second quarter costs were lower. Variable SG&A expenses should continue to be in the 17.3% to 17.5% range as a percent of sales for 2013.
Our effective tax rate for 2013 is expected to be in the 38.5% to 38.8% range.
Planned capital expenditures for 2013 are $20.0 million. We expect to expand three of the stores undergoing major remodeling and complete another 18 of our Bright Inspirations store refreshes. Our plans also include closing three store locations during the first half of 2013, these and other changes should result in a 1.0% decrease in total retail square footage from 2012.
Havertys, established in 1885, is a full-service home furnishings retailer with 121 showrooms in 17 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges. Additional information is available on the company`s website at www.havertys.com
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