Havertys Reports Third Quarter Comparable-Store Sales Decline

Furniture World Magazine

Haverty Furniture Companies, Inc. reported a loss for the third quarter ended September 30, 2008. The net loss for the third quarter of 2008 was $1.5 million or $0.07 per diluted share of Common Stock, as compared to the third quarter 2007 net earnings of $643,000 or $0.03 per diluted share of Common Stock. For the nine months ended September 30, 2008, the net loss was $2.8 million or $0.13 per diluted share of Common Stock versus net income of $123,000 or $0.01 per diluted share of Common Stock for the same period in 2007. As previously reported, net sales for the third quarter of 2008 were $175.6 million, a decrease of 12.5% compared to sales of $200.7 million for the corresponding quarter in 2007. Comparable-store sales declined 14.9% for the quarter. Clarence H. Smith, president and chief executive officer, said, "We have seen more deterioration in consumer spending for big-ticket purchases and the current outlook for the near term continues to be difficult. Our strategy to maintain a strong balance sheet and contain costs has proven to be particularly prudent. Subsequent to the end of the third quarter, all of our borrowings were repaid and we are closely managing our inventories. During the third quarter, we continued to adjust all aspects of our operations to business conditions and reduced our SG&A costs while improving our gross margins. "Gross margins for the third quarter increased from 49.6% in 2007 to 51.5% this year. Reductions in markdowns and our cessation of in-house free financing for terms greater than one year were the primary contributors to the improvement in gross margins. Total SG&A expenses in the third quarter were $6.9 million lower in 2008 than in the prior year as we adjusted our advertising spending and corporate office, store, and distribution operations. The $8.0 million of reductions in these areas were partially offset by an increase of $1.1 million in our reserve for store closing costs, which includes amounts for potential defaults by our sub-tenants. All of our fixed costs are currently being analyzed for additional reductions. We are evaluating locations with leases reaching renewal for potential renegotiations of option terms or possible closures. "Inventory levels are currently lower than those throughout the first half of the year. We no longer offer in-house free financing greater than one year and accounts receivable balances have continued to come down and serve as a source of cash. In early October we made the final scheduled payments on two unsecured notes and prepaid the remaining obligations associated with certain properties. Our capital expenditure plans are being curtailed as we spend on normal store maintenance but forego any additional new store activity. We expect to close on a $7.0 million sale-leaseback of one of our stores during the fourth quarter. "Our total written business in the fourth quarter to date is down approximately 23% versus the same period last year. We cannot predict the depth or length of the current negative business cycle. Our attention is on tightly managing our business during this period, gaining market share from weaker and defunct competitors, and emerging from this historic down cycle as the most prominent furniture retailer in our markets." Havertys is a full-service home furnishings retailer with 123 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 .