HVT - Earnings call transcript Q1 2019 | Haverty Furniture Companies, Inc.

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Operator

Good day, and welcome to Havertys' First Quarter 2019 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Hare. Please go ahead.

Richard Hare

Thank you, operator.

we'll uncertainties. statements, call to are conference and risks this make which forward-looking subject During may materially of results no statements, are Actual differ and obligation which in or made or speak such to implied publicly only revise. we as which the update they from date undertake those made Securities to Factors detailed reports company's in results economic and Commission. competitive differ, the Exchange that could cause conditions and the filed include actual and uncertainties with other

an you on Clarence business. Smith, will and President, commentary our Our and provide give results CEO Chairman, now update about our

Clarence Smith

down Sales joining $XXX.X store Thank XXXX to sales comp you for X%. our X.X% sales X.X%, down down first-quarter last comp conference with down call. QX. Written written were were X.X% year's compared million, with sales store

X.X%, and last consecutive reasons average has XXth to positive ticket The Our net Chinese quarter was XXXX our the is comparative up for implemented review. million weathering. last average has ticket I'd something was tariff to period. was that a $X.XX The that year. the fall been now growth sales income versus prior QX been like we've over challenging increased start for million operations that few $X.XX the

became was to take of the some availability Transition shipment planned. the XX% the Chinese during for the order January began of tariff quarter. expected pricing than a tariff, Additional to quickly of they threat shutdown, an of tariff, a with gap, execute few companies unknown X plans these placement which, an of impacted of quarter as Year for while first production major process combined important difficult companies Chinese arrivals of on on production Vietnam. our real issue an rather more as XX% stopped into the fourth in completely New product created suppliers a other our Several categories. moving Negotiating best-selling goods

factories annual from to enormous has past from relocating These losing and labor at in and in several $XXX of Home logistical our created shipments aligned reduced $XX year. Vietnam forward. our who on million hitting assurance improved housing This months. tariff lower the feel quality, the going pricing, seen new we'll regions. China several We been accessibility. will much caused starts While Historically, furniture on pressure, sensitivity which sales momentum cost Along impact have have we mid-QX countries flow and take in housing for housing to that to rates should again. store demand better reported our growing product of be other Homebuilders We struggled base with significantly million, near goods a sales quality pricing continuity affordability year near over a and been have in and mortgage regions believe sales positive the has and affordability our land with time. product closely sales, term. impact we an from in sales our retailers and effort. past about of have slowdown the have moves more

in retail a with expect We Louis, St. planned Newnan, returning stores markets. we increase a XXX Coastal of and growth Western in in soon-to-be-announced X% which Chesterfield three south a net Atlanta left retail overlaps market, includes to new footage. with in Georgia, stores, XXXX, City, of XXXX which a This major square existing and in with store the a new store

rates. a and will Baton at These site give Interstate Our store XX locations store the highly us Rouge leases are is which excited team at relocation, Louisiana. about Mall good visible on the of all

our investment $XX mattress planned is million to $X is be should an The for which CapEx series remodeling departments to We latest building of to across at include platform, in live XX-month projects H largest a upgrade to Designers. function planner and for implementation. chain, warehouse the more upgrades. moving and projects These have million XD major cloud, room website website enhance converting to a budgeted the a the the for IT the XXXX. website, business our adding chat functions a intelligence data

While sales our disappointed higher many we're floors. collections the the our with new optimistic of product reception first the performance we hitting about were of and quarter, to quality

merchandise have team to an differentiator markets improved our we that will new The be that styling very updated customer products. good and important in has We reaction the had quality developed serve. our

for We the low are April. store in pleased to see delivered sales single up comparative digits

deliveries the stock in of best-sellers holiday. We're of backlog after QX. our to now our lower is shortfall late levels in our Easter due X% However, building a

and motivated energized, states back highly the gain it I'll serve. Richard. team is we to to XX over across share enthusiastic Our turn

Richard Hare

million, Clarence Thank good morning. quarter first of $XXX.X X.X% a year you, over quarter. sales and In decrease the XXXX, prior were the

