ATLANTA, Ga. -- HAVERTYS (NYSE:HVT and HVT.A), today reported its operating results for the fourth quarter and year ended December 31, 2022.
Fourth quarter 2022 versus fourth quarter 2021:
-- Diluted earnings per common share ("EPS") of $1.42 versus $1.35.
-- Consolidated sales increased 5.5% to $280.6 million. Comparable store sales increased 5.8%.
-- Gross profit margin of 57.0% versus 56.4%.
-- Pre-tax income of $32.5 million versus $32.1 million.
FY 2022 versus FY 2021:
-- EPS of $5.24 versus $4.90.
-- Consolidated sales increased 3.4% to a record $1,047.2 million. Comparable store sales for the year rose 3.4%.
-- Gross profit margin of 57.7% versus 56.7%.
-- Pre-tax income of $119.5 million versus $118.5 million.
Clarence H. Smith, chairman and CEO, said, "We are pleased to report continued record-breaking quarterly sales and our second year of annual sales over a billion dollars. Our fourth quarter gross profit margins remained strong and for the year reached a new high of 57.7%. Inflation and rising interest rates impacted our operating costs for wages and benefits and third-party financing. Our pre-tax income of $32.5 million was the 11th consecutive quarter we have achieved our goal of double-digit operating income as a percentage of sales.
"In 2022, we returned $63.9 million of capital to our shareholders. We purchased $30.0 million in common shares, paid quarterly dividends of $17.8 million, and in December paid a special cash dividend of $16.1 million. We have paid an annual cash dividend since 1935 and increased our quarterly cash dividend payouts each year since 2008.
"Looking ahead, we face an uncertain consumer spending environment, and rising interest rates have impacted the housing industry, particularly new home sales, which have a high correlation with our business. Despite these headwinds, we remain cautiously optimistic that our store expansion plan supported by our improved online presence, high-quality merchandise, and helpful service will drive market share gains. We are planning for profitable long-term growth and have the financial strength, systems, and importantly the people to achieve our goals and deliver investor value."
Fourth Quarter ended December 31, 2022 Compared to Same Period of 2021
Total sales up 5.5%, comp-store sales up 5.8% for the quarter. Total written sales were down 6.2% and written comp-store sales declined 6.3% for the quarter.
Gross profit margins increased 60 basis points to 57.0% in 2022 from 56.4% in 2021 due to pricing discipline and merchandise mix.
SG&A expenses were 45.8% of sales versus 44.4% and increased $10.5 million. The primary drivers of this change are:increase of $6.1 million in selling expenses due to increased compensation and third-party credit costs; increase in warehouse, transportation, and delivery costs of $1.9 million due to increased fuel and compensation costs partially offset by lower demurrage fees.
Effective tax rate of 27.0% driven by higher state tax expense and the impact of favorable adjustments in the prior year quarter for tax credits.
Balance Sheet and Cash Flow
Cash and cash equivalents at December 31, 2022 are $129.9 million.
Generated $51.0 million in cash from operating activities primarily from solid earnings performance, offset by changes in working capital, primarily a $50.1 million reduction in customer deposits.
Purchased approximately 1.1 million shares of common stock for $30.0 million and paid $17.9 million in quarterly cash dividends and $16.1 million in special cash dividends in December 2022.
The Company has no funded debt.
Expectations and Other
We expect gross profit margins for 2023 will be between 58.0% to 58.5%. Gross profit margins fluctuate quarter to quarter in relation to our promotional cadence. Our estimated gross profit margins are based on anticipated 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 2023 are expected to be in the $292.0 to $295.0 million range. Variable SG&A expenses for the full year of 2023 are anticipated to be in the 19.5% to 19.7% range. Variable expense increases over 2022 are primarily inflationary driven and costs of third-party financing costs.
Our effective tax rate for 2023 is expected to be 25% excluding the impact from the vesting of stock-based awards, potential tax credits, and any new tax legislation.
Planned capital expenditures are approximately $28.0 million in 2023. We expect retail square footage will increase 2.2% as we open five stores and close one during 2023.
Comparable Store Sales
Comparable-store or "comp-store" sales is a measure which indicates the performance of our existing stores and website by comparing the sales growth for stores and online for a particular month over the corresponding month in the prior year. Stores are considered non-comparable if they were not open during the corresponding month or if the selling square footage has been changed significantly. Stores closed due to COVID-19 were excluded from comp-store sales.
Cost of Goods Sold and SG&A Expense
We include substantially all our occupancy and home delivery costs in SG&A expense as well as a portion of our warehousing expenses. Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold.
We classify our SG&A expenses as either variable or fixed and discretionary. Our variable expenses are comprised of selling and delivery costs. Selling expenses are primarily compensation and related benefits for our commission-based sales associates, the discount we pay for third party financing of customer sales and transaction fees for credit card usage. We do not outsource delivery, so these costs include personnel, fuel, and other expenses related to this function. Fixed and discretionary expenses are comprised of rent, depreciation and amortization and other occupancy costs for stores, warehouses and offices, and all advertising and administrative costs.