Haverty Furniture Companies, Inc.

Greetings and welcome to Havity's third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Tiffany Hinkle, Assistant Vice President, Financial Reporting and Investor Relations. Thank you. You may begin.

Thank you, Operator. Good morning, and thank you for joining us for our third quarter earnings call. I'm here today with our President and CEO, Steve Burdett, and Executive Vice President and CFO, Richard Hare. Before we begin, I'd like to remind everyone that today's conference call may contain 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 uncertainties detailed in the company's reports filed with the SEC. A replay of this call will be available on our investor relations website this afternoon. For commentary about our business, I will now turn the call over to Steve.

Good morning. Thank you for joining our 2025 third quarter conference call. We are excited to report an increase in both written and delivered comp sales for Q3. Our sales for Q3 were 194.5 million, which was up 10.6% with comps up 7.1%. Total written sales were up 10% with comps up 8%. Our steady growth in written and delivered sales over the past four quarters reflects improvements across marketing, merchandise assortments, promotions, supply chain, distribution, home delivery, service, and store execution. While this quarter's results are positive, we remain focused on the significant opportunities in front of us that will allow our return to a billion-dollar-plus company with no additional investments needed in our distribution infrastructure. Gross margins continue to be strong, coming in at 60.3% compared to 60.2% in Q3 2024. Our pre-tax profits for the quarter were 6.4 million, or 3.3% operating margin, compared with 6.9 million, or 3.9% operating margin in Q3 2024. Our EPS for the quarter came in at 28 cents compared to 29 cents. Richard will provide additional details regarding the increase in SG&A expenses and LIFO impact for the quarter. During the quarter, our Labor Day event was the company's largest event of the year and was key to our success in the quarter. We had a terrific written four day increase of 13.6% over last year with strong metrics. Traffic was positive in the mid single digits. Average ticket grew to over $4,000 with design average ticket over $8,000. And conversion rates showed a slight, although conversion rates did slow a slight decrease compared to last year. The industry faces ongoing challenges. High interest rates and rising home prices continue hurting the housing market. Tariffs remain an issue. Geopolitical tensions persist. Consumer confidence is falling. And the government shutdown is now heading into week five. Recent and planned interest rate cuts have yet to lower mortgage rates or boost the housing sector. Despite these pressures, our customers with household incomes over $150,000 are still spending, giving us confidence for the rest of 2025 and into 2026. Traffic for the quarter stayed positive, with growth in the mid-single digits compared to last year. The average ticket increased 6.1%, reaching $36.68, and the designer's average ticket rose 11.9% to $79.86. Our design business remained robust, accounting for 34.2% of sales, driven by a 7.1% increase in upholstery special orders. Conversion rates for the quarter showed continued improvement over Q2, finishing the quarter down slightly in the low single digits. Our merchandising and supply chain teams have done a great job moving much of our production out of China during the quarter so we could resume our special order business. The announcements of potential new tariffs on furniture by the administration in late August was disappointing. Ultimately, these new tariffs were finalized at 25% on all upholstered wood products out of Mexico along with Vietnam, Cambodia, Thailand, and Indonesia beginning October 14th. but we'll be moving to 30% beginning January 1, 2026. Our merchandising and supply chain teams have worked with our vendors to secure pricing to not disrupt any shipments. As with previous price increases, we will adjust retail prices strategically to maintain our values and margins. We appreciate our vendors' collaboration in helping us deliver strong values to our customers. The positive out of these new tariffs is that they are not stackable on the existing reciprocal tariffs put in place back in the summer. We are monitoring the administration's current trip to Asia and the upcoming Supreme Court decisions to see what the impact will be on tariffs going forward. The new merchandising team has now been in place for a full year, and we are starting to see their impact on our product assortments. We just brought our store management team from the field to Atlanta for a three-day leadership event at the end of September to celebrate our 140th anniversary and to show them in person the new products arriving over the next six to nine months. The merchandising team did a fabulous job presenting the new products, creating lots of excitement for our store management to take back to their teams. From a category performance, all categories showed nice increases during the quarter. Bedroom and bedding outperformed all categories with increases in the low to mid double digits, followed by upholstery and occasional in the high single digits, and dining room and decor in the mid single digits. Our inventories have remained basically flat in Q3 compared to Q2 this year. We anticipate the inventories will increase slightly in Q4 due to the additional tariffs implemented in October. Our marketing, creative, and media plans continue to resonate with our customers through broadcast, connected TV, and digital marketing channels. Our expanded use of AI and data has improved our targeting and personalization, making our marketing investments more efficient. And we saw web traffic, including organic and site engagement, increase by double digits as our written e-commerce sales grew 13.6% for the quarter. We invested an additional $2.8 million this quarter in marketing, including our first direct mail campaign in several years. The direct mail piece proved to be very successful in attracting new customers to Haverty's with a 12-page layout that showcased our product offerings and design capabilities. We continue offering 60 months no interest financing to remain competitive, and our credit costs continue to remain in line with last year. We completed the closing of the Waco store at the end of September. However, we are pleased to announce the opening of our third store in the Houston market in mid-October. The new store is in New Caney, which is in the northeast part of Houston. This will bring our store count back to 129, which is where we will end the year. We will return to our store growth goals of five per year in 2026. As stated on our last call, we have finalized four additional leases for 2026, openings in St. Louis, Nashville, and two more in Houston. We have one new market and one relocation in the LOI process now, but are unable to announce. We will make investments in our stores throughout 2026 in the bedding departments and design centers to maintain our focus on improving the customer experience. Our distribution, home delivery, and customer service teams continue to do a fantastic job controlling expenses while furnishing happiness to our customers. The management teams are great at balancing the number of team members with the workflow demand needed due to natural turnover. We continue to believe that due to Haverty's control in the final mile delivery with Haverty team members, it is a huge advantage to our success in providing our customers with unwavering service. Thank you to all our Haverty team members for your dedication to our customers and the company's success. Our people define us. and I am proud to be a part of this great team. With a debt-free balance sheet, operational consistency, integrity, consumer focus, in-home design services, and our regret-free experience, Haverty's offers confidence to our customers to furnish their homes with a Haverty brand. I will now turn the call over to Richard.