Havertys Reports Operating Results For Fourth Quarter 2023
ATLANTA, GA / ACCESSWIRE / February 21, 2024 / HAVERTYS (NYSE:HVT) and (NYSE:HVT), today reported its operating results for the fourth quarter ended December 31, 2023.
Fourth quarter 2023 versus fourth quarter 2022:
- Diluted earnings per common share ("EPS") of $0.90 versus $1.42.
- Consolidated sales decreased 24.9% to $210.7 million. Comparable store sales decreased 25.5%.
- Gross profit margin of 62.4% versus 57.0%.
- Pre-tax income of $18.5 million versus $32.5 million.
FY 2023 versus FY 2022:
- Diluted earnings per common share ("EPS") of $3.36 versus $5.24.
- Consolidated sales decreased 17.7% to $862.1 million. Comparable store sales decreased 18.4%.
- Gross profit margin of 60.7% versus 57.7%.
- Pre-tax income of $72.7 million versus $119.5 million.
Clarence H. Smith, chairman and CEO, said, "We delivered solid fourth quarter results of strong gross profit margins and expense control within a difficult environment for retail home furnishing sales. Higher interest rates and record low housing sales and inflation combined with prior years' outsized sales results have generated challenging headwinds. Our strong balance sheet is enabling us to execute our strategic store growth plans and invest in our business.
"In 2023, we returned $42.1 million of capital to our shareholders. We purchased $6.9 million in common shares, paid quarterly dividends of $19.1 million, and in December paid a special cash dividend of $16.1 million. We have paid an annual cash dividend since 1935 and increased our quarterly cash dividend payouts each year since 2008.
"Our team members remain focused on our business objectives and dedicated to delivering excellent service to our customers. The Havertys legacy of quality furniture and service is foundational for our "Regret-Free Guarantee" now featured in our marketing."
Key Results
(amounts in millions, except per share amounts)
Results of Operations | ||||||||||||||||
| Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | |||||||||||||
Sales | $ | 210.7 | $ | 280.6 | $ | 862.1 | $ | 1,047.2 | ||||||||
Gross Profit | 131.4 | 159.9 | 523.1 | 604.2 | ||||||||||||
Gross profit as a % of sales | 62.4 | % | 57.0 | % | 60.7 | % | 57.7 | % | ||||||||
SGA | ||||||||||||||||
Variable | 42.3 | 53.1 | 170.5 | 193.7 | ||||||||||||
Fixed | 72.4 | 75.4 | 285.3 | 292.6 | ||||||||||||
Total | 114.7 | 128.5 | 455.8 | 486.3 | ||||||||||||
SGA as a % of sales | ||||||||||||||||
Variable | 20.0 | % | 18.9 | % | 19.8 | % | 18.5 | % | ||||||||
Fixed | 34.4 | % | 26.9 | % | 33.1 | % | 27.9 | % | ||||||||
Total | 54.4 | % | 45.8 | % | 52.9 | % | 46.4 | % | ||||||||
Pre-tax income | 18.5 | 32.5 | 72.7 | 119.5 | ||||||||||||
Pre-tax income as a % of sales | 8.8 | % | 11.6 | % | 8.4 | % | 11.4 | % | ||||||||
Net income | 15.0 | 23.7 | 56.3 | 89.4 | ||||||||||||
Net income as a % of sales | 7.1 | % | 8.5 | % | 6.5 | % | 8.5 | % | ||||||||
Diluted earnings per share ("EPS") | $ | 0.90 | $ | 1.42 | $ | 3.36 | $ | 5.24 | ||||||||
Other Financial and Operations Data
| FY 2023 | FY 2022 | |||||||
EBITDA (in millions)(1) | $ | 85.8 | $ | 134.8 | ||||
Sales per square foot | $ | 197 | $ | 241 | ||||
Average ticket | $ | 3,278 | $ | 3,171 | ||||
Liquidity Measures
Free Cash Flow | FY 2023 | FY 2022 | Cash Returns to Shareholders | FY 2023 | FY 2022 | ||||||||||||
Operating cash flow | $ | 97.2 | $ | 51.0 | Share repurchases | $ | 6.9 | $ | 30.0 | ||||||||
Dividends | 19.1 | 17.8 | |||||||||||||||
Capital expenditures | (53.1 | ) | (28.4 | ) | Special Dividends | 16.1 | 16.1 | ||||||||||
Free cash flow | $ | 44.1 | $ | 22.6 | Cash return to shareholders | $ | 42.1 | $ | 63.9 | ||||||||
(1) See the reconciliation of the non-GAAP metrics at the end of the release.
