Haverty Furniture Companies, Inc.

In fact, after implementing to the home page, which makes up approximately 20% of our site traffic, we saw a double-digit lift in organic traffic. Our plans are to have this rolled out to all our product listing pages and our product display pages by late Q1. As you know, we brought in our new media partner in April 2024, Carmichael Lynch, who we believe has contributed to the changes in our traffic patterns over the year. They made some adjustments with our advertising mix, moving to more broadcast in some of our larger markets for the bigger events, shifting our digital optimizations from product views to store visits, overhauling our search program, and adding Pinterest in Q4. In early November, we opened new stores in St. Petersburg, Florida, followed by Greenwood, Indiana. And then in mid-December, we opened the Woodland store, marking our return to Houston after 40-plus years. All three openings are meeting our expectations. In 2024, this totals six new stores and one closure, giving us a total of 129 stores at year end. Earlier this month, we opened our second store in southeast Houston in the Bay Brook Mall area and have planned a relocation of our Daytona store in the Orlando market in Q2. We are finalizing leases to open a third Houston store in late 25, followed by two additional stores in 2026. This will give us five stores, and our plan is to have six to eight stores to serve the Houston market. Our supply chain team has effectively managed our inventories, reducing them over 11% for the year. However, we see an opportunity to work with our partners to increase inventories on our best sellers, which will help us serve our customers quicker. We have relied on our just-in-time system with our partners in a time when there are too many unknowns. To support our new initiative and store growth, we expect inventories to rise approximately five to 10% over the next few quarters. On a positive note, we were fortunate to avoid the port disruptions from the potential strike that was looming in January, as it was resolved with no real impact on our flow of products. However, we are dealing with tariff issues with China, Canada, and Mexico. The tariffs have already begun in China, with Canada and Mexico being pushed out to the beginning of March. We are hopeful that this is the administration posturing for other concessions from Canada and Mexico, but we are getting prepared as if this will happen. We are fortunate to have great partners who are willing to work with us as they did in 2018-2019. We will have to deal with each of our partners based on their capabilities regarding production opportunities and or pricing opportunities. We will adjust retail pricing or look to reassort the lineup, but do not expect this to impact our current margin guidance or flow of product. Our distribution, home delivery, and customer service teams continue to increase productivity across all areas. We ended the year at just over 2,330 team members, which is approximately down 9.5% from year-end 2023. I am expecting to see this number increase in 2025 as we continue to grow the company. I want to conclude by recognizing all our team members as we celebrate our 140th year in business. This is something special as we continue to do the same thing today that we did 140 years ago, but with different people and different assets. We remind our team members every day that at the point of contact with the customer, you are Haverty's. Our team is committed to getting our company back to a billion dollars. I will now turn the call over to Richard.

Thank you, Steve. As we reported in the fourth quarter of 2024, the net sales were 184.4 million, a 12.5% decrease over the prior year quarter. Comparable store sales were down 13.7% over the prior year period. Our gross profit margin decreased 50 basis points to 61.9% from 62.4%. The decrease was driven primarily by the change in the LIFO reserve, which generated a $900,000 positive impact on gross profit margins in Q4 of 2024 compared to a positive impact of 2.8 million in the fourth quarter of 2023. Excluding the impact of our LIFO reserve, our gross margins increased 40 basis points over the prior year quarter. Selling general and administrative expenses decreased 8.9 million or 7.7 percent to 105.8 million dollars. As a percentage of sales, these costs approximated 57.4% of sales, up from 54.4% in the prior year quarter. We experienced decreased selling costs, advertising, administrative, warehouse, and delivery costs during the quarter. Our other income expense in the fourth quarter of 2024 was $200,000 and interest income was approximately $1.5 million. Income before income taxes decreased $8.9 million to $9.6 million. Our tax expense was $6.2 million for the calendar year, which resulted in an effective annual tax rate of 23.6% compared to an effective tax rate of 22.5% in the prior year. The primary difference in the effective rate and the statutory rate is due to expected state income taxes and non-deductible items. Net income for the fourth quarter of 2024 was 8.2 million or 49 cents per diluted share of our common stock compared to net income of 15 million or 90 cents per share in the comparable quarter last year. Now, turning to our balance sheet at the end of the fourth quarter, our inventories were $83.4 million, which was down 10.5 million from the year-end balance of last year and down 5.3 million versus Q3 2024 balance. At the end of the fourth quarter, our customer deposits were $40.7 million, which was up $4.9 million from the December 31, 2023 balance and down $3.2 million versus the Q3 2024 balance. We ended the quarter with $120 million of cash and cash equivalents, and we have no funded debt on our balance sheet at the end of the fourth quarter of 2024. Looking at some of our cash flow usage, CapEx was $32.1 million for the year of 2024. We also paid out $20.5 million of regular dividends in the 2024 calendar year. We did purchase approximately $5 million of common shares under our share repurchase program during the fourth quarter of 2024. And we have approximately $8.1 million of existing authorization in our buyback program. Our earnings release lists out several additional forward-looking statements indicating our future expectations of certain financial metrics. I will highlight a few, but please refer to our press release for additional commentary. We expect our gross profit margins for 2025 to be between 60 and 60.5%. We anticipate gross profit margins will be impacted by our current estimates of product and freight costs. Our fixed and discretionary type SG&A expenses for 2025 are expected to be in the $291 to $293 million range, which is an increase over the prior year resulting from our store growth and inflation. The variable type costs within SG&A for 2025 are expected to be in the range of 19 to 19.3%. Our planned CapEx for 2025 is $27.1 million. Anticipated new or replacement stores, remodels, and expansions account for $22.7 million. Investments in our distribution network are expected to be $1.8 million. And investments in our information technology are expected to be approximately $2.6 million. Our anticipated effective tax rate in 2025 is expected to be 26.5%. This projection excludes the impact of vesting of stock awards, discreet items, and potential new tax legislation. This completes my commentary on the fourth quarter financial results. Operator, we would like to open up the call for questions at this time.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Our first question comes from Anthony Liebensinsky with Sudoku & Co. Please proceed with your question.