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Haverty Furniture(HVT) - 2023 Q4 - Annual Report

Store Operations and Expansion - As of December 31, 2023, Havertys operated 124 stores across 16 states, with approximately 4.4 million retail square feet[32]. - The company aims to open five new stores per year and increase retail square footage by approximately 2.8% in 2024[33]. - The company opened 4 new stores in 2023, increasing total store count to 124, with plans to increase net selling space by approximately 2.8% in 2024[157]. - The total number of stores increased to 124 in 2023 from 122 in 2022[131]. - The company has 124 showrooms across 16 states as of December 31, 2023, maintaining its retail presence without franchising[216]. Sales and Financial Performance - Net sales for 2023 were $862.1 million, a decrease of 17.7% compared to $1,047.2 million in 2022[131]. - Comparable store sales decreased by 18.4% in 2023, following a 3.4% increase in 2022[131]. - Gross profit for 2023 was $523.1 million, representing 60.7% of net sales, up from 57.7% in 2022[131]. - Net income for 2023 was $56.3 million, or 6.5% of net sales, down from 8.5% in 2022[131]. - Diluted earnings per share decreased to $3.36 in 2023 from $5.24 in 2022[131]. - The average ticket size for sales increased to $3,278 in 2023 from $3,171 in 2022[131]. - Cash dividends paid in 2023 totaled $35,240, compared to $33,948 in 2022, reflecting a commitment to returning value to shareholders[215]. Supply Chain and Inventory Management - The largest ten suppliers accounted for approximately 40.2% of product purchases in 2023, with 19.4% of case goods and 9.2% of upholstery sales generated by direct imports[38][39]. - Approximately 61% of the company's total furniture purchases in 2023 were sourced from non-domestic goods[63]. - The average time between purchase and delivery for in-stock items is 3 to 5 days, while special order items take 5 to 7 weeks[42]. - Significant fluctuations in the prices of raw materials could adversely affect the company's profits, with potential supply chain disruptions impacting order fulfillment[68]. - The distribution system relies on third-party providers and is sensitive to transportation costs, which could adversely affect profitability if costs exceed what can be passed on to consumers[86]. - Inventories are stated at the lower of cost or market, with cost determined using the last-in, first-out (LIFO) method[221]. Employee and Operational Management - As of December 31, 2023, Havertys employed a total workforce of 2,574, with 1,561 in retail operations and 779 in warehouse and delivery[43]. - High employee turnover in the retail industry could lead to increased costs for hiring and training, impacting service levels and brand image[80]. - The company must attract and retain skilled employees across various functions, including distribution and technology, to maintain operational efficiency[81]. - The company has a strong safety program to ensure a hazard-free environment for employees and customers[44]. Risk Management and Cybersecurity - Cybersecurity threats are a concern, and any successful cyber-attacks could result in data breaches, harming customer relationships and the company's reputation[77]. - The company has implemented a cybersecurity framework to manage risks, although the sophistication of threats continues to increase[94]. - The board of directors oversees the company's cybersecurity risk management, with regular updates from the Chief Information Officer[96]. - The company faces risks related to potential increases in retail prices due to changes in exchange rates or tariffs, which could negatively impact gross profit[64]. - The company relies on third-party producers for product supply, and any operational difficulties with these manufacturers could adversely affect product quality and timely delivery[65]. Financial Position and Capital Expenditures - The company had $120.6 million in cash and cash equivalents as of December 31, 2023, with no funded debt and $80.0 million available under a revolving credit facility[144][146]. - Capital expenditures for 2023 amounted to $53.1 million, with planned expenditures of approximately $32.0 million for 2024 to support operations and strategic expansion[155][145]. - Total current assets decreased to $251,593 in 2023 from $276,253 in 2022, primarily due to a reduction in inventories[209]. - Total liabilities decreased to $345,767 in 2023 from $359,650 in 2022, indicating improved financial stability[209]. - The effective tax rate decreased to 22.5% in 2023 from 25.2% in 2022, primarily due to state income taxes[143]. Governance and Compliance - The company has adopted a Code of Conduct for its directors and officers, which is available on its website[183]. - The independent registered public accounting firm issued an unqualified opinion on the consolidated financial statements for the year ended December 31, 2023[176]. - The management concluded that the internal control over financial reporting is effective as of December 31, 2023[170]. - The audit conducted by Grant Thornton LLP expressed an unqualified opinion on the company's internal control over financial reporting as of December 31, 2023[204]. - There were no critical audit matters identified during the current period audit, indicating a stable financial reporting environment[207].