HAVERTY FURNITURE COMPANIES INC

Previous wording

The following table outlines our sales and comp-store sales increases and decreases for the periods indicated. (Amounts and percentages may not always add to totals due to rounding.)

Current wording

The following table outlines the changes in our sales and comp-store sales for the periods indicated. (Amounts and percentages may not always add to totals due to rounding.)

Previous wording

Total sales for the second quarter of 2024 decreased $27.7 million, or 13.4%, compared to the same period in 2023. Our comp-store sales decreased 13.6% or $27.7 million, in the second quarter of 2024 compared to the same period in 2023.

Current wording

Total sales for the third quarter of 2024 decreased $44.4 million, or 20.2%, compared to the same period in 2023. Our comp-store sales decreased 20.5% or $44.9 million, in the third quarter of 2024 compared to the same period in 2023.

Previous wording

Total sales for the six months ended June 30, 2024, decreased $68.4 million, or 15.9%, compared to the same period in 2023. Our comp-store sales decreased 16.2%, or $69.1 million, in the first six months of 2024 compared to the same period in 2023.

Current wording

Total sales for the nine months ended September 30, 2024, decreased $112.8 million, or 17.3%, compared to the same period in 2023. Our comp-store sales decreased 17.7%, or $114.0 million, in the first nine months of 2024 compared to the same period in 2023.

Previous wording

Demand for home furnishings rose rapidly during the COVID years as consumers redecorated their homes and outfitted home offices, pulling forward sales. Furthermore, recent inflationary pressures and economic uncertainty have had negative effects on consumer discretionary spending. Rising interest rates have also exacerbated the small supply of homes available for sale and further weakened the housing market. All of which has had a negative impact on demand for furniture and has adversely impacted our sales volumes in the first and second quarters of 2024. Written business for the second quarter of 2024 compared to the second quarter of 2023 was down 15.2% and written comp-store sales were down 15.8%.

Current wording

Demand for home furnishings rose rapidly during the COVID years as consumers redecorated their homes and outfitted home offices, pulling forward sales. Furthermore, recent inflationary pressures and economic uncertainty have had negative effects on consumer discretionary spending. High interest rates have also exacerbated the small supply of homes available for sale and further weakened the housing market. These factors have negatively impacted demand for furniture and have adversely impacted our sales volumes in each quarter of 2024. Written business for the third quarter of 2024 compared to the third quarter of 2023 was down 15.3% and written comp-store sales were down 16.3%.

Previous wording

Gross profit for the second quarter of 2024 was 60.4%, down 10 basis points compared to the prior year period of 60.5%. For the second quarter of 2024, the change in the LIFO reserve generated an immaterial impact on gross profit compared to a positive impact of $3.4 million for the same period of 2023. Gross profit for the six months ended June 30, 2024 was 60.4% compared to 59.8% for the same period of 2023. Our gross margins, excluding the impact of LIFO, were up based on product selection and merchandising mix in 2024 compared to 2023.

Current wording

Gross profit margin for the nine months ended September 30, 2024 was 60.3% compared to 60.1% for the same period of 2023. The impact of the change in the LIFO reserve was immaterial for the nine months ended September 30, 2024 but generated a positive impact of $6.6 million for the same prior year period. Excluding the impact of LIFO, our gross profit margins were up in 2024 compared to 2023 due to product selection and merchandising mix.

Previous wording

Our SG&A costs as a percent of sales for the second quarter of 2024 were 57.7% versus 53.3% for the same period in 2023 largely as a result of decreased sales. SG&A dollars decreased $6.9 million, or 6.3%, for the second quarter of 2024 compared to the same prior year period. The change is driven by lower warehouse and delivery costs of $3.5 million primarily from reduced labor costs, lower costs in selling expense of $3.3 million, decrease of $1.6 million in administrative expenses due to lower stock compensation costs, and a decrease of $1.3 million in advertising expenses. Occupancy costs were $2.8 million higher as rent expense in the prior year quarter was reduced by $1.8 million for incentives to vacate a property before the end of its lease term.

Current wording

Our SG&A costs as a percent of sales for the third quarter of 2024 were 57.4% versus 51.1% for the same period in 2023 largely as a result of decreased sales. SG&A dollars decreased $11.8 million, or 10.5%, for the third quarter of 2024 compared to the same prior year period. The change is driven by lower costs in selling expense of $6.2 million due to lower commission-based compensation and third-party creditor costs, lower warehouse and delivery costs of $3.6 million, and a decrease of $2.9 million in administrative expenses due to lower salaries and stock compensation costs. Occupancy costs were $1.8 million higher, primarily due to an increase in rent expense. Rent expense in the prior year quarter was reduced by $1.3 million for incentives to vacate a property before the end of its lease term.

Previous wording

Our SG&A costs as a percent of sales for the first six months of 2024 were 58.6% versus 53.0% for the same period in 2023 largely as a result of decreased sales. SG&A dollars decreased $15.9 million, or 7.0%, for the first half of 2024 compared to the same prior year period. The change results primarily from lower costs in selling expense of $8.0 million, a decrease in warehouse and delivery costs of $6.8 million, and an increase in occupancy costs of $2.7 million.