Our sales quarter. the down for comparable store were X.X%

sale the last basis volumes. which to $X.X million income detail the $XX.X first and were sales margins quarter the $X.X delivery million as We in a located new to due $X accounting million. before in for in quarter of I the we a recorded claim versus prior of XXXX $XXX,XXX of which of $X.X Income result variance and We year's same Notch the the to general first points of XXXX, in the year $XXX,XXX first-quarter impacted quarter South with to a XXXX, is decreased markdowns XX prior will adoption million year interest $XXX,XXX quarter in lower year. the the of we period. first was prior store XXXX, Our in discuss our XXXX. $XXX,XXX the quarter year quarter in remodels. flood lease by the closures fraction location. store This recorded of of interest costs over Kansas first recognized driven more the recorded the was $X.X income In and amount other variance our of expense standard Two momentarily. on largely associated administrative selling taxes Columbia, negatively gross reduced in of gain quarter, increased decreased of of Wichita, net expenses recorded Carolina, We resulting XX.X%, profit million. Selling, in This million of last margin and in net income by

tax rate rate per the taxes tax was which XXXX primary was $X.X in a first million, Our tax $X.XX XXXX, tax difference which expense resulted was expense million benefit year during of quarter in stock quarter Net XX.X%. effective $X,XXX,XXX to the compared share per on In the the of $X,XXX,XXX an period first in The state tax share our the for net statutory rate is $X.X income associated quarter year. diluted resulted last tax stock awards. comparable the or of and in or XX.X%. due effective of rate and additional to of with the income common income $X.XX prior vested

remains the $XX million which We Now first was last million untapped. facility flat equivalents, $XX our sheet. million balance quarter, essentially with year, cash the turning ended same to cash up were quarter with end revolving $X.X period $XXX.X the At of our the over of million, of and credit XXXX. and quarter fourth our inventories the

a As funded have reminder, we no debt.

for expenditures our $X.X of some Looking uses were capital flow, of million cash the quarter. the at

year, paid common remaining during stock per in purchase we this not dividends, share. any the We also common quarter did We program. have our our current million $X.X $X.XX of $XX.X in first authorization buyback under regular and representing quarterly million

less associated we expense on total balance As years. will adoption to In expected, on compared We comparable year pronouncement depreciation a expense than of interest be our XXXX, expect the $X don't prior of and to of lease have the January lease million their new capitalize results. lease lease the accounting prior our not quantitative are their will the approximately a liabilities of summary, cash the in the be X, by directly that the sheet, results press requires new standard $XXX.X obligations additional material financial to to earnings our the on XXXX statement results adopted to and lease QX with on regard companies have we sheet. in XXXX implementation XXXX, details qualitative accounting In impact in standard notes and Further the $XXX.X our release. flows. assets balance million With of our disclosures. in statements our our with included rent statement, income million along regarding of

release highlight additional expect XXXX, earnings XX.X% as will the we SG&A our range XXXX for refer our approximately type be and percentage of expectations statements to addition, Fixed full out sales. for for of XX.X%. million a to few are several to I the In list release Variable indicating SG&A to press $XXX future continue In expenses expected are please expected profit for our commentary. financial be margin gross our metrics. within forward-looking to year costs in $XXX million but to be XXXX. a discretionary certain

XXXX which CapEx for Our is million, four locations. planned includes $XX opening

As previously a in two Atlanta one existing one in in disclosed, markets, is the are relocation new and market market. is an

XX%, overall based awards. impact from be We expect to of rate excluding compensation in vesting any XXXX stock our the tax

Our our financial be XX%, the federal make tax to This state commentary the call. and up rate is Operator, on in we questions. expected up today's call and to now results. remaining like participation appreciate first-quarter completes your for open We differences. would the local taxes

Operator

Instructions]. Thank you [Operator

go from come & ahead Our Please Anthony will Sidoti first question with Lebiedzinski Company.

Anthony Lebiedzinski

Good for you the questions. morning and thank taking

same-store the to sales, get sense. a on just the wanted So first, better

did For store quarter, board across were far were that all as than regions more as any see that your affected base? first Or others? the you particular weakness the there

Clarence Smith

did when would our region. we anything are much every think and stock, base, the as of I it best see affect across Anthony, sellers as that out

stood was out there So that really there. nothing

Anthony Lebiedzinski

Got it.

Okay.

possible look tariffs same-store for did because quarter, of other when consistent in the weakness of the at was sales product the due first you isolate flow it the to So to is how you you lack how much issues? of versus it

Clarence Smith

our work. have did the know leather tariff, of coming hit it But at things particularly that China. we category hottest number is selling from which a You

China the got comes digits our that some... growth leather was down was and category our previous and to year, high-single groups. Richard, from of all So, it best-selling And you've our category. basically compared

Richard Hare

a the out. That I was in release, say, in just our a the largest we It in the going XX%. decline -- stands down was XX-Q see bit definitely Yes. over year-over-year little that was quarter. little first categories category to upholstery you'll

