Haverty Furniture Companies, Inc. (NYSE:HVT) Q1 2024 Earnings Call Transcript May 2, 2024
Haverty Furniture Companies, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Haverty’s First Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Richard Hare, Chief Financial Officer.
Richard Hare: Thank you, operator. During this conference call, we’ll make forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those made or implied in such statements, which speak only as of the date they are made and which we undertake no obligation to publicly update or revise. Factors that could cause actual results to differ include economic and competitive conditions and other uncertainties detailed in the company’s reports filed with the SEC. Our Chairman and CEO, Clarence Smith, will now give you an update on our results and our President, Steve Burdette, will provide additional commentary about our business.
Clarence Smith: Thank you for joining our first quarter conference call. Our Q1 sales were down 18.1% to $184 million with comparable store sales down 18.5%. Total written sales were down 12.6%. We continued with strong gross margins at 60.3% and controlled cost, which allowed us to produce a pre-tax profit of $3.2 million compared to $15.4 million in last year’s Q1. We’re well prepared for the Memorial Day event, the most important of the first half, with energized marketing plans and exciting lineup of new products, excellent balanced inventories and new in-store signage. Our Board approved a 6.7% increase in our quarterly dividend, which is our 12th year of consistent dividend increases. Haverty has paid a dividend every year since 1935.
Our strong balance sheet with over $100 million in cash, allows us to return capital to our shareholders and invest in infrastructure and stores in our markets. In 139 years of furnishing homes throughout our regions, Haverty has consistently gained market share, especially in difficult times. The falloff in furniture demand following the dramatic sales increases due to COVID has had a major impact on the industry. The industry struggled to supply timely furniture deliveries in the gangbuster years during COVID, but once that backlog cleared up, we experienced a significant negative impact throughout the industry. We pulled forward roughly two years of sales and then experienced a two year slide back to pre-COVID. This time, there will be many players who won’t survive the recovery.
While the first weakness was felt at the lower end of the market, it has impacted all the industry. And we believe that that will continue until housing begins to edge back positive. Home sales in the South have a very high correlation to our business. Clearly, interest rates are a major factor in housing. In the past year, we’ve seen numerous furniture failures of major manufacturers and retailers with the demand slot and we expect to see more competitors struggle and players fail. These are times when it becomes clear that, this industry closely tied to housing, cannot handle heavy debt leverage. Major debt positions combined with higher interest rates is a fast slide to bankruptcy in the furniture world. We have zero funded debt and are strongly positioned in the best states and fastest-growing markets in the customer.
We believe that we are uniquely well-positioned to continue to grow our market share in these important growth areas in the coming years. We’re investing in store growth and upgrading our store and operating systems to better serve our customers. We have a couple of major remodeling projects underway in major markets, which should be completed by next month. We believe in financial resilience for sustained financial growth. We’re on track to reach our goal of opening five new stores this year and five in 2025. I recently attended our new store opening in South Haven, Mississippi, entering our 17th state and a major growth suburb of Memphis, Tennessee. South Haven was the first store opening of four from former Bed Bath & Beyond stores, which will allow us to gain strong locations in market areas, where we have not been able to find sites.
In the next three months, we will be opening stores in three markets in Florida. Destin, central to the Emerald Coast; St. Petersburg, submitting the — Southern coastal site in our Tampa region and Suez Canal,…
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