Haverty Furniture Companies (NYSE:HVT) said it is seeing continued strength in higher-ticket furniture purchases and its in-store design business, even as the company monitors freight costs, promotional activity and uncertainty around tariffs.
Speaking during a fireside chat, Tiffany Hinkle, Haverty’s AVP of Financial Reporting, described the Atlanta-based retailer as a 141-year-old seller of residential furniture and accessories with 130 stores in 17 states. The company planned to enter its 18th state with a Pittsburgh location in the fourth quarter. Haverty operates primarily across Southern and Midwestern markets and has distribution centers in Florida, Georgia and Texas.
Design Sales and Ticket Growth
President and CEO Steve Burdette said positive traffic, stable conversion rates and higher average ticket values supported the company’s performance. Haverty reported four consecutive quarters of positive comparable-store sales, with second-quarter comparable sales up 8% and year-to-date written comparable sales up 12.3%, according to the discussion.
Burdette said average ticket rose roughly 15%, with design-related average tickets reaching about $8,800. Design sales represented nearly 36.5% of revenue during the reported quarter.
“Design is driving our business,” Burdette said, describing it as a key differentiator for Haverty relative to other furniture retailers.
The company believes its design service can reach more customers. Hinkle said about 17% of current customer tickets use design services, compared with what the company believes could be a 25% to 30% range. Haverty is investing in store signage, updated design centers, display screens, tables, material swatches and other tools intended to create a more collaborative planning process for customers, sales associates and designers.
Custom special orders increased about 24%, Hinkle said, largely alongside the growing design business. She added that the company does not see a meaningful gross-margin difference between custom orders and other sales.
Category Trends and Store Expansion
Burdette said all major categories posted growth, with upholstery, occasional furniture, bedroom and dining room products producing double-digit gains. Mattresses and décor also increased, although at lower rates. He identified outdoor furniture as a significant opportunity, noting Haverty currently has a limited online offering in that category.
Richard Hare, Haverty’s executive vice president and CFO, said the company had opened its 130th store in Fredericksburg, Virginia. Haverty expects eight store openings and four closures during the year, including one relocation, resulting in a net increase of four locations to 133 by year-end.
New stores generally require $2 million to $3 million of spending to retrofit a location into the Haverty brand format, Hare said. The company targets a three- to four-year payback period, at least a 25% cash-on-cash return and store-level breakeven by month 12.
Margins, Freight and Inventory
Hare said Haverty remains committed to a gross-margin range of 60.5% to 61%. While the company has benefited from tariff refunds, he said those gains are not sustainable, though Haverty expected to receive some additional tariff relief in the second half of the year.
Burdette said lower tariff rates of 10% and 12.5% had provided relief from prior levels near 20%, though he identified potential Section 232 tariffs on upholstery as an unresolved issue. He said Haverty does not currently expect to change its sourcing strategy and remains comfortable with its vendor base.
The larger near-term pressure is fuel and freight, Burdette said. Container rates were up 25% to 30%, while rising fuel costs affect delivery operations, warehouse transfers and supplier input costs. The company also cited labor issues in Vietnam and potential supply-chain delays if overseas conflicts expand, though Burdette said Haverty has not yet been affected by container shortages.
Haverty ended the last reported quarter with inventory just above $100 million. Burdette said inventory was in strong condition, with markdowns at an all-time low, and projected a year-end inventory range of $90 million to $100 million. The company could carry additional inventory if lead times lengthen ahead of Chinese New Year, he said.
Capital Returns and Longer-Term Goals
Hare said annual capital expenditures were expected to total about $33 million to $34 million, elevated by store openings. Beyond capital investment, Haverty intends to return capital through regular dividends, opportunistic share repurchases and, when appropriate, special dividends.
The company repurchased more than 700,000 shares during the first half, including 600,000 shares purchased from a long-term shareholder at a 2% discount, Hare said. Haverty’s target has been to return roughly half of earnings per share to shareholders through dividends, repurchases and special dividends combined.
Looking ahead, Burdette said Haverty does not need double-digit comparable-store sales growth to improve profitability. He said sustained low-single-digit comparable-store growth, combined with approximately five annual store openings and expense discipline, could help the company return to double-digit operating margins and pursue its longer-term goal of reaching $1 billion in revenue.
About Haverty Furniture Companies (NYSE:HVT)
Haverty Furniture Companies, Inc is a specialty retailer of residential furniture and related home furnishings. The company sells products for living rooms, bedrooms, dining rooms, home offices and other areas of the home, including upholstered furniture, case goods, mattresses, rugs, lighting and home accessories.
Founded in Atlanta in 1885 by James J. Haverty, the company operates under the Havertys name and serves customers through a network of retail stores and its e-commerce platform.
