Haverty Furniture Companies, Inc., third quarter 2011 operating results of earnings per share of $0.01 compared to $0.05 for the same period of 2010. The loss per share for the nine months ended September 30, 2011 is ($0.07) compared to earnings per share of $.13 for the same period of 2010.
As previously reported, net sales for the third quarter of 2011 were 1.1% lower than in the same period of 2010 and down 1.2% for the nine months ended September 30, 2011. Written sales for the third quarter of 2011 increased 2.6% over the same quarter of last year.
Clarence H. Smith, president and chief executive officer, said, "The retail home furniture business remains challenging but we are committed to connecting with our customers by having great showrooms, excellent service and exciting new products. Our program for enhancing store interiors is complete in 33 stores and will continue through early 2013. We are working with a new marketing agency to develop a consumer segmentation model which will aid in more efficiently reaching our target customers with a resonating message. The review of manufacturers` new products is ongoing as we develop a merchandise assortment that embraces the Havertys brand of style, quality and value.
There are numerous opportunities for store expansion that we evaluate. Our new Boca Raton, Florida store introduced customers in that market to Havertys in late October and a relocated Asheville, North Carolina store will open later this month. We have slated for opening in 2012 a new store in Baltimore, Maryland and a replacement store in the Atlanta market as well as two new stores in other markets.
The housing market, to which home furnishings sales are naturally linked, continues to be a persistent and significant drag on the economy. Given this fragility, it is important for us to maintain our strong balance sheet and cash position and we are careful in the deployment of capital. Our middle to upper-middle income target customer is also likely to remain cautious in spending until overall economic growth shows signs of sustainability accompanied by improvements in the housing market.
Financial Highlights Third Quarter 2011 Compared to Third Quarter 2010
- Net income of $0.1 million in 2011 compared to $1.2 million in 2010.
- Net sales decreased 1.1% to $155.4 million and comparable store sales decreased 0.6%.
- Bedding sales continue to show year over year growth with strength at the higher price points.
- Gross profit margins were up slightly at 51.8% as a percent of sales compared to 51.3% and better than our expectations.
- Selling, general and administrative costs increased $1.2 million. Lower sales made leveraging the costs more difficult, and accordingly, total SG&A rose 1.3% as a percent of net sales. Our advertising and marketing expenditures for the third quarter were up $0.4 million due in part to new initiatives. Higher fuel prices increased our delivery expenses and rising group insurance costs impacted our SG&A.
Nine Months ended September 30, 2011 Compared to Same Period of 2010
- Net loss of $1.5 million in 2011 compared to earnings of $2.9 million in 2010.
- Net sales decreased 1.2% to $452.6 million and comparable store sales decreased 0.9%.
- Gross profit margins were 51.4% as a percent of sales compared to 51.5%.
- Selling, general and administrative expense increased $1.3 million and with lower sales rose 0.9% as a percent of sales.
- Income tax expense for the nine months ended September 30, 2011 includes approximately $0.2 million related to a non-cash adjustment to our recorded income tax receivables. For the 2010 period the income tax expense that would otherwise have been recognized was virtually offset by a reduction in the allowance for deferred taxes.
Expectations and Other
Gross profit margins for the fourth quarter are expected to be approximately 1.0% higher than the 51.0% recorded in the fourth quarter of 2010.
Advertising and marketing expense are planned to be approximately 0.8% as a percent of sales greater in the fourth quarter of 2011 than in the comparable prior year period.
We completed the relocation of a store in Austin, TX during the second quarter and during the fourth quarter, opened a store in the Boca Raton, FL market and will also relocate our Asheville, NC, store. During 2012 we plan to open a store in Baltimore, MD in the second quarter and in the second half of the year a replacement store in Atlanta, GA and two new stores in other markets.
Cash flow from operations for the nine months ended September 30, 2011 was $30.1 million.
Cash at the end of the third quarter of 2011 totaled $66.5 million. We have no funded debt and did not use our $50.0 million credit facility.
Our capital expenditures for the third quarter included $4.8 million for the purchase of four existing Havertys stores previously under lease. Total capital expenditures are expected to be $19.0 million for 2011 and $18.5 million for 2012.
For the fourth quarter to date delivered sales are up 4.9% and written sales are down 1.4% compared to the same period last year.
About Havertys: Havertys, established in 1885, 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. Additional information is available on the company`s website at www.havertys.com