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Havertys Reports 13.2% Same Store Sales Increase for Second Quarter

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Haverty Furniture Companies, Inc., reported second quarter 2010 operating results, with increased sales of 11.9%, solid gross profit margins and leveraging of operating costs. The loss per share for the second quarter of 2010 is ($0.03) compared to a loss per share of ($0.31) for the same period of 2009. The earnings for the six months ended June 30, 2010 are $0.08 compared to a loss per share of ($0.65) for 2009.

Clarence H. Smith, president and chief executive officer, said, “We believe we are continuing to grow our market share as second quarter comparable store sales were up 13.2%. Recent sales trends and consumer confidence reports however indicate the tenuous nature of the recovery. Shipping lines are cautiously managing capacity, and although we have not experienced the level of disruption in receiving products from overseas suppliers that others have encountered, increases in contract container freight rates have modestly reduced our gross profit margins.

Our discipline in holding operating costs in check kept SG&A expenses controlled. Despite today’s economic uncertainty, we are not complacent in our approach to gaining market share. We are investing in our current store base and our internet site because we believe that focusing on the customer experience is vital to our continued success.”

Financial Highlights

Second Quarter 2010 Compared to Second Quarter 2009

  • Net sales increased 11.9% to $145.1 million and comparable store sales increased 13.2%.
  • Gross profit margins were 51.2% as a percent of sales compared to 51.4%.
  • The decrease is due to the negative impact of a $0.6 million (0.4% of sales) increase in the LIFO inventory reserve due to inflation partly offset by certain improvements.
  • Selling, general and administrative costs decreased 4.6% as a percent of net sales. Occupancy costs continued to benefit from lower depreciation expense and improved efficiencies were realized in all major cost categories.
  • Income tax benefit includes an increase to our valuation allowance on deferred tax assets of $0.2 million, a decrease of $0.01 in per share earnings compared to the prior period increase in the allowance of $2.4 million, which decreased earnings $0.11 per share.
  • Our retail store count is 119 versus 121.

Six Months ended June 30, 2010 Compared to Same Period of 2009

  • Net sales increased 9.9% to $301.1 million and comparable store sales increased 11.6%.
  • Gross profit margins increased to 51.7% as a percent of sales from 51.3% due to pricing discipline and product mix, offset in part by the impact of a $0.6 million increase in the LIFO inventory reserve.
  • Selling, general and administrative costs decreased by 5.0% as a percent of net sales. Improved efficiencies were realized in all major categories as fixed costs were leveraged.
  • Income tax expense includes a reduction in our valuation allowance on deferred tax assets of $0.7 million, an increase of $0.03 in per share earnings compared to the prior period increase in the allowance of $5.1 million, which decreased earnings $0.24 per share.

Expectations and Other

  • Delivered sales for the third quarter to date of 2010 have increased 7% over the same period last year while written business is up 1%.
  • Gross profit margins for the remainder of the year will be impacted by increased costs as recognized under our LIFO inventory accounting method.
  • We expect that gross profit margins for the full year will be near the second quarter levels.
  • During the fourth quarter, we will enter the Columbus, Georgia market with one store and close our single stores as leases expire in Bowling Green, Kentucky and Abilene, Texas.
  • Our anticipated annual capital expenditures for 2010 are $13.5 million.
  • Cash flow from operations for the six months ended June 30, 2010 was $18.0 million.
  • Cash at the end of the second quarter of 2010 totaled $62.1 million. We have no funded debt and $34.5 million of availability under our credit facility.

Havertys, established in 1885, is a full-service home furnishings retailer with 119 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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