Fourth Quarter ended December 31, 2023 Compared to Same Period of 2022
- Total sales down 24.9%, comp-store sales down 25.5% for the quarter. Total written sales were down 13.1% and written comp-store sales declined 14.0% for the quarter.
- Gross profit margins increased 540 basis points to 62.4% in 2023 from 57.0% in 2022. In 2023, the change in the LIFO reserve generated a positive impact on gross profit of $2.8 million compared to a negative impact of $4.8 million.
- SG&A expenses were 54.4% of sales versus 45.8% and decreased $13.8 million. The primary drivers of this change are:
- decrease of $7.7 million in selling expenses due to decreased compensation and third-party credit costs.
- decrease in warehouse, transportation, and delivery costs of $3.7 million primarily from reduced headcount via attrition and less usage of temporary labor, and lower expenditures for fuel and demurrage fees.
- decrease of $3.2 million in advertising expenses due to reduced spending on television and interactive marketing.
Balance Sheet and Cash Flow
- Cash and cash equivalents at December 31, 2023 are $127.8 million.
- Generated $97.2 million in cash from operating activities primarily from solid earnings performance, and by changes in working capital, primarily a $24.4 million decrease in inventories and a $12.1 million reduction in customer deposits.
- Purchased approximately 227,000 shares of common stock for $6.9 million and paid $19.1 million in quarterly cash dividends and $16.1 million in special cash dividends in 2023.
- The Company has no funded debt.
Expectations and Other
- We expect gross profit margins for 2024 will be between 59.5% to 60.0%. Gross profit margins fluctuate quarter to quarter in relation to our promotional cadence. Our estimated gross profit margins for 2024 are based on anticipated product and freight costs and the marginal impact on our LIFO reserve as compared to the prior years.
- Fixed and discretionary expenses within SG&A for the full year of 2024 are expected to be in the $295.0 to $297.0 million range. The increases over 2023 are primarily from costs associated with our store growth and inflation. Variable SG&A expenses for the full year of 2024 are anticipated to be in the 19.9% to 20.2% range. Variable expense increases over 2023 are primarily inflationary driven.
- Our effective tax rate for 2024 is expected to be 26.5% excluding the impact of potential tax credits and any new tax legislation.
- Planned capital expenditures are approximately $32.0 million in 2024. We expect retail square footage will increase 2.8% as we open five stores and close one.
