Havertys posts 1% 2Q sales gain, flat earnings


Furniture / Tips 632 Views

ATLANTA — Havertys posted a 1% gain in net sales and a slight increase in profit as consumers responded to new merchandise, and website traffic picked up.

But the threat of tariffs on Chinese imports looms, and could lead the Top 100 company to take steps to mitigate the impact, including possible shifts in sourcing and price increases.

Net sales for the quarter ended June 30, increased 1% to $198.8 million from $196.8 million for the same period last year. Same stores sales increased 1.3%.

Net income was nearly flat, up 0.5% to $6.21 million from $6.19 million a year ago. Earnings per share were flat at 29 cents.

The average written ticket increased 3.4% for the quarter over the same period a year ago, and custom upholstery sales increased 3%. Gross profit margins were down slightly to 54.2% from 54.4%, as Havertys was pressured by higher freight costs, promotions and markdowns, it said.

“We are encouraged by the performance of several of our new product lines, particularly in the bedroom category,” said Clarence Smith, chairman, president and CEO of Atlanta-based retailer with 121 stores in 16 Southern and Midwestern states.

“This bodes well as customers begin to refresh more areas of their homes and we add more new groups in the second half of 2018.”

Smith weighed in on the potential impact of the recently proposed a 10% tariff on furniture, accessories, components and other Chinese imports, suggesting that it's hard to pin down but noting Havertys imported about $100 million in Chinese goods last year. It was the importer of record on about 12% of that amount. The rest was purchased through vendors.

“The impact of the proposed tariffs, should they be imposed, would result in price negotiations with manufacturers and suppliers, the possible shifting of sourcing and potential retail price increases,” he said. "Given the waterfall effect of tariffs on cost inputs and retail pricing, the complete effect of a tariff imposition is not quantifiable.”

For the first six months, Havertys’ net sales increased 0.2% to $398.2 million, and same-store sales were up 0.1%. The average ticket increased 2.5%, and custom upholstery sales rose 9%.

Net income for the first half increased 2.9% to $12.5 million, and earnings per share increased to 58 cents from 56 cents.

Smith said Havertys is looking forward to beginning operations in its expanded western distribution facility in Dallas, which should be fully online for the fall selling season.

“This investment will improve our daily product handling and increase efficiencies,” he said, adding that the additional space (the facility is more than doubling to 388,000 square feet) “provides supply chain options and additional opportunity for expanding region specific merchandise offerings.”

Smith also noted a new marketing campaign “to amplify our brand message” begins this quarter. “We believe this will build on our progress as website sessions increased 36% in the second quarter over last year,” he said.

“Our focus remains on engaging and personalizing the customer’s Havertys experience and allowing her to move seamlessly between the website and store. We believe that our omnichannel capability is one of Havertys’ competitive advantages over those furniture retailers operating as part of a dealer network.”