Haverty Furniture(HVT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q4 2025 were $201.9 million, an increase of 9.5% year-over-year, with comparable sales up 8.2% [3][4] - Gross margins for Q4 were 60.4%, down from 61.9% the previous year, with LIFO charges of $3.9 million impacting results [3][4][14] - Pre-tax income for Q4 was $10.8 million, resulting in earnings per share of $0.51, compared to $0.49 in the same quarter last year [4][15] Business Line Data and Key Metrics Changes - The design business accounted for 33.3% of total sales, driven by a 14.8% increase in upholstery special orders [5] - Average ticket for Q4 increased by 10.9% to $3,759, with design average ticket growing 11.9% to $8,072 [5][6] - Written sales for the year were up 2.8%, with comparable sales up 0.7% [6] Market Data and Key Metrics Changes - Traffic for Q4 followed a decreasing trend, ending with a low single-digit decline overall [5][6] - The company experienced a mid-single-digit increase in traffic for the year, with conversion rates showing improvement [6] Company Strategy and Development Direction - The company plans to open five new stores in 2026, including its first location in Pennsylvania, while closing one underperforming store [10][11] - Capital expenditures for 2026 are projected at $33.5 million, focusing on new stores, remodels, and technology investments [11][19] - The company aims to maintain a debt-free balance sheet and continue its focus on customer experience and product quality [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business rebound in 2025, feeling they hit an inflection point in Q3 with momentum continuing into Q4 [12] - The company is monitoring tariff developments closely, with expectations for gross margins in 2026 to be between 60.5% and 61% [18][19] - Management noted that the recent government shutdown may have impacted consumer behavior and traffic [39] Other Important Information - The company’s inventories were up $12.7 million year-over-year, totaling $96.2 million, with expectations for a decrease in the next six months [7][16] - Marketing expenses were down slightly as a percentage of net sales, with a focus on maintaining competitive promotions [9][10] Q&A Session Summary Question: Can you provide details about same-store sales trends throughout the quarter? - Management reported high single-digit growth in October, mid-single-digit growth in November, and low single-digit decline in December [23] Question: What factors are affecting the variable component of your SG&A outlook for 2026? - Management indicated that higher sales commissions and third-party credit costs are expected to pressure variable SG&A expenses [25] Question: How will the evolving tariff environment affect pricing actions? - Management stated they will be deliberate in their approach, working through existing inventories before making pricing changes [28] Question: Will recent weather events affect your quarterly models? - Management indicated that typical weather patterns in January and February are not expected to have a significant impact [31] Question: How will the new mattress refresh program be implemented? - Management noted that the program will enhance consumer understanding and improve sales consultant effectiveness, with a rollout expected to take place over the next year [41]