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
(In thousands, except per share data - unaudited) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net sales | $ | 210,744 | $ | 280,557 | $ | 862,133 | $ | 1,047,215 | ||||||||
Cost of goods sold | 79,330 | 120,622 | 339,041 | 442,990 | ||||||||||||
Gross profit | 131,414 | 159,935 | 523,092 | 604,225 | ||||||||||||
Expenses: | ||||||||||||||||
Selling, general and administrative | 114,706 | 128,482 | 455,812 | 486,298 | ||||||||||||
Other (income) expense, net | 13 | (131 | ) | 77 | 44 | |||||||||||
Total expenses | 114,719 | 128,351 | 455,889 | 486,342 | ||||||||||||
Income before interest and income taxes | 16,695 | 31,584 | 67,203 | 117,883 | ||||||||||||
Interest income, net | 1,807 | 920 | 5,508 | 1,618 | ||||||||||||
Income before income taxes | 18,502 | 32,504 | 72,711 | 119,501 | ||||||||||||
Income tax expense | 3,501 | 8,766 | 16,392 | 30,143 | ||||||||||||
Net income | $ | 15,001 | $ | 23,738 | $ | 56,319 | $ | 89,358 | ||||||||
Basic earnings per share: | ||||||||||||||||
Common Stock | $ | 0.93 | $ | 1.48 | $ | 3.48 | $ | 5.43 | ||||||||
Class A Common Stock | $ | 0.88 | $ | 1.40 | $ | 3.29 | $ | 5.17 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Common Stock | $ | 0.90 | $ | 1.42 | $ | 3.36 | $ | 5.24 | ||||||||
Class A Common Stock | $ | 0.89 | $ | 1.39 | $ | 3.25 | $ | 5.07 | ||||||||
Cash dividends per share: | ||||||||||||||||
Common Stock | $ | 1.30 | $ | 1.28 | $ | 2.18 | $ | 2.09 | ||||||||
Class A Common Stock | $ | 1.23 | $ | 1.21 | $ | 2.05 | $ | 1.96 | ||||||||
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) | December 31, 2023 | December 31, 2022 | ||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 120,635 | $ | 123,126 | ||||
Restricted cash and cash equivalents | 7,142 | 6,804 | ||||||
Inventories | 93,956 | 118,333 | ||||||
Prepaid expenses | 17,067 | 9,707 | ||||||
Other current assets | 12,793 | 18,283 | ||||||
Total current assets | 251,593 | 276,253 | ||||||
Property and equipment, net | 171,588 | 137,475 | ||||||
Right-of-use lease assets | 202,306 | 207,390 | ||||||
Deferred income taxes | 15,641 | 15,501 | ||||||
Other assets | 13,005 | 12,430 | ||||||
Total assets | $ | 654,133 | $ | 649,049 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 18,781 | $ | 23,345 | ||||
Customer deposits | 35,837 | 47,969 | ||||||
Accrued liabilities | 46,289 | 48,676 | ||||||
Current lease liabilities | 37,357 | 34,442 | ||||||
Total current liabilities | 138,264 | 154,432 | ||||||
Noncurrent lease liabilities | 180,397 | 186,845 | ||||||
Other liabilities | 27,106 | 18,373 | ||||||
Total liabilities | 345,767 | 359,650 | ||||||
Stockholders' equity | 308,366 | 289,399 | ||||||
Total liabilities and stockholders' equity | $ | 654,133 | $ | 649,049 | ||||
HAVERTY FURNITURE COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands - unaudited) | Twelve Months Ended December 31, | |||||||
| 2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 56,319 | $ | 89,358 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 18,603 | 16,926 | ||||||
Stock-based compensation | 8,010 | 7,195 | ||||||
Deferred income taxes | (1,171 | ) | 584 | |||||
Net gain on sale of land, property, and equipment | 71 | 128 | ||||||
Other | 1,160 | 960 | ||||||
Changes in operating assets and liabilities: | ||||||||
Inventories | 24,378 | (6,303 | ) | |||||
Customer deposits | (12,131 | ) | (50,928 | ) | ||||
Other assets and liabilities | 8,641 | (923 | ) | |||||
Accounts payable and accrued liabilities | (6,677 | ) | (5,982 | ) | ||||
Net cash provided by operating activities | 97,203 | 51,015 | ||||||
Cash Flows from Investing Activities: | ||||||||
Capital expenditures | (53,115 | ) | (28,411 | ) | ||||
Proceeds from sale of land, property and equipment | 53 | 86 | ||||||
Net cash used in investing activities | (53,062 | ) | (28,325 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Dividends paid | (35,240 | ) | (33,948 | ) | ||||
Common stock repurchased | (6,895 | ) | (29,998 | ) | ||||
Other | (4,159 | ) | (1,676 | ) | ||||
Net cash used in financing activities | (46,294 | ) | (65,622 | ) | ||||
Decrease in cash, cash equivalents and restricted cash equivalents during the period | (2,153 | ) | (42,932 | ) | ||||
Cash, cash equivalents and restricted cash equivalents at beginning of period | 129,930 | 172,862 | ||||||
Cash, cash equivalents and restricted cash equivalents at end of period | $ | 127,777 | $ | 129,930 | ||||
GAAP to Non-GAAP Reconciliation
We report our financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides additional useful information but should not be considered in isolation or as substitutes for the related GAAP measures. We believe that EBITDA is a meaningful measure to share with investors.