Current wording

Our SG&A costs as a percent of sales for the first nine months of 2024 were 58.2% versus 52.4% for the same period in 2023 largely as a result of decreased sales. SG&A dollars decreased $27.7 million, or 8.1%, for the first nine months of 2024 compared to the same prior year period. The change results primarily from lower costs in selling expense of $14.2 million, a decrease in warehouse and delivery costs of $10.4 million, a decrease in administrative costs of $4.8 million, a decrease in advertising and marketing costs of $2.9 million and an increase in occupancy costs of $4.5 million.

Previous wording

The variable expenses in dollars were lower in the second quarter and for the first six months of 2024 compared to the same periods in 2023, primarily due to the decrease in commission expense and third-party credit costs.

Current wording

The variable expenses in dollars were lower in the third quarter and for the first nine months of 2024 compared to the same periods in 2023, primarily due to decreases in commission expense and third-party credit costs.

Previous wording

Our variable expenses within SG&A for the full year of 2024 are anticipated to be 19.7% to 20.0%, a 20 basis point decrease primarily due to lower delivery and third-party credit costs. Fixed and discretionary expenses are expected to be to approximately $282.0 to $284.0 million for the full year of 2024, a decrease of $8.0 million from our previous guidance based on reductions in advertising, incentive compensation, and professional fees.

Current wording

Our variable expenses within SG&A for the full year of 2024 are anticipated to be 19.6% to 19.9%, a 10 basis point decrease from our previous guidance primarily due to lower third-party credit costs. Fixed and discretionary expenses are expected to be approximately $279.0 to $281.0 million for the full year of 2024, a decrease of $3.0 million from our previous guidance driven by reductions in incentive compensation and professional fees offset by an increase in advertising expense.

Previous wording

At June 30, 2024, we had $109.9 million in cash and cash equivalents, and $6.1 million in restricted cash equivalents. We believe that our current cash position, cash flow generated from operations, funds available from our credit agreement, and access to the long-term debt capital markets should be sufficient for our operating requirements and to enable us to fund our capital expenditures, dividend payments, and lease obligations through the next several years. In addition, we believe we have the ability to obtain alternative sources of financing, if needed.

Current wording

At September 30, 2024, we had $121.2 million in cash and cash equivalents, and $6.2 million in restricted cash equivalents. We believe that our current cash position, cash flow generated from operations, funds available from our credit agreement, and access to the long-term debt capital markets should be sufficient for our operating requirements and enable us to fund our capital expenditures, dividend payments, and lease obligations through the next several years. In addition, we believe we have the ability to obtain alternative sources of financing, if needed.

Previous wording

In October 2022, we entered into the Fourth Amendment to our Amended and Restated Credit Agreement (as amended, the “Credit Agreement”) with Truist Bank. The Credit Agreement, which matures October 24, 2027, provides for a $80.0 million revolving credit facility. The borrowing base at June 30, 2024 was $117.5 million and the net availability was $80.0 million.

Current wording

In October 2022, we entered into the Fourth Amendment to our Amended and Restated Credit Agreement (as amended, the “Credit Agreement”) with Truist Bank. The Credit Agreement, which matures October 24, 2027, provides for a $80.0 million revolving credit facility. The borrowing base at September 30, 2024 was $121.7 million and the net availability was $80.0 million.

Previous wording

Net cash provided by operating activities was $17.5 million in the first six months of 2024 compared to $40.1 million during the same period in 2023. This difference resulted primarily from a decrease in net income and changes in working capital. Working capital was impacted by more normalized levels of inventories and customer deposits in 2024, as compared against the reduction of the backlog in 2023 and an increase in other liabilities.

Current wording

Net cash provided by operating activities was $42.0 million in the first nine months of 2024 compared to $79.4 million during the same period in 2023. This difference resulted primarily from a decrease in net income and changes in working capital. Working capital in 2024 was impacted by optimizing inventory levels to sales conditions, normalized delivery backlog and customer deposits, changes in operating lease assets and liabilities, and the timing of other payments and cash receipts.

Previous wording

Investing Activities. Cash used in investing activities decreased by$24.6 million in the first six months of 2024 compared to the first six months of 2023, due to capital expenditure spend.

Current wording

Investing Activities. Cash used in investing activities decreased by$22.6 million in the first nine months of 2024 compared to the first nine months of 2023, due to lower capital expenditures.

Previous wording

Assuming the new stores open as planned, the above activity and other changes are expected to increase net selling space at the end of 2024 by approximately 3.4% over net selling space at the end of 2023.

Current wording

Assuming the new stores open as planned, we will meet our expansion goal of five net new locations and end 2024 with 129 stores. The above activity and other changes are expected to increase net selling space at the end of 2024 by approximately 3.4% over net selling space at the end of 2023.