Haverty Furniture Companies, Inc.

Good day and welcome to the HVT third quarter 2021 financial results conference call. Today's conference is being recorded. At this time, I would like to turn the presentation over to Mr. Richard Herr, Chief Financial Officer. Please go ahead, sir.

Thank you, operator. During this conference call, we'll make forward-looking statements which are subject to risk 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 in 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 report filed with the Securities and Exchange Commission. Our chairman and CEO, Clarence Smith, will now give you an update on our results, and then our president, Steve Burdette, will provide additional commentary about our business.

Good morning. Thank you for joining our 2021 third quarter conference call. We're very pleased with another record quarter with sales at $260.4 million and net income of $24.2 million. Our team's done an outstanding job in producing this performance during the ongoing COVID concerns, significant product pricing increases, major hiring challenges, especially in warehouse and distribution, rising operating costs, and unprecedented supply chain disruptions. I believe that we've outperformed the competition in being able to deliver to our customers. We're very pleased with the efforts of our merchandising team and the pricing discipline at the store level. Even with the unusual and significant demurrage and LIFO charges, we increased our gross margins and reached record operating profits. Our available inventory is in the best shape we've had in over a year. We're finally restarting new product development that was on hold due to COVID and the massive backlog of sold orders. Clearly, our priority focus is bringing in sold merchandise to bring down our backlogs and to better serve our customers. However, we're a home furnishings retailer, and fashion and style are important drivers of sales. We're always excited to see the latest design and styles hit our floors which is an important differentiator for Havreys. In the past several months, we've added over 500 online exclusive products, including outdoor products and specially occasional items, which have had good response. We greatly appreciate our manufacturing partners in China and Vietnam who struggled with COVID shutdowns in the past several months, but are opening back up and increasing their production levels. Because of the COVID related shutdowns, we will have gaps in imported products, creating some out of stocks, especially in case goods. Our merchandise and supplies teams have a strategy to soften this gap related to the Vietnam factory shutdowns. We expect to end 2021 with 121 stores, one store over last year. In 2022, We have plans to open five stores, netting three. We're evaluating numerous opportunities for locations which we can serve in our distribution footprint. We've been pleased with our strategy of converting existing retail space to Haverty stores. Recently, we've had very good results with stores in the 30 to 35,000 square foot size, a building size with more availability. With the importance of our website and special order tools, we can present a large selection set of merchandise without requiring a much larger store. We're in the process of planning 2022 CapEx. We expect we'll be in the same range as we had this year, approximately $35 million net. Investments in stores and renovations are the largest block. Our single largest investment will be expansion of our Virginia Distribution Center, which we bought back earlier this year. We're converting the facility from a regional home delivery center to a full distribution center to better serve our Atlantic Coast growth. The expansion will allow us to receive direct shipments from the Norfolk port, reducing shipment costs, and allow for quicker deliveries. Our IT and marketing teams are amid major investments in remaking and upgrading our website to be the best in class industry leader. We're focused on ease of use and inspiring our customers throughout the process utilizing the Adobe platform. It will align with an upgraded 3D floor planner, significantly improve graphics, design, and search. The new site will have enhanced personalization, better presentation tools for H designers, and upgraded analytics and reporting. We're expecting the rollout of the new site early in the second quarter next year. As we just released, our fourth quarter written sales are down approximately 3.5% from the same period last year, with delivered sales up 17.5% over last year. For perspective, this year's Q4 written sales to date are up 20.9% and delivered are up 41.5% over 2019. We're having record delivery weeks as we receive more incoming sold product and having much better inventory compared to last year. As all of retail is struggling with delayed shipments for Christmas, we also have real challenges in supply chain and I'd like to ask Steve Burdette, President, to give us an update on our supply chain status.