Haverty Furniture Companies, Inc. reported earnings for the third quarter ended September 30, 2005. Net income for the third quarter was $3.8 million or $0.17 per diluted share of Common Stock, as compared to the third quarter 2004 net income of $4.2 million or $0.18 per diluted share of Common Stock.
For the nine months ended September 30, 2005, net income was $8.3 million or $0.36 per diluted share of Common Stock versus net income of $13.9 million or $0.60 per diluted share of Common Stock for the same period in 2004.
Net sales for the third quarter of 2005 were $202.0 million, an increase of 2.3% over sales of $197.4 million for the corresponding quarter in 2004.
Clarence H. Smith, president and chief executive officer, said, "As previously reported, we experienced a comparable-store sales decline of 1% for the third quarter. These soft sales results did not allow us to leverage the higher occupancy and transportation costs we incurred.
"Our efficiency and timeliness in delivering to our customers was hampered in part due to challenges with our imported merchandise flow relative to space in our distribution center. A significant expansion of our Eastern Distribution Center is underway and is scheduled for completion early next year. This change should enable us to better handle the normal fluctuations in business and increase our peak throughput capacity. We are also paring down our expansive product line to better fit our migration to a higher level of imports. Our supply chain team has been strengthened by the addition of individuals with significant experience who are implementing better techniques and discipline in this vital area.
"The third quarter other income was primarily the gains on sales of two stores and one closed warehouse.
"We are continuing to build our Havertys brand. In mid-October we mailed our first ever catalog to select consumers. This attractive 80-page piece is expected to have longer consumer retention time than our typical freestanding newspaper inserts.
"Our sales reporting and productivity tools have been significantly enhanced. This allows our managers and merchandisers quicker and easier access to the pulse of our business in the merchandise area and in managing and motivating our sales force.
"Havertys is entering its 17th state this week with the grand opening of our Indianapolis, Indiana store. We plan to open our second Ohio store, this one in Columbus near the Polaris Mall, by the end of the year. In addition to the openings in 2006 that we have previously announced, we expect there will be additional fill-in opportunities," Smith concluded.
Dennis Fink, executive vice president and chief financial officer, said, "Our inventory is valued based on certain components including product costs and in-bound freight. Inventory that flows through our distribution centers, and the regional warehouses in prior periods, is capitalized with additional costs for certain expenses related to handling and transportation to local markets. The amounts shown in cost of goods sold previously included only the product costs, certain vendor allowances, in-bound freight and LIFO adjustments. All warehouse, transportation and distribution costs were included in the line item Selling, General and Administrative (SG&A). The portion of SG&A expenses capitalized into inventory was recognized through SG&A rather than cost of goods sold. We have completed our transition to a distribution model that has increased the level of inventory flowing through the distribution centers. Accordingly, we are now including in cost of goods sold the amounts capitalized into inventory for handling and transportation, and reclassified the prior periods for comparability. This is a change only in the presentation of our Statements of Income and has no impact on earnings or the valuation of inventory."
Havertys is a full-service home furnishings retailer with 118 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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