Anthony Lebiedzinski

ticket, momentum. helpful. to average your of That's just type And of the about increases out consecutive XX Okay. you've switching that that to you've pointed ability done sustain wondering very quarters there, obviously, over

Clarence Smith

product. I full think or doing doing is only and we're up. somebody's we'll house not more see Design mean, selling there our a average better still full the because home, H growth I are for price displays SKU we

We're doing higher product. leathers. in goods better selling case more selling end our we're areas. We're So with well the

continue to average And customers we as in maybe for known will a that some So, of ultimately that service is something think grow, not that is, house. grow our I I to forward. around be a which that We're that's design ticket going a don't that to area our think XX%. want And dramatically. offering just though, want, there portion

be will that think a I driver.

Anthony Lebiedzinski

All right. best Got and it. you very of luck. Well, thank much

Clarence Smith

Thank Anthony. you,

Operator

question. question. with your with you from instructions]. question Griffin The come Please the Raymond Thank for [Operator ahead Bobby James. next will go

Bobby Griffin

Good taking and for questions. my Thanks morning, Clarence Richard.

Clarence Smith

Yes, Bobby, morning. good

Bobby Griffin

availability more first, through and So can of what give the past maybe to hearing of high just suppliers? anything your normal, getting you out a And today start some China, seeing move issues April talk more want gives to just will a level, that these normalize you product of here us, And we can I are at from that sense coming where you're kind issues? you your are about Clarence. things

Clarence Smith

sure. Sure,

pretty us first we when by to think position out any feel good we'll and feel then think not the weeks good of for that's have about. into about traumatic, manufacturers mean, about the in and happening quarter, key be I that. our traumatic. our going a we of pretty now getting deliveries shipping in pretty It's through And half, now. flow And to good that relocate Memorial like in-stock June, position all I feel through to we I have we more," Memorial hard Day. though, important talked from been product. been that's as relocate, suppliers able first the best-sellers. most product, sudden say, in we I and of we've that mean, you the hit couple other pretty Day And that's "We're

we've it the good through and worked we as done weren't we've first in renegotiating, And able I pretty job. a think think repositioning like I pretty deliver quarter liked, we the as the well. but the to and far relocations

Bobby Griffin

margin, gross was there, the impressive. was of And It it Rich, is better hear. markdowns, with I there tariff to were mean, I good help quarter. you detail else other than think last there give any even costs but the you in the that’s can headwinds And expecting Good. me this walk? was some some of expansion? I year-over-year to anything year-over-year about mentioned the the kind know on me year from

Richard Hare

Yes. -- the had gave categories as It's when when increases we to the absorb tariffs. same price we quarter some took had last we guidance our of of some we slight

we So you'll the big see expansion for to a but last year, I the margin don't quarter similar our gross very in think in year. the see variances whole

Bobby Griffin

than that's expected. the and I Yes, just was Okay. to little was better It first quarter referring I a thinking, I reported. was

that little, when account and a to how as expand kind ramp-up appreciate these store, mind what the modeling we're then keep markets? as I for else of we a for need cost goes detail. market, maybe just lastly we type out, of a you're So new for period us should that new you into into going in me, anything refresh And

Clarence Smith

that's Well, because Louis St. they will cost do -- started most to the us get know the us there. is that the not one

haven't since XXXX. been We there

to we a have So -- team. build and

they'll will this relocation. the is our a that hire some an awareness our We store and already well-known. we're is base. key our The of -- place area is -- Baton like from But Atlanta markets clearly is there the the customer people Rouge areas coastal best where we're up. Carolinas

want that is Louis. more St. will there that? start-ups on you give And our in not be one are budget. That's do certainly significant. any The to the color Richard, So

Richard Hare

No. latter laying Yes. And in part year. these most of are the of the

Clarence Smith

fourth mostly and Right. They're third quarter. the quarter, fourth in

Bobby Griffin

that again thanks for detail and appreciate I best going answering questions forward. luck and of

Clarence Smith

Bob. Thanks

Operator

from Markets. with next KeyBanc go instructions] ahead. will come Capital question Brad [Operator The Thomas Please

Brad Thomas

good morning, Good Richard. Clarence, morning Hi.

Clarence Smith

Good morning, Brad.

