Haverty Furniture Reports 3.8% Sales Increase For 2006

Furniture World Magazine

Haverty Furniture Companies, Inc., reported earnings for the fourth quarter and the year ended December 31, 2006. Earnings for the fourth quarter were $3.2 million, or $0.14 per diluted share, compared with $6.8 million, or $0.30 per diluted share in the fourth quarter of 2005, a 53.1% and 53.3% decrease, respectively. Earnings for the year ended December 31, 2006 were $16.0 million, or $0.70 per diluted share, compared with $15.1 million, or $0.66 per diluted share for 2005, a 6.3% and 6.1% increase, respectively. As previously reported, sales for the fourth quarter were $216.0 million, or 4.2% less than the sales in the corresponding quarter in 2005. Sales for the year ended December 31, 2006 increased 3.8% to $859.1 million from $827.7 million in 2005. Comparable-store sales in 2006 decreased 6.7% for the fourth quarter and increased 1.8% for the year. Clarence H. Smith, president and chief executive officer, said, "Our fourth quarter results were driven by lower sales along with the continuation of our fixed costs at planned levels. Gross profit margins for the quarter were better than the fourth quarter in the prior year and the highest of any 2006 quarter. We attribute this to the strength of our product line-up and our cautious approach to making changes in our pricing and promotional plans. "SG&A costs increased 3% on a dollar basis over the prior year's quarter but were flat on a sequential basis with the third quarter of 2006. Our payroll costs were greater in the current quarter than in the prior year and advertising expense was also higher as we incurred costs associated with our new marketing campaign. "The other income of $1.2 million for last year's fourth quarter was for gains on property dispositions. "Our inventories are up from the 2005 levels which had been admittedly too low to properly serve our customer. We believe that we have reached a manageable breadth of products and have greatly enhanced our supply chain techniques from a year ago. The current business environment does present challenges to maintain an optimal level of inventory given the long lead times from order placement with our suppliers to receipt of the merchandise. We are actively working with our vendors to have them warehouse more of our products in Asia. "The retail home furnishings sales environment continues to be very difficult. Business in our Florida markets remains challenging along with difficult comparative results in our gulf coast stores which were strong for most of 2006 following Hurricane Katrina. Our February delivered sales month- to-date are down approximately 12% in total from last year. We are evaluating our costs in a number of areas and reviewing our distribution processes for adjustment to the current business conditions on a regional basis. "We are committed to our new integrated and enhanced marketing program which is focused on building our Havertys brand. The initial costs and effort from 2006 will carry over into 2007 as the campaign is fully implemented. "Our store growth plans for 2007 are focused on strengthening our position in our current regions served by our existing distribution infrastructure. We are investing significant capital and resources towards developing a cross- channel website with e-commerce capability. We know our customers and believe that we need to provide them with additional tools to enhance their Havertys shopping experience and earn more of their business," Smith concluded. Havertys is a full-service home furnishings retailer with 120 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 .