Haverty Furniture Companies, Inc.

Please stand by. We're about to begin. Good day and welcome to the Haverty Furniture First Quarter Results 2022 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Hare, 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 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 Securities and Exchange Commission. Our Chairman and CEO Clarence Smith is a little under the weather this morning and he will not be on today's call. Our president, Steve Burdett, will now give you an update on our results and comment on our business. Thank you, Richard.

Good morning, and thank you for joining our 2022 first quarter conference call. We are pleased to report a record first quarter in sales and a strong profit of $1.11 per share versus $1.04 per share last year. We had outstanding gross profit margins of 59%. demonstrating our ability to adjust our retail pricing to our cost increases and our values in the marketplace. We had good pricing discipline in the stores and with our merchandise teams to help build the record gross margins. Our business was good during the early part of the quarter in both delivered and written business compared to the very strong results in 2021 due to a record President's Day weekend. For the quarter, our sales performance could be attributed to our continued improvement in our average ticket of over $3,000, an improvement in our special orders, and more H design in-home opportunities. However, we now face headwinds, including inflation, rising interest rates, continued supply chain disruptions, softening consumer confidence, and an adverse geopolitical situation. Overall, our written sales were down 8.8% for the quarter, with March being the weakest month. We have a very strong backlog of undelivered orders, but our average age has increased slightly to 11 weeks. However, with our planned increase in shipments on the water, we expect to be able to fulfill a number of the back orders and reduce the average age of the undelivered orders over the next several quarters. This past weekend, we opened our third store in the Austin Market in Pflugerville, Texas. We believe that we are beautifully positioned to build our business in that dynamic market. This year, we expect to open a relocated store in Indianapolis, a store in Gainesville, Virginia, which is a suburb of Washington, D.C., and another store in an existing market not yet announced. We plan to net an additional two stores in 2022, bringing our store count to 123 at year end, which will be a 1% to 2% growth in retail square footage. We are closely evaluating new store opportunities to expand our reach within our distribution footprint. We have several sites we are pursuing, but we'll be opportunistic in making the best long-term deals for the company. We believe that we are very well positioned in many of the fastest growing markets in the country and offer a unique, better quality product mix with broad custom and special order opportunities. Our merchandising teams are excited about the new products and designs which are finally arriving following the COVID delays. It is energizing for the store teams to have the new designs hit the floor. Several of our new collections have already jumped to the bestseller list. We are pleased with our recently expanded, curated product selections that are held in third-party warehouses. This allows us to expand our selections, serve our customers quicker, and move into new home furnishing categories without inventory risk. The strongest categories are occasional, home office, upholstery, and outdoor. During Q1, we continue to experience challenges in our supply chain network. Our import vendors have been slower to recover from the shutdowns in 2021, and the recent COVID restrictions in Shanghai have not helped. However, we do remain optimistic that we are seeing an increase in production over the last 60 days out of Vietnam, which should help to offset some of these delays. Also, we continue to be encouraged with the reduction in lead times from our domestic upholstery vendors, which we have seen lead times reduced by 10 to 25%. Our expectations are this will continue to improve during Q2. Our special order business has improved by 20 plus percent from Q4 to Q1 in total dollars, which is a tremendous improvement. And we remain focused on getting our special order business back to our targeted 25% of total upholstered sales by mid-year. It is important to note that this business carries a higher average ticket. The most important internal project for the company is the upcoming relaunch of our Habities.com. We are on track for the launch later this summer using the Adobe suite of applications as the foundation. Haverty's.com is our front door, and almost all our customers utilize the site in the shopping process. Several of the planned enhancements are an improved AI-driven smart search, improved brand positioning, better personalization, integrated content and commerce, enhanced category and product tools, and real-time analytics, all of which should provide our customers with faster and more relevant content to drive a better user shopping experience. We are committed to having the best home furnishings website in the industry, and our team is excited about the upcoming relaunch. We have had a good start to the year in repeating our record sales and profit performance, and we believe that we are the best positioned home furnishings retailer in the country and see great growth opportunities both near term and into the future. Our management teams continue to focus on retention with our team members to ensure that we are furnishing happiness to all our customers with the absolute best service and quality as we continue to enhance the customer shopping experience through our key investments and our digital capabilities. Finally, I'd like to thank the entire Haverty team and our merchandise and logistic partners for all their support and efforts in making Q1 a record for Haverty's. Now I'll turn the call over to Richard.