Brad Thomas

One trends little little bit you'd interesting fourth up the in the was slowed. course, bit follow written more a that negative of was comps Just first, actually, want thing about your here a try little delivery two, to, break had more. than while, a apart to quarter, sales was and cadence better this the the the comp, that

Clarence Smith

correct. is That

Brad Thomas

slowed. well, comps Yes, delivery your

Clarence Smith

right. that's Yes,

Brad Thomas

understand not maybe the So have to that guess, written think but have having I was hoping a of much you listed the not in-stock, I earlier, in as do And product you help a being the to having being in sense maybe way, in headwind it about asked was that ask just the for how it maybe was, comp comp. right what floor, product XQ? right written might looked like another

Clarence Smith

could can know and minimum, a it, every Well, there would you back able which we was back it hope almost to be trends and in we're to somebody's but point business. key and But now in seen Easter some worst can't looking short I some And business, and a stock. recover. ago. deliver delivery it. year, out is just the good And that We've Easter, is the furniture that after is you there. dates some because not know, I of a on know coming the we're week -- did week while, category move But when the there'd year. business guesswork lose we was execute in believe time as to to we going we for it's a them hope that be we hurt we

to about So get feel we're pretty glad and good us turnaround. that that behind

Brad Thomas

why delivered of something in we weren't comp, that you I'm to like And had trying orders have so able quarter you. that? the to that negative fulfill I the Got you about much. comp the just understand or as slowed then think occurred X.X%, mean, delivered cancellations that

Clarence Smith

[Indiscernible] were places think that to that have higher couldn't up reposition set had more we and booked because deliver have deliver we we -- make knew don't we wouldn't have wouldn't to other cancellations I we relocate it product to to the happen. if It's we and didn't it.

Brad Thomas

think And as lower described to backlog you being as the a the we bit I Easter. backlog, timing about think then little of the due

great work think but don't we to you Easter happy about you're a with with, how as have backlog started. things, So

a so it? about hopefully that the XQ. that to way And Is drives better think

Clarence Smith

can Right. our sell well, we've on okay we the we got that's Because, actually, something product but with of pretty year. position backlog the now down about catch the Clearly, going forward, X%, to only feel quickly. for and QX up rest

Brad Thomas

great. Okay,

but, could our already Let's in tell haven't variable see, expenses a shared items, were Richard, couple could. housekeeping if other for I missed what apologize it, it, models? XQ fixed the if I you us you if I and

Richard Hare

-- $XX,XXX,XXX Sure. add $XX,XXX,XXX, its those is for total $XX,XXX,XXX. the The variable a fixed was and together,

Brad Thomas

Perfect. the just are year around whole, this, accounting, we all? headwind lease income the showing in on be the And right? expenses you up, of the clear change on is just think then to the net statement in accounting you income some with change of lease from respect a the any to there As to moving for where some net about as

Richard Hare

Yes. if summary statement, by. I will the in previous expense is comments, at mentioned geography our it going depreciation income but about amount same rent as the the our on look my in declined go be to you up

basically $X about under So same. line item, go to our But interest million down interest of going that Depreciation's go then away. expense about goes rent's capitalized the going goes away, the expense, million. that $X to up

that make that's the geography So Does sense? there.

Brad Thomas

Right.

the net so line just effect statement. is And which income moving hits on the it

seeing retailers change. from a think XXXX, about are that accounting having we we're As earnings some the versus XXXX to headwind

earnings, have technically around item from right? is hitting, line which just headwind it's a don't moving on a You that

Richard Hare

$X little bit a of a Well, I don't by got a about have I've million. headwind. lift

Brad Thomas

question I'd was mattress in be any what Clarence, around color mentioned could you interesting, you're it I share only thought other curious the guess, I I category. there? great. if you the some doing Okay, enhancements more had,

Clarence Smith

is bedding, have In of merchandise The higher positive been the us well. is positives. a It in, vendors the the new doing really real business for year. has put few quality mattress our that product this one lineup the

and feel is found like up, we the update. good going presentation one And board. going to So back we're really We've chain. done put we look the and that a improve in whole across we're about We it category. that to better, the our across

Richard Hare

category sales, that our see product had you early this next about see during really issue they and think I $X.X When that in up you'll really only later three quarter. million XX-Q or up. we'll week the It's is week, the launches that's good

Brad Thomas

Thank helpful. I very That's luck. and you for appreciate the color. all all good

Clarence Smith

you, Brad. Thank

Operator

you. sir. Thank you, showing time. [Operator it instructions]. turn further I'm questions I'll no this to back at

Richard Hare

Well, in when and our to we in quarter your you today's second future the you thank look call, with results. forward for participation we talking release

Operator

ladies event. gentlemen. you concludes This today’s Thank and

now your may You line. disconnect

Haverty Furniture Companies (HVT) 4 May 192019 Q1 Earnings call transcript