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Summary of Haverty Furniture Companies Conference Call Company Overview - **Company Name**: Haverty Furniture Companies, Inc. (NYSE: HVT) - **Established**: 140 years ago - **Store Count**: 129 stores across 17 states, primarily in Florida, Texas, and Georgia [4][5] - **Target Customer**: Female, aged 35-55, married, college-educated, with household income above $150,000 [4] Business Strategy and Operations - **Distribution Centers**: Operates seven distribution centers located in Dallas, Texas; Braselton, Georgia; and Lakeland, Florida, with four cross-docks in various states [4] - **Store Growth**: Aims to open five stores annually but will only open three this year, resulting in a net of 129 stores by year-end [5] - **Product Mix**: Positioned in the upper middle segment, competing with brands like Crate & Barrel and Pottery Barn [6] - **Design Services**: Design services account for about one-third of business volume, with an average ticket of $3,400, and $7,600 for design services specifically, growing at 5% [6] Marketing and Customer Engagement - **Media Strategy**: Utilizes broadcast, OTT, and digital platforms, including Instagram and Pinterest, to reach customers [10][11] - **Website Revamp**: Launched a new website in late 2022, which took time to stabilize, but has since seen double-digit organic growth [12][13] - **Regret-Free Guarantee**: Implemented to enhance customer confidence, with no increase in exchange rates or markdowns reported [15][16] Financial Performance - **Credit Program**: Approximately one-third of sales are made through credit, primarily via Synchrony, with high approval ratings [22] - **Capital Allocation**: Planned capital allocation for the year is around $24 million, focusing on new stores and infrastructure [55] - **Dividends**: The company has paid dividends since 1935, with ongoing discussions about special dividends and buybacks [55] Market Conditions and Challenges - **Housing Market**: Currently at a 30-40 year low, impacting store performance; however, the company remains optimistic about future growth [30][31] - **E-commerce Goals**: Aims for e-commerce to reach 10% of total business, currently in low single digits [32][34] - **Tariffs Impact**: Tariffs primarily affect bedroom and dining room categories, with ongoing adjustments to sourcing strategies [36][37] Operational Efficiency - **Staffing Changes**: Reduced headcount from 3,500 pre-pandemic to below 2,400, while maintaining operational efficiency [50][51] - **AI Utilization**: Exploring AI for marketing and operational efficiencies, aiming to grow without increasing headcount [53] Future Outlook - **Growth Strategy**: Focus on expanding in Florida and Texas, with plans for new stores in metropolitan areas and contiguous states [26][29] - **Long-term Goals**: Aiming to return to $1 billion in sales, emphasizing commitment to customer service and operational excellence [57] Key Takeaways - Haverty Furniture Companies is strategically positioned in the furniture market with a focus on design and customer service - The company is navigating current market challenges while planning for future growth and operational efficiency - Strong financial management and a commitment to shareholder returns through dividends and potential buybacks are evident This summary encapsulates the key points discussed during the conference call, highlighting the company's strategic direction, market positioning, and operational insights.

Financial Data and Key Metrics Changes - The company reported a net sales increase of 18% to $680 million, driven by new store openings and comparable store sales growth [15] - Adjusted earnings per share increased by 26.9% to $0.99 for the quarter, with adjusted net income reaching $61 million [18] - Adjusted EBITDA rose by 26% to $94 million, with an adjusted EBITDA margin of 13.8% for the quarter [18] Business Line Data and Key Metrics Changes - The company opened 29 new stores in Q2, bringing the total to 613 stores, a 17% year-over-year increase [14] - Comparable store sales increased by 5%, driven by an increase in transactions, with strong demand for consumer staples and seasonal items [15] - The top five performing categories included Lawn and Garden, Hardware, Food, Housewares, and Domestics [15] Market Data and Key Metrics Changes - The company has seen a 10.6% increase in Ollie's Army members, reaching 16.1 million, with members spending over 40% more per visit than non-members [9][15] - The company is capitalizing on market share opportunities due to retail bankruptcies and store closures, which have provided additional buying opportunities [6][30] Company Strategy and Development Direction - The company is committed to profitable growth and plans to open 85 new stores in total for the year, raising its new store target [8][21] - The Ollie's Army loyalty program is a key focus, with enhancements aimed at customer acquisition and retention [13][39] - The company aims for double-digit annual unit growth moving forward, leveraging a flexible store model adaptable to various geographies and demographics [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business momentum, raising the sales and earnings outlook for the fiscal year [13][20] - The company anticipates continued strong deal flow due to market disruptions from tariffs and retail bankruptcies, which are beneficial for its business model [28][30] - Management noted that the current economic environment presents unique opportunities for market share expansion [22] Other