Havertys' 4Q earnings fall 53.1%
By Jay McIntosh -- Furniture Today, February 25, 2007
Atlanta — A 4.2% sales decline in the fourth quarter sent Havertys' earnings down by 53.1% from the same period a year earlier, to $3.2 million, the retailer reported.
For the year, earnings were up 6.3% from 2005 to $16 million, the Atlanta-based company said.
Sales amounted to $216 million in the fourth quarter and $859.1 million for the year, a 3.8% increase from the previous year. Comparable-store sales were down 6.8% in the quarter but up 1.8% for the year.
The fourth quarter of 2005 included an extra $1.2 million in pretax income in a gain on the disposition of property.
"Our fourth-quarter results were driven by lower sales along with the continuation of our fixed costs at planned levels," said Clarence Smith, president and CEO. "Gross profit margins for the quarter were better than the fourth quarter in the prior year and the highest of any 2006 quarter. We attribute this to the strength of our product lineup and our cautious approach to making changes in our pricing and promotional plans."
Smith added that the company's inventories are up from the 2005 level, which he said were "admittedly too low to properly serve our customer." He said the company has improved its supply chain techniques, and is working with suppliers to have them warehouse more product in Asia.
"The retail home furnishings environment continues to be very difficult," Smith said. Business in Florida remains "challenging," and Gulf Coast comparisons are tough after 2006, which was strong after Hurricane Katrina.
To date, delivered sales in February are down 12% from the same period a year ago, he said.
"We are evaluating costs in a number of areas and reviewing our distribution processes for adjustment to the current business conditions on a regional basis," he said. One reduction will be in advertising spending, which will be down by about $2 million or 13% for the first quarter and 7% for the remainder of the year, officials said.
Smith said the company's growth plans for this year center on strengthening its position in regions served by its existing distribution structure. The company also investing in its Web presence and expects to have e-commerce capability within a year, he said.
The company plans to open seven stores this year, including three locations already announced: a second store in Austin, Texas, next month; Huntsville, Ala., in the second quarter; and Rockville, Md., a lease it took over from Mastercraft Interiors, in the fourth quarter.
Smith also said that with sales on the decline and the U.S. housing market soft, he expects an "acceleration in the fallout of weaker players" in furniture retailing. He said that should give Havertys, which has a strong balance sheet with little debt, the opportunity to increase market share.
| Quarter ended 12/31 | 2006 | 2005 | Change |
|---|---|---|---|
| Sales | $216,038,000 | $225,587,000 | (4.2%) |
| Operating income | 4,821,000 | 8,633,000 | (44.2%) |
| Net income | 3,170,000 | 6,755,000 | (53.1%) |
| Earnings per share | 0.14 | 0.30 | (53.3%) |
| Year ended 12/31 | 2006 | 2005 | Change |
| Sales | $859,101,000 | $827,658,000 | 3.8% |
| Operating income | 21,637,000 | 18,132,000 | 19.3% |
| Net income | 16,000,000 | 15,054,000 | 6.3% |
| Earnings per share | 0.70 | 0.66 | 6.1% |
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