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Havertys Reports Earnings For Fourth Quarter And Full Year 2016

Furniture World News Desk on 3/3/2017


Havertys (NYSE:HVT) (NYSE:HVT.A) recently reported earnings for the quarter ended December 31, 2016 of $0.51 per share compared to $0.41 per share for the same period of 2015. The earnings per share for the full year 2016 were $1.30 compared to $1.22 per share for 2015.

Clarence H. Smith, chairman, president and CEO, said, “We are pleased with our strong finish to the quarter. Gaining greater productivity from our existing store base is a primary focus and average ticket increased over its prior year comparable period for the ninth consecutive quarter. Generating store and site visits remains challenging and expensive for retailers as methods for reaching the consumer continue to change and fragment. The Havertys brand merchandise, pricing discipline, and tight control of inventory were factors in our gross profit margin expansion.

“The payment of the $21.0 million special dividend in the fourth quarter and $21.3 million in share repurchases during the year reflect our commitment to provide returns to our shareholders and manage our capital as we work to improve operating margins within our current distribution network.

“We remain confident in our ability to serve the on-trend furniture customer and grow our business, despite challenges in the current economic and political climate.”

Financial Highlights


Fourth Quarter 2016 Compared to Fourth Quarter 2015

  • As previously reported, net sales increased 2.2% to $220.6 million. On a comparable store basis, sales rose 2.5%. Total written sales increased 5.3% and written comparable store sales rose 5.2% over the same period last year.

  • Average written ticket was up 2.6% and custom upholstery written business rose 1.9%. 

  • Gross profit margin increased 100 basis points to 54.9%. There was a $0.8 million decrease in the LIFO reserve in 2016 versus a $0.2 million increase in 2015, a positive change of $1.0 million or 44 basis points.

  • Selling, general and administrative costs as a percent of sales increased 50 basis points to 47.3% from 46.8%. Fixed and discretionary expenses increased $1.5 million. We incurred additional administrative costs of $1.8 million largely from compensation expense and $0.6 million of increased operating insurance claims costs. New locations and improvements also generated increases in depreciation of $0.7 million which was partially offset by $0.4 million in lower rent costs. Advertising expense was also $0.5 million lower in 2016. Variable expenses were 18.2% as a percent of sales in 2016 compared to 17.8% in 2015 as sales from our in-home design program increased 27.4% and delivery costs increased 20 basis points.

  • Other income includes a $0.9 million gain from the insurance recovery related to the destruction by a storm of our Lubbock, Texas location at the end of 2015 and a $0.7 million gain from the sale of a former retail location.

  • We paid $21.0 million in a special dividend of $1.00 to holders of common stock and $0.95 to holders of Class A common stock. 

  • A dedicated clearance center in Atlanta, Georgia, was opened in mid-December.

Twelve Months ended December 31, 2016 Compared to Same Period of 2015

  • As previously reported, net sales totaled $821.6 million, compared with $804.9 million in 2015, representing an increase of 2.1%. Comparable store sales increased 2.1%.

  • Average written ticket was up 2.3% and custom upholstery written business rose 4.0%.

  • Gross profit margin increased 50 basis points to 54.0% from 53.5%. Our LIFO inventory valuation method generated a $1.9 million positive impact in 2016.

  • Selling, general and administrative costs increased 80 basis points to 48.6% from 47.8%. Fixed and discretionary expenses increased $9.0 million to $249.9 million. We had $6.1 million in additional administrative costs primarily from greater benefits and compensation expense, $3.1 million of which related to increases in medical benefit costs. Depreciation and other occupancy costs from new stores and improvements increased expenses $3.3 million. Variable expenses as a percent of sales were 18.2% in 2016 versus 17.9% in 2015 as our in-home design business grew and due to higher delivery costs.

  • Other income includes a $3.3 million gain from the insurance recovery related to the destruction by a storm of our Lubbock, Texas location at the end of 2015 and a $0.7 million gain from the sale of a former retail location. 

  • We returned to stockholders via stock repurchases and dividends $51.7 million in 2016 and $22.1 million in 2015.

  • Our retail store count increased to 124, with a net 3 new stores in 2016 as we opened a temporary location to serve Lubbock, Texas, opened two stores, each in a new market, closed a store in Florida, and opened a clearance center in the Atlanta market.
Expectations and Other

  • Total written sales for the past eight weeks, including our full New Year’s weekend sales event, are 3.5% higher than the same period last year and written comparable store sales are up 1.9%.

  • Total delivered sales for the first quarter to date are 5.0% lower than the same day of week last year and comparable store sales are 6.7% less. The Presidents’ Day sales event ended yesterday, a week later than in 2016. On average we deliver merchandise to customers within two to four weeks after a holiday sales event and should routinely make up this delivered sales differential versus last year.

  • Our gross profit margin for the full year of 2017 is expected to be 53.6% compared to 54.0% in 2016. The reduction is primarily due to the impact of the estimated increase to the LIFO reserve. First half gross profit margin is projected to be 20 basis points higher than the average for 2017, with the second half running approximately 20 basis points lower.

  • Fixed and discretionary type expenses within SG&A are expected to be approximately $260.0 million for 2017, up $10.1 million or 4.0% over those same costs in 2016. The increase is largely due to an expanded advertising budget, higher occupancy costs from new and relocated stores, and inflation. Fixed and discretionary type expenses in total should average $64.0 million per quarter in the first half of 2017 and $66.0 million per quarter in the second half. For 2016, these expenses averaged $61.2 million per quarter in the first half and $63.7 million in the second half. Variable SG&A expenses for 2017 are anticipated to be at a 18.1% rate, somewhat higher in the first half and lower in the second half due to efficiencies from the typical higher volume in the third and fourth quarters. Other non-SG&A costs, net of credit revenues, are expected to be $1.0 million for the year.

  • Our effective tax rate for 2017 is expected to be in the 38.4% to 38.5% range.

  • Planned capital expenditures for 2017 are $26.9 million. Our current 2017 plans include opening one store in a new market, two relocations, one store closure and starting on the expansion of our western distribution center. These changes will increase selling square footage approximately 0.3% and our store count is planned to remain at 124.


More about Havertys: Havertys (NYSE:HVT) (NYSE:HVT.A), established in 1885, is a full-service home furnishings retailer with 124 showrooms in 16 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges. For more information, visit havertys.com.