Important Information - The company celebrated its 43rd anniversary and its 10-year anniversary as a public company, highlighting its strong performance as a retail IPO [10][11] - The balance sheet remains strong, with total cash and investments increasing by 30% to $460 million and no meaningful long-term debt [19] Q&A Session Summary Question: Can you elaborate on the improving cadence of comp as the second quarter progressed? - Management noted that May was flat, June began to accelerate, and July was the strongest month of the quarter [32] Question: How did the Ollie's Army Night compare to traditional events? - The revamped Ollie's Army Night exceeded expectations, driving record customer engagement and acquisition, with sales surpassing previous events [36][39] Question: What are the opportunities for gross margins over the next couple of years? - Management indicated that while they are guiding for gross margins above 40%, they are cautious about long-term projections and plan to maintain flexibility in pricing [49][116] Question: How are new stores performing compared to prior cohorts? - New stores are performing above plan, with strong payback periods consistent with historical performance [62] Question: What is the impact of tariffs on product sourcing? - Management stated they are price followers and will adjust sourcing strategies to maintain value propositions despite tariff impacts [118] Question: How is the customer acquisition from former Big Lots stores? - The company is seeing accelerated acquisition in new stores, with many customers expressing familiarity with the deep discount model [105]

Financial Data and Key Metrics Changes - Total sales for the second quarter grew 5% to $5.5 billion, up from $5.3 billion last year, with comparable store sales up 2% [5] - Earnings per share for the second quarter were $1.56 on net income of $508 million, compared to $1.59 per share on net earnings of $527 million in the prior year [5] - Operating margin decreased 95 basis points to 11.5%, primarily due to tariff-related costs [12] Business Line Data and Key Metrics Changes - Cosmetics was the best-performing merchandise area in the second quarter [6] - The ladies' business showed positive comp growth, outperforming the chain average [26] - Overall comparable store sales at BB's Discounts were solid and ahead of Ross, with growth in both traffic and basket size [7] Market Data and Key Metrics Changes - The strongest markets were the Southeast and the Midwest [6] - New store openings included 28 new Ross locations and three dd's Discount locations, with a total of approximately 90 new locations planned for the year [8] Company Strategy and Development Direction - The company is focused on maintaining its value proposition relative to traditional retailers while balancing the opportunity to preserve merchandise margin [10] - The strategy includes expanding the portion of the business driven by closeouts to mitigate tariff impacts [9] - The company plans to open approximately 90 new locations this year, with a focus on new and existing markets [8] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the sales outlook for the remainder of the year, with comparable store sales growth projected at 2% to 3% for the third and fourth quarters [14] - The company anticipates modest pressure from tariffs in the third quarter, which is expected to be mitigated in the fourth quarter [10] - Management noted that pricing across the retail industry is beginning to rise, and they are focused on delivering high-quality branded merchandise at compelling price points [10] Other Important Information - The company repurchased 1.9 million shares of common stock for an aggregate cost of $262 million, remaining on track to buy back a total of $1.05 billion in stock for the year [13] - Management acknowledged the retirement of CFO Adam Orvis and expressed gratitude for his contributions [19] Q&A Session Summary Question: Can you elaborate on the sequential top line improvement and the rebound in July? - Management noted broad-based sequential improvement across nearly all merchandise categories, with strong performance in July, particularly in cosmetics and ladies' business [25][26] Question: What are the gross margin drivers for the third and fourth quarters? - Management indicated that tariff costs would continue to impact gross margins, but they expect the pressure to be slightly lower than in Q2 [29] Question: How is the customer responding to price increases? - Management stated that there has been a very modest change in prices, and they will be cautious about significant changes in average unit retail (AUR) [35] Question: What initiatives are being implemented to improve store operations? - Management highlighted store refreshes, self-checkout pilots, and new marketing campaigns as key initiatives to enhance customer experience and drive sales [41][46] Question: Are there any changes in consumer demographics or trade down activity? - Management reported no significant changes in income cohorts but noted a strong response from stores with high concentrations of Hispanic customers [60] Question: What actions are being taken to mitigate tariff impacts? - Management emphasized efforts in vendor negotiations, diversifying sourcing, and increasing closeout merchandise to offset tariff pressures [66][68] Question: What is the outlook for new store openings and associated costs? - Management expressed optimism about new store openings, particularly in Puerto Rico and the New York Metro area, with strong customer responses [98]