Haverty Furniture Companies, Inc.

Greetings and welcome to Havre's fourth quarter 2023 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, 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 SEC. Our Chairman and CEO, Clarence Smith, will now give you an update on our results, and our President, Steve Burdette, will provide additional commentary about our business.

Good morning. Thank you for joining our 2023 fourth quarter and full year conference call. Our fourth quarter sales were $210.7 million, down 24.9%. Total written sales were down 13.1%, and written comp store sales declined 14.3% for the quarter. Total sales for the year were 862,132 million, down 17.7% from 2022. Our current sales performance returned to the pre-COVID sales trends we experienced in 2019 and 2018. In the fourth quarter, our teams did a solid job in expense control, higher gross margins, and excellent inventory management. Improvement in average ticket designer sales and maintaining high-quality service helped produce pre-tax margins of 8.7% and $18.5 million. For the full year, we produced $72.7 million pre-tax earnings versus $119.5 million in 2022. Following record sales and profit years post-COVID, the furniture industry was first hit by consumer spending on travel and entertainment, and by most recently the higher mortgage and interest rates, which significantly impacted housing sales. For Haverty's, home sales in the South have historically been highly correlated to our furniture sales. Currently, home sales have been at historic lows and have clearly impacted on our customers' interest in buying furniture. These trends are reflected in our recent performances. We're encouraged that we believe that home sales seem to have bottomed out after dramatic declines. It is evident now that we've experienced a two-year pull forward of furniture and accessory sales due to COVID, and now have experienced a two-year fall-off in sales. Our teams have done a fine job in reducing our costs in reaction to the weakening sales trends and adjusting across all areas of our business. Our headcount compared to 2019 pre-COVID is down from approximately 3,500 to 2,500 team members making similar sales volumes. We're continuing to evaluate all areas of our business for opportunities to consolidate and add productivity. We've focused on serving our customers better with improved in-store and online technology, strengthening of our design service, adding customization and special order products, and upgrading our product lines. All these areas will continue to separate us from the more promotional players in our markets. The acquisition of Four former Bed Bath & Beyond locations are on track for converting to Haverty stores in the first half of 2024. All these stores are in adjacent markets to current Haverty stores, and we're leveraging existing management. We're currently training staff in nearby stores to prepare for the spring, early summer openings. We're very pleased with the three important Florida stores and one store outside Memphis and South Haven, Mississippi, We're in due diligence on several additional opportunities, including other former Bed Bath & Beyond locations in our regions, and expect to meet our goal of five new stores per year in 2024 and 2025. Our plans are to add stores in adjacent and existing markets within our distribution footprint. This could expand to several states from our soon-to-be 17th state. We have several sites and locations we're evaluating and expect to see additional store opportunities soon from retailers struggling with sliding sales and refinancing debt. Haverty's financial strength with zero funded debt and over $100 million in cash allows us to continue to invest in new stores and upgrading stores and systems to better serve our customers. We continue to focus on helping our customers' vision of their home come to life. We have a long history of gaining market share and building on our strengths in difficult times. We believe that we're especially well positioned to grow our business in many of the fastest-growing markets in the country in the near term and into the future.