Haverty Furniture Announces Expansion Plans

Furniture World Magazine

Haverty Furniture Companies, Inc.announced the planned acquisition of seven former Homelife retail stores which will be transformed into Havertys showrooms. The Company is purchasing four of the stores and is leasing three other locations. The lease documents are being prepared by counsel to the parties but all material terms have been agreed to verbally. John E. Slater, Jr., President and CEO, said, "We are making this opportunistic step to replace two stores in existing markets, to open our first store in Clearwater, Florida, and to enter two new major markets for Havertys, with two stores each in Orlando and in the northern Virginia suburbs of Washington, D.C. The demographic data for these metro areas are strongly correlated to our target customer and our ability to enter these markets at favorable costs is very exciting. The replacement stores will serve our Pensacola, Florida and Richmond, Virginia customers. We expect to complete the necessary conversion improvements to enable these new Havertys stores to open during the third and fourth quarter of 2002. Our current expectations are that these seven new stores should increase our total sales by approximately $12 million for 2002 and approximately $42 million for 2003. In addition to the Homelife stores, we will open another metro Atlanta store in Fayetteville, Georgia in February and relocate one of our Dallas/Fort Worth stores to a highly visible site in the Arlington, Texas area in next year's fourth quarter. In total for 2002, nine stores are planned to open, with four expected closures. Net selling area should increase by 204,000 square feet, or 5.8%." "Previously we had announced the consolidation of our Atlanta, Georgia and Charlotte, North Carolina regional warehouses into a new distribution center in Braselton, Georgia, scheduled to open in the third quarter next year," said Clarence H. Smith, COO. "We will also be phasing in our successfully tested remote home delivery methods to the markets in six of our fourteen states of operation served by this new facility. This method will involve assembling and prepping merchandise at the Braselton facility or two satellite home delivery centers opening in late 2002 and early 2003, then loading home delivery trailers and shuttling them overnight to twenty market areas where local drivers will start their daily routes. Operating in this fashion will reduce inventory and warehousing costs and maintain the quick delivery service that Havertys customers expect. Our enhanced inventory and distribution systems will enable us to enter new markets within a huge service footprint without adding local warehouses and to eliminate our numerous existing warehouse facilities in the various markets served by the new distribution center. As a result, total warehouse and delivery costs for these markets are expected to be 1% lower as a percent of sales by 2004 versus the 2001 levels. "Capital expenditures for 2001 are expected to approximate $21 million and $35 million in 2002. The expenditures in 2002 will be for the improvements to the former Homelife leased stores, the two new stores in other markets mentioned previously, a portion of the costs for stores which will open in 2003 and those related to the new distribution infrastructure. The sale of various local market warehouse facilities we will be disposing of during late 2002 and early 2003 are expected to generate proceeds of approximately $14 to $15 million. The gains from these sales should offset all costs of moving and starting up the new centers, as well as inventory close-out losses associated with the warehouse closings. We plan to finance the $11 million purchase of the four Homelife stores in an off-balance-sheet transaction to enable us to defer the tax on the gains from properties which will be sold," Mr. Smith concluded. "November sales have been very encouraging thus far and are approximately 4% ahead of our prior guidance. Total sales for the month are now expected to increase about 5% with slightly less than flat comparable-store sales," Mr. Slater added. "We are excited about the great new markets we will be entering and the new customers we will be cultivating. Our operational improvements should make us more profitable and more nimble for future expansion. Many economic indicators predict a rebound in the home furnishings sector in the second half of next year. We believe that our strategic focus on opportunistic growth within our distribution system and target customer base and on increasing operational efficiencies will continue to well serve our shareholders," Mr. Slater concluded. Havertys is a full-service home furnishings retailer with 104 showrooms in 14 southern and central states 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 http://www.havertys.com.