Havertys Furniture will open three new locations in 2022.
ATLANTA -- HAVERTYS (NYSE: HVT and HVT.A) reported its operating results for the second quarter ended June 30, 2021.
Second quarter 2021 versus second quarter 2020:
— Diluted earnings per common share (“EPS”) of $1.21 versus $0.72.
— Adjusted EPS of ($0.52) in 2020 excludes $1.24 for gain on sale-leaseback.
— In 2020, due to COVID-19, we closed our stores on March 19 and 103 stores reopened on May 1 and the remaining 17 byJune 20. Deliveries were halted on March 21 and restarted on May 5 with less capacity.
— Consolidated sales increased to $250.0 million for 2021 compared with $110.0 million for 2020. Comparable store sales increased 46.9%.
Clarence H. Smith, chairman and CEO, said, “As we pass the anniversary of the reopening of our stores, I want to thank all the Havertys team members for their remarkable resiliency, dedication, and hard work. Their collective efforts have contributed to our exceptional results since we reopened last May.
“Sales for the second quarter were outstanding and we made some progress on reducing our backlog. Customers are showing a stronger inclination towards purchases of in-stock merchandise as “pandemic patience” seems to be waning. We have seen this in our upholstery business as the lead times for custom merchandise has grown significantly and sales have shifted from custom order items to inline merchandise. Sales in the mattress category also increased this quarter as availability of product improved.
“Our merchandising and supply-chain teams have done a tremendous job in adapting to the current environment of product shortages, price increases, manufacturing delays, freight increases, and mercurial cargo shipping. We were able to achieve gross profit margins of 56.6% in the second quarter despite these challenges.
“Many of the changes we made last year have allowed us to lower expenses and improve our operating leverage. We are keen to maintain this level and are closely managing expenses. Our strong cash position provides us flexibility to take advantage of opportunities and advance our strategic goals.
“We believe that the resurgence of the importance of the home is not a short-lived trend. Home sales have seen rapid growth and inventory shortages, driven by low interest rates and millennials joining older homeownership cohorts. These factors and the general economic health of our target customer and our geographic locations provide favorable tailwinds for the future.”
Second Quarter ended June 30, 2021 Compared to Same Period of 2020
— In 2020, due to COVID-19, we closed our stores on March 19, and 103 stores reopened on May 1 and the remaining 17 by June 20. Deliveries were halted on March 21 and restarted on May 5 with less capacity.
— Total sales up 127.3%, comp-store sales up 46.9% for the quarter. Total written sales for the two-months period of May-June of 2021 were up 18.8% compared to the same period of 2020.
— Gross profit margins increased 240 basis points to 56.6% in 2021 from 54.2% for the same period of 2020 due to pricing discipline partially offset by a larger charge for our LIFO reserve.
— SG&A expenses decreased to 45.0% of sales from 66.1% and SG&A dollars increased $39.8 million. The primary drivers of this change are:
— Sales growth in 2021 and leveraging of expenses and closure of our stores in April 2020 and the measures taken as part of our business continuity plan.
— Increase of $15.2 million in selling expenses due to sales growth.
— Increase of $6.9 million in advertising and marketing spend.
— Increase of $2.4 million in incentive compensation due to performance and prior year amount at low level due to store closures and outlook for 2020.
— Increase in delivery costs of $4.8 million due to sales growth.
Balance Sheet and YTD Cash Flow
— Generated $57.6 million in cash from operating activities driven by a solid performance, a $29.9 million increase in customer deposits from written orders, offset by funding of a $25.1 million increase in inventories.
— Cash and cash equivalents at June 30, 2021 are $235.3 million.
— Renewed leases covering ten retail locations, increasing right-of-use assets by $17.6 million, lease liabilities by $20.6 million, and recording $3.0 million in tenant incentives.
— Paid $8.6 million in quarterly cash dividends.
— No funded debt.
Expectations and Other
— Our written business for the third quarter to date of 2021 is up approximately 4.1% versus the same period last year. The written business for the third and fourth quarters of 2020 were up 22.8% and 16.7%, respectively, over 2019. Our delivered sales for the third quarter to date of 2021 are up approximately 22.8% versus the same period last year. Delivered sales for the third and fourth quarters of 2020 were up 3.9% and 12.9%, respectively, over 2019.
— We expect gross profit margins for 2021 will be between 56.5% to 56.8%. 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 $275.0 to $278.0 million range, an increase over our previous 2021 estimate due to rising warehouse, compensation, and benefit costs. Variable SG&A expenses for the full year of 2021 are anticipated to be in the 17.3% to 17.5%.
— 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 $37.0 million which include amounts for a store which opened in February in Myrtle Beach, South Carolina, a new market for Havertys, the opening in August of a new store in The Villages, Florida, and the addition of a new store in November in Austin, Texas. We will close one store in 2021 and retail square footage is expected to increase approximately 1% versus 2020. We are also investing in new information technology in support of our website and operations. This revised capital expenditure expectation includes amounts for the purchase of a store and a home delivery center, both currently under lease.
— Our suppliers have recently paused their manufacturing operations in Vietnam due to COVID-19. These closures, if not resolved in August, may begin to impact our merchandise available for delivery in the fourth quarter.
About Havertys
Havertys, established in 1885, is a full-service home furnishings retailer with 121 showrooms in 16 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges. Additional information is available on the Company’s website havertys.com.