Haverty Furniture Companies, Inc.

Good day, ladies and gentlemen, and welcome to Haverty's Report, Operating Results for Second Quarter 2022 Conference Call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Richard Hare, Chief Financial Officer. Sir, the floor is yours.

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 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 uncertainty details 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 then our President, Steve Burdette, will provide additional commentary about our business. Good morning.

Thank you for joining our 2022 Second Quarter Conference call. We're very pleased to report a record Q2 sales performance of $253 million and earnings per share of $1.27, 5% over last year. The second quarter was the fourth best earnings performance in the company's history. Our team has produced seven straight record sales quarters going back to the fourth quarter of 2020. We continue our billion-dollar annual sales pace that we reached in 2021. We believe that our target customer, located in the fastest-growing markets in the country, has been impacted less than the more price-sensitive promotional customer base. We've seen a slowdown in store traffic, which has hit written orders, but we feel that we're very well positioned with a strong backlog of orders to provide and build profitable market share in our regions. We've changed our business model since pre-COVID. Our store count and retail square footage is level with 2019. However, our productivity measured by sales per employee is up 61% because we've been able to deliver more sales volume with fewer team members compared to 2019. In the second quarter, our written sales are 23.2% up over 2019. Average sale ticket is up 39% with a higher closing rate. Traffic is down double-digit compared to Q2 2019, and units are down compared to Q2 2019. But with the average ticket over $3,000, a higher closing rate, and a 58% gross margin, we are producing record profits. Recent sales trends have changed compared to 2021. Last year, we had more consistent volume during the week and a balanced traffic flow outside of the typical promotional activity. This year, we've seen stronger weekend sales and more activity around the holiday events, but weaker traffic during the weekdays returning to a more historically normal sales path. In our marketing efforts, we're more focused on attracting and driving new customers because we've seen the new customers bill higher sales tickets and more quickly grow our volume. We're targeting a slightly younger customer than we've historically attracted with more digital advertising and social media. Our merchandising efforts also align with this strategy, emphasizing more contemporary styles, customization, and special order. Upholstery continues to be the key driver at over 40% of sales. We built our inventories back up in upholstery and domestic special order delivery times are improving, coming closer to pre-COVID performance levels. We're finally beginning to fill orders in bedroom and dining room with incoming containers from Vietnam and leather upholstery from China. Recently, our biggest sales gains have been in bedroom and case goods as we're able to complete back orders after the long delays. We expect to be in the best inventory position for the important Labor Day events than we have been in many years. Our team's top marketing, merchandising, and IT efforts are the relaunch of Harrys.com later this year. We're actively pursuing a number of store locations within our distribution footprint with a goal of adding five stores a year beginning next year. We believe that there are very good locations both in new and existing markets that reach our target customer. We will be relocating a store in Indianapolis and opening an additional store in the Washington, D.C. market this fall. Currently, we expect to end the year with 121 stores level with last year. Our best-in-class balance sheet allows us to invest in the latest technologies for efficiency and managing supply chain, the major relaunch of our website, state-of-the-art business intelligence, and upgrading and repositioning our stores in the best locations in the fastest-growing markets in the country. We're also able to build back our inventories to support growth and maintain an ongoing priority position with the industry's top suppliers. We are pleased with our team's dedicated performance for the first half of 2022. We have challenges with reduced traffic and lower incoming orders related to high inflation and slowing home closures. We're encouraged by our team's dedication to serving our customer better with great values, more design service, and customization. We believe that we will be able to earn a larger share of the home furnishings markets in the months and quarters ahead. I'll now turn the call back over to Steve Burdette.