Reconciliation of GAAP measures to EBITDA
(in thousands) | FY 2023 | FY 2022 | ||||||
Income before income taxes, as reported | $ | 72,711 | $ | 119,501 | ||||
Interest income, net | (5,508 | ) | (1,618 | ) | ||||
Depreciation | 18,603 | 16,926 | ||||||
EBITDA | $ | 85,806 | $ | 134,809 | ||||
Comparable Store Sales
Comparable-store or "comp-store" sales is a measure which indicates the performance of our existing stores and website by comparing the sales growth for stores and online for a particular month over the corresponding month in the prior year. Stores are considered non-comparable if they were not open during the corresponding month or if the selling square footage has been changed significantly.
Cost of Goods Sold and SG&A Expense
We include substantially all our occupancy and home delivery costs in SG&A expense as well as a portion of our warehousing expenses. Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold.
We classify our SG&A expenses as either variable or fixed and discretionary. Our variable expenses are comprised of selling and delivery costs. Selling expenses are primarily compensation and related benefits for our commission-based sales associates, the discount we pay for third party financing of customer sales and transaction fees for credit card usage. We do not outsource delivery, so these costs include personnel, fuel, and other expenses related to this function. Fixed and discretionary expenses are comprised of rent, depreciation and amortization and other occupancy costs for stores, warehouses and offices, and all advertising and administrative costs.
Conference Call Information
The company invites interested parties to listen to the live webcast of the conference call on February 22, 2024 at 10:00 a.m. ET at its website, ir.havertys.com. If you cannot listen live, a replay will be available on the day of the conference call at the website at approximately 12:00 p.m. ET.
About Havertys
Havertys (NYSE:HVT), 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. Additional information is available on the Company's website havertys.com.
Safe Harbor
This press release contains, and the conference call may contain forward-looking statements subject to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are subject to risks and uncertainties and change based on various important factors, many of which are beyond our control.
All statements in the future tense and all statements accompanied by words such as "expect," "likely," "outlook," "forecast," "preliminary," "would," "could," "should," "position," "will," "project," "intend," "plan," "on track," "anticipate," "to come," "may," "possible," "assume," and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the execution and effect of our initiatives, our expectations for selling square footage and capital expenditures for 2024, and our liquidity position to continue to fund our growth plans.
We caution that our forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information you are cautioned not to place undue reliance on our forward-looking statements, and they should not be relied upon as a prediction of actual results. Factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements include, but are not limited to: the state of the economy; state of the residential construction and housing markets; the consumer spending environment for big ticket items; effects of competition; management of relationships with our associates, potential associates, suppliers and vendors; public health issues (including pandemics and quarantines, related shut-downs and other governmental orders, as well as subsequent re-openings); new regulations or taxation plans, as well as other risks and uncertainties discussed in our Annual Report on Form 10-K for 2022 and from time to time in our subsequent filings with the Securities and Exchange Commission (SEC).
Forward-looking statements describe our expectations only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-K, 10-Q, 8-K, and other reports filed with the SEC.
Contact:
Havertys 404-443-2900
Jenny Hill Parker
SVP, Finance, and Corporate Secretary
SOURCE: Havertys
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