Havertys posts loss of $1.5 million in 3Q
By Clint Engel -- Furniture Today, November 9, 2008
ATLANTA — Havertys posted a third-quarter net loss of $1.5 million last week, citing a continuing decline in consumer spending on big-ticket items.
To counter what the Top 100 company called a “historic down cycle,” Havertys said it has paid off debt, tightened up its inventory, outsourced new financing, put expansion on the back burner and cut other capital expenditures.
In the same quarter a year earlier, the company posted a profit of $643,000. For the first nine months of this year, Havertys reported a net loss of $2.8 million compared with net income of $123,000 in 2007.
Sales for the quarter were down 12.5% to $175.6 million, and same-store sales fell 14.9%.
Written business in the fourth quarter to date is down about 23% from the same period a year ago, Havertys President and CEO Clarence Smith said.
Given the continuing tough climate, Smith said the 123-store retailer’s “strategy to maintain a strong balance sheet and contain costs” has been a prudent one. He added that “all of our borrowings were repaid and we are closely managing our inventories.”
Selling, general and administrative expenses were cut by $6.9 million in the third quarter and gross margins increased to 51.5% from 49.6% a year ago, thanks largely to reduced markdowns and an end to in-house free consumer financing beyond one year.
Cost reductions of $8 million were partially offset by an increase of $1.1 million in the reserve for store closing costs. The company said it is evaluating locations with leases up for renewal that might be closed.
While industry bankruptcies are likely to lead to big-box opportunities for expansion, Smith said the company will be deliberate in evaluating them.
“If a location isn’t a home run, we won’t be interested,” he said.
Havertys will end this year with 122 stores in 17 states in the South and Midwest, one fewer location than at the close of 2007. It will soon close an Atlanta-area store with an expiring lease.
Smith said inventory levels are lower than they were in the first half.
“Our capital expenditure plans are being curtailed as we spend on normal store maintenance but forego any additional new store activity,” he said.
It also expects to close on a $7 million sale-leaseback of one of its stores this quarter.
Smith said Havertys had continued to upgrade its training efforts and has expanded Web-based conferencing for training to cut travel costs.
“We cannot predict the depth or length of the current negative cycle,” he said. “Our attention is on tightly managing our business during this period.”
| Haverty Furniture | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 9/30 | 2008 | 2007 | Change |
| (a) Includes income tax benefit of $767,000 in the 2008 quarter, $84,000 in the 2007 quarter, $1.6 million in the 2008 nine months and $380,000 in the 2007 nine months. |
|||
| Sales | $175,579,000 | $200,666,000 | (12.5%) |
| Operating income | (2,404,000) | (273,000) | — |
| Net income (a) | (1,515,000) | 643,000 | — |
| Earnings per share | (0.07) | 0.03 | — |
| 9 months ended 9/30 | 2008 | 2007 | Change |
| Sales | $529,243,000 | $578,843,000 | (8.6%) |
| Operating income | (4,975,000) | (2,775,000) | — |
| Net income (a) | (2,792,000) | 123,000 | — |
| Earnings per share | (0.13) | 0.01 | — |
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