HAVERTY FURNITURE COMPANIES, INC. reported third quarter 2010 operating results, with increased sales of 3.4% and improved earnings. The earnings per share for the third quarter of 2010 are $0.05 compared to $0.02 for the same period of 2009. The earnings for the nine months ended September 30, 2010 are $0.13 compared to a loss per share of ($0.62) for 2009.
Clarence H. Smith, president and chief executive officer, said, “Although our performance in 2010 has improved over last year, we have previously reported a softening of demand trends in the most recent months. The fourth quarter is historically our strongest of the year and our results will be against more difficult comparisons. We are confident that our shopping experience, both in-store and on-line, the stylish and affordable merchandise we offer, excellent service and strength of our brand will allow us to continue to grow market share. Our ongoing evaluation of stores will result in future new store locations and the exiting of other sites similar to our entrance in the Columbus, Georgia market in October and the closing of our Abilene, Texas location in December. We will also be investing in our operations to upgrade information systems. The competitive advantages that we have developed and our financial strength will support our efforts in growing our business.”
Financial Highlights
Third Quarter 2010 Compared to Third Quarter 2009
- Net sales increased 3.4% to $157.1 million and comparable store sales increased 4.3%.
- Gross profit margins were 51.3% as a percent of sales compared to 52.1%. The decrease is mostly due to the negative impact of a $0.4 million (0.3% of sales) increase in the LIFO inventory reserve due to inflation compared to the positive impact of a $0.5 million (0.3% of sales) reduction in the reserve in 2009.
- Selling, general and administrative costs decreased 1.1% as a percent of net sales. Occupancy costs continued to benefit from lower depreciation expense and improved efficiencies were realized in most major cost categories.
- Income tax expense includes a decrease to our valuation allowance on deferred tax assets of $0.4 million, an increase of $0.02 in per share earnings compared to the prior period increase in the allowance of $0.1 million, which had a negligible impact on earnings per share.
- Our retail store count at September 30 was 118 versus 121.
Nine Months ended September 30, 2010 Compared to Same Period of 2009
- Net sales increased 7.6% to $458.2 million and comparable store sales increased 9.0%.
- Gross profit margins remained flat at 51.5% as a percent of sales due to pricing discipline and product mix, offset by the negative impact of a $1.0 million increase in the LIFO inventory reserve compared to a $0.5 million reduction in the reserve in 2009.
- Selling, general and administrative costs decreased by 3.6% as a percent of net sales. Improved efficiencies were realized in the major categories as fixed costs were leveraged.
- Income tax expense includes a reduction in our valuation allowance on deferred tax assets of $1.1 million, an increase of $0.05 in per share earnings compared to the prior period increase in the allowance of $5.2 million, which decreased earnings $0.24 per share.
Expectations and Other
- Total delivered sales for the fourth quarter to date of 2010 are 2.5% lower than the same period last year while total written business is up slightly.
- Gross profit margins for the remainder of the year will be impacted by increased costs as recognized under our LIFO inventory accounting method. We expect that gross profit margins for the full year will be near the third quarter levels.
- We closed our store in Bowling Green, Kentucky as its lease expired at the end of the third quarter. We opened a store in Columbus, Georgia, a new market for us in early October. During the fourth quarter, we will also close our Abilene, Texas, store as its lease expires.
- Cash flow from operations for the nine months ended September 30, 2010 was $26.8 million.
- Cash at the end of the third quarter of 2010 totaled $67.1 million. We have no funded debt and $34.1 million of availability under our credit facility.
Havertys, established in 1885, is a full-service home furnishings retailer with 119 showrooms in 17 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges. Additional information is available on the company's website at www.havertys.com.