In February, Havertys enters new market with a Myrtle Beach, South Carolina location.
ATLANTA, -- HAVERTYS (NYSE: HVT and HVT.A), today reported strong operating results for the first quarter ended March 31, 2021.
First Quarter 2021 Versus First Quarter 2020:
-- Diluted earnings per common share (“EPS”) of $1.04 versus $0.09.
-- Stores closed March 19, 2020 and deliveries halted March 21, 2020 in response to the COVID-19 pandemic.
-- Consolidated sales increased 31.8% to $236.5 million. Comparable store sales increased 11.5%.
Clarence H. Smith, chairman and CEO, said, “We are pleased to see our teams’ hard work translate to continued sales and earnings growth. The high pace of demand for home furnishings, which started during the second quarter of 2020, has not slowed. Our first quarter written business this year was up 10.8% over the fourth quarter of 2020. We are addressing our staffing needs and engaging with key vendors to navigate the various supply chain challenges to reduce our backlog and update future delivery estimates. We also have worked with vendors on price increases, impacting our retail prices and product mix. Our gross profit margins remain strong despite the product and freight cost increases as customers see the value in the quality products and dedicated customer service we offer.
“Our operating margins are benefitting from enhanced leveraging of fixed costs and outstanding productivity from our distribution and sales teams. Strategic initiatives expanded or implemented during the height of the pandemic such as chat, buy-online-pickup-in-store, and online shopping tools were successful as we pivoted to new ways to serve our customers. We are committing resources to improve all these customer experiences during 2021.
“The current high level of demand is likely to be impacted as discretionary consumer spending shifts away from its current concentration on “nesting.” We do see positive trends in home sales and the current interest rate and economic outlook are encouraging indicators for our business.
“As we mark the anniversary of the beginning of the COVID-19 pandemic, we are pained by the personal and economic devastation it wrought but heartened by the compassion, resiliency, and ingenuity that it generated. The accelerating roll-out of the vaccine is a hopeful sign that a return to our normal patterns of living is just ahead.”
First Quarter Ended March 31, 2021 Compared to Same Period of 2020
-- Stores closed March 19, 2020 and deliveries halted on March 21, 2020 due to COVID-19.
-- Total sales up 31.8%, comp-store sales up 11.5% for the quarter. Total written sales for the first two months of 2021 were up 24.9% compared to the same period of 2020.
-- Gross profit margins increased 160 basis points to 57.1% in 2021 from 55.5% for the same period of 2020 due to pricing discipline partially offset by a larger charge for our LIFO reserve.
-- SG&A expenses fell to 46.4% of sales from 54.4% and increased $12.2 million. The primary drivers of this change are:
-- increase of $3.7 million in selling expenses due to sales growth
-- increase of $4.9 million in incentive compensation due to performance and prior year amount at lowest level due to store closures and outlook for 2020
-- increase in delivery costs of $1.4 million due to sales growth.
Balance Sheet and Cash Flow
-- Generated $19.6 million in cash from operating activities from solid earnings performance, an $18.5 million increase in customer deposits from written orders, and funding of a $13.7 million increase in inventories and a $10.4 million reduction in payables and other operating assets and liabilities.
-- Cash and cash equivalents at March 31, 2021 are $210.1 million.
-- Paid $4.0 million in quarterly cash dividends.
-- No funded debt.
Expectations and Other
-- We expect gross profit margins for 2021 will be between 56.5% to 57.0%. Gross profit margins fluctuate quarter to quarter in relation to our promotional cadence. Our estimated gross profit margins are based on changes in product and freight costs and its impact on our LIFO reserve.
-- Fixed and discretionary expenses within SG&A for the full year of 2021 are expected to be in the $265.0 to $268.0 million range, a slight increase over our previous 2021 estimate due to rising benefit costs. Variable SG&A expenses for the full year of 2021 are anticipated to be in the 17.5% to 17.8%, a slight increase from our most recent quarters’ levels based on potential increases in selling and delivery costs.
-- Our effective tax rate for 2021 is expected to be 24.0% excluding the impact from the vesting of stock-based awards and potential new tax legislation.
-- Planned capital expenditures for 2021 are approximately $23.0 million which include amounts for a store which opened in February in Myrtle Beach, S.C., a new market for Havertys, and also opening in 2021 a new store in The Villages, Fla., and another location in an existing market. We will close one store in 2021 and retail square footage is expected to increase approximately 1% versus 2020.