Haverty Furniture Reports Comparable Store Sales Increase of 8.2%

Furniture World News

Haverty Furniture Companies, Inc., reported earnings for the third quarter ended September 30, 2006. Net income for the third quarter was $4.1 million or $0.18 per diluted share of Common Stock, as compared to the third quarter 2005 net income of $3.8 million or $0.17 per diluted share of Common Stock. For the nine months ended September 30, 2006, net income was $12.8 million or $0.56 per diluted share of Common Stock versus net income of $8.3 million or $0.36 per diluted share of Common Stock for the same period in 2005. As previously reported, net sales for the third quarter of 2006 were $222.9 million, an increase of 10.3% over sales of $202.0 million for the corresponding quarter in 2005. Comparable-store sales increased 8.2% for the quarter. Clarence H. Smith, president and chief executive officer, said, "Our third quarter results reflect strong sales and gross profit relative to last year, tempered by increased costs and much lower other income. Sales were helped by better in-stock levels and a reduction in the time to complete home delivery after a customer's purchase. Gross profit margin was 135 basis points better than last year due to the strength of our product line-up but 32 basis points lower than achieved for the second quarter this year. The sequential quarter reduction was influenced by the closing of two stores and the sell through of clearance merchandise. "Total SG&A expenses were up 44 basis points as a percent of net sales compared to the third quarter last year. Our increased sales productivity leveraged expenses in advertising, warehouse, occupancy and administrative areas. Selling expenses were up for the current quarter as compared to the third quarter of last year as the volume financed by customers under outsourced no-interest credit promotions grew and the discount rates we pay increased in this higher interest rate environment. The total discount expense for these promotions increased by 73 basis points as a percent of sales for the quarter compared to last year. We also had an increase in local delivery expense in the current quarter as compared to last year due to labor costs and the higher fuel prices in effect for most of the period. These delivery expenses were comparable to the second quarter as a percent of net sales. "Last year's results for the quarter included a $2.6 million gain on the sale of real estate which was included in the other income line item. "We opened two new stores in August this year. One was our first store in the Ft. Lauderdale, Florida area, located near the Sawgrass Mills Mall. The other was in Cedar Hill, a southern suburb of Dallas, Texas that replaced an older store in the Redbird shopping area. Our Texarkana, Texas store was also closed during the quarter. Today we are opening an additional store in the greater Cincinnati market area located in Florence, Kentucky. No other openings or closings are planned for the fourth quarter. "We have separately just announced a decrease in sales for October compared to last year. Retail furniture sales as reported by many of the industry participants have shown a definite slowdown in recent months that appears to be continuing. We are cautious about making changes other than minor ones to our pricing and promotional plans but will review opportunities to increase top line growth if it helps overall profitability. Given the slow start in October, we believe total fourth quarter sales are likely to be below last year. Our policy is not to give specific earnings guidance; however, we expect that fourth quarter gross profit margins and overhead expense levels will be similar to the run rates experienced in the third quarter. "We believe that our investment in the Havertys Collections(R) brand, together with our reputation as a quality retailer, will serve us well as we weather any temporary soft business climate in our space and will allow us to reap benefits as trends improve in the future." Havertys is a full-service home furnishings retailer with 120 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 http://www.havertys.com/.