Havertys 4Q earnings down
By Clint Engel -- Furniture Today, March 13, 2006
Atlanta — Despite improved profit margins, higher expenses for energy, transportation and warehousing sent Havertys' fourth-quarter earnings down 22.4% from the same period a year earlier.
Net income for the 118-store, Top 100 company was $6.8 million, compared with $8.7 million a year earlier. Sales increased 4.1% to $225.6 million, and same-store sales were up 1.2%.
For the full year, Havertys' earnings fell 33.5% to $15.1 million, while sales increased 5.5% to $827.7 million. Same-store sales rose 1.8%.
The decline in fourth-quarter earnings reflected the modest sales gains and improving gross margins, offset by higher costs and lower income from property sales, said President and CEO Clarence Smith.
Higher costs stemmed from higher energy prices, increased delivery and transportation expenses and what the company expects will be the last period of "abnormally high demurrage charges," which are fees freight carriers charge when there are delays in unloading and returning import containers.
Imports for Havertys have increased considerably in the past few years and its distribution centers haven't been able to handle the full flow, Smith said. But the situation is improving, he added. A second expansion phase of the company's main Georgia distribution center will be finished in April, and the retailer began receiving goods into the first-phase expansion area in January.
"We are improving our supply chain techniques, systems and controls and are managing our product line more closely in 2006," Smith said. Such moves are expected to greatly reduce demurrage costs and improve speed and accuracy of deliveries to consumers.
During the fourth quarter, Havertys expanded into two key Midwest markets, Indianapolis and Columbus, Ohio.
Its proprietary store brand product will continue to be a focus this year, Smith said, as the retailer continues to seek ways to differentiate itself from the competition — including manufacturer-dedicated stores — while boosting margins and enhancing its value proposition to consumers.
Smith said that in the months and years ahead, Havertys "will take bold steps" to raise consumers' awareness of its brand and its new furniture collections. Among other things, the company is refining it store presentations and advertising, putting more emphasis on consumer research and using more direct marketing.
This year, the retailer expects to open five or six stores, including one replacement. A more aggressive growth plan won't kick in until same-store sales growth gets back on track — in the mid single-digit range, the company said.
Smith said the company also is evaluating using slightly smaller format stores — of 20,000 to 25,000 square feet — in certain markets where the approach may make sense because of real estate availability and costs. Most new stores have been running around 35,000 square feet.
| Haverty Furniture | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 12/31 | 2005 | 2004 | Change |
| (a) Includes other income of $1.2 million in the 2005 fourth quarter, $3.6 million in the 2004 fourth quarter, $4.3 million in the 2005 year and $5.4 million in the 2004 year. | |||
| Sales | $225,587,000 | $216,803,000 | 4.1% |
| Operating income | 8,633,000 | 9,994,000 | (13.6%) |
| Net income (a) | 6,755,000 | 8,705,000 | (22.4%) |
| Earnings per share | 0.30 | 0.38 | (21.1%) |
| Year ended 12/31 | 2005 | 2004 | Change |
| Sales | $827,658,000 | $784,162,000 | 5.5% |
| Operating income | 18,132,000 | 30,073,000 | (39.7%) |
| Net income (a) | 15,054,000 | 22,636,000 | (33.5%) |
| Earnings per share | 0.66 | 0.98 | (32.7%) |
