Haverty Furniture Companies, Inc., reported its results of operations for the quarter and the year ended December 31, 2009.
Fourth Quarter 2009
Sales for the fourth quarter of 2009 were $162.4 million, a 0.4% increase from the fourth quarter of 2008. Comparable store sales were up 2.0%.
Net income for the fourth quarter of 2009 was $9.2 million, or $0.42 per diluted common share. This compares to a net loss for the fourth quarter of 2008 of $9.3 million, or $0.44 per diluted common share.
During the fourth quarter of 2009, the Company recorded a non-cash charge to tax expense of $0.6 million, or $0.03 per diluted common share to increase the valuation allowance for its net deferred tax assets. The Company increased the valuation allowance $8.2 million, or $0.39 per diluted common share in the fourth quarter of 2008. Excluding these charges to tax expense, net income was $9.8 million, or $0.45 per diluted common share for the fourth quarter of 2009, compared to a net loss of $1.1 million, or $0.05 per diluted common share in 2008.
Full Year 2009
Sales for 2009 were $588.3 million, a decrease of 14.9% from 2008. Comparable store sales for the year declined 14.2%.
The net loss for the year was $4.2 million, or $0.20 per diluted common share compared to a net loss of $12.1 million or $0.57 per diluted common share in 2008.
Excluding the charges to tax expense for the increases to the valuation allowance, the net loss was $3.5 million or $0.16 per diluted common share for 2009, compared to a net loss of $3.9 million, or $0.18 per diluted common share for 2008.
Clarence H. Smith, president and chief executive officer, said, “We are pleased with the earnings leverage that we achieved on a small increase in sales. The return to positive comparable store sales in the fourth quarter was a good sign since it historically is the strongest period for furniture retailers. We believe by carefully highlighting great merchandise values in our advertising we are stimulating sales and protecting our brand.
“Gross profit margins for the fourth quarter 2009 were 110 basis points better than the same period in 2008. There was modest deflation in product costs and lower inbound ocean freight rates in 2009. Changes to our LIFO reserve provided a benefit of approximately $0.6 million in the fourth quarter of 2009 compared to an expense of $0.2 million in 2008.
“Our SG&A costs for the fourth quarter 2009 decreased $7.5 million or 8.7% when compared to the same quarter of 2008 even with the slight increase in sales. We are encouraged by these results as they reflect the outcome of efficiency improvements in our operations and difficult curtailment steps taken. We reduced spending in each major category with more than half of the savings coming in advertising and marketing expenditures, occupancy and administrative expenses. We have altered our media mix with more television during key retail selling time periods and increased our direct and web based efforts. Total advertising spending was down over 11% in the fourth quarter yet our surveys initiated in 2006 demonstrate our brand strength is growing. Our occupancy costs, which are generally flat period to period, were lower due to reductions in depreciation and utilities expenses. Our administrative expenses were significantly lower reflecting headcount reductions taken during the year.
“For the full year total SG&A costs were reduced by $53.6 million or 14.7% compared to 2008, consistent with our sales decline. Our scaling of operations to reflect reduced sales levels cut across all facets of our business with heavier reductions in those areas more closely linked with volume. Gross profit margins for the year improved slightly in 2009 compared to 2008. Reductions in costs from close-out and damaged merchandise and the impact of the change in our LIFO valuation reserve were positive to our margin results. These changes, along with improvements generated by new products, helped offset the impact to gross profit margins from selected promotional pricing discounts.
“We increased our cash $40.8 million during 2009 and ended the year with no borrowings on our $60 million revolving credit facility. The primary source of cash was $38.5 million from operations driven by reductions in our in-house customer accounts receivable as we continued to outsource more of our financed sales and as we lowered our inventory levels as well as by depreciation expenses.
“Our plans for 2010 include efforts to drive positive comparable store sales and sales per square foot. We will be carefully monitoring our gross profit margins and maintaining tight controls over inventory. Capital spending is expected to be higher during 2010 with expenditures of approximately $15 million for new and remodeled stores and upgrades for certain computer hardware. Cash from operations is expected to be sufficient so that we will not be using our credit facility. Our solid balance sheet and healthy liquidity puts the Company on solid footing, which is critical during a difficult economic cycle.
“Our total written business in the first quarter to date is up approximately 8% in spite of some interruptions due to harsh winter weather in several of our key markets. The economic climate is fragile and although pleased with recent trends, we remain cautious and committed to our leaner operating strategies. We believe that the cost-cutting and cash conservation steps taken during the past year, while difficult for our associates and our stockholders, have helped us weather this challenging period. As the economic cycle stabilizes and improves, we look forward to reaping the benefits of these actions, gaining market share and sharing the returns with our stockholders.”
Havertys is a full-service home furnishings retailer with 119 showrooms in 17 states in the Southern and Midwestern regions providing its customers with a wide selection of quality merchandise in middle- to upper-middle price ranges.