管理層發言
Greetings, and welcome to the Haverty's Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Richard Hare, CFO. Thank you, sir. You may begin.
Thank you, and good morning. During this conference call, we'll make forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those made or implied in such statements, which speak only as of the date they are made and which we undertake no obligation to publicly update or revise. The factors that could cause actual results to differ include economic and competitive conditions and other uncertainties detailed in the company's reports filed with the SEC. Our President and CEO, Steve Burdette, will now provide additional commentary about our business.
Good morning. Thank you for joining our 2025 second quarter conference call. We are excited to report our first increase in written and delivered sales for Q2 in over two years. While this progress is encouraging, we remain focused on returning to positive same-store sales. Our sales for Q2 were $181 million, which was up 1.3% with comps down 2.3%. Total written sales were up 0.4% with comps down 2.1%. Gross margins continue to show our discipline and consistency coming in at 60.8% compared to 60.4%. Our pretax profits for the quarter were $4.3 million or 2.4% operating margin compared with $6.5 million or 3.6% operating margin in Q2 2024. Our EPS for the quarter came in at $0.16 compared to $0.27. Richard will provide additional details later in this call regarding the increase in SG&A expenses for the quarter. During the quarter, we continue to see a struggling housing market with high interest rates and rising home prices, lack of clarity around tariffs, inflation concerns, ongoing geopolitical issues and consumer confidence remaining low.
Despite all this noise in the economy, the consumer has remained remarkably resilient. Traffic in the quarter remained positive in the mid-single digits compared to the same period last year. Our average ticket decreased slightly but remained strong at just under $3,400, while designer average ticket continued to grow at approximately 5% to over $7,600. However, our overall design and special order business was down mid-single digits for the quarter. A portion of the decrease can be attributed to the 145% additional tariffs placed on China imports in early April, which caused us to temporarily suspend our special order capabilities from our China vendors. We got more clarity in mid-May when the additional China tariff was reduced from 145% to 30%. During the quarter, our supply chain and merchandising teams have been realigning our production moves out of China with our import vendors. We should be fully operational in Q3, allowing us to resume our special order business.
Conversion rates showed a nice improvement in the quarter, moving from a double-digit decrease in Q1 to a mid-single-digit decrease in Q2. Memorial Day is the company's largest event in the first half of the year. Sales increased by just over 3% during the two-week period and by more than 14% over the four-day period. The company noted improvements during the four-day event in all key metrics. Traffic was up double digits. Average ticket was just under $4,000 and conversion rates were consistent with last year. Our marketing creative and media plans continue to reach our customers through broadcast, OTT, and digital marketing channels. We continue to use AI algorithms to learn from our first and second-party data to ensure our digital ads are efficient and more effective in driving engaged site traffic. In June, we converted all product page traffic and listing page traffic in addition to the homepage, which was converted in Q4 to Adobe's Edge delivery service.
Since this change, we have seen a 15.6% increase in organic traffic, which we believe, combined with the more engaged site traffic, has contributed to our web sales growth of 8.4% for the quarter. We invested an additional $1.1 million over the quarter to get our messaging out as we promoted 60 months no interest to be more competitive and strengthen our credit offerings. However, we did not experience an increase in our credit usage. In fact, our overall credit cost for the quarter decreased double digits compared to last year's Q2. We implemented a more aggressive promotional strategy by increasing sale offerings, both externally and internally. The loyalty email campaign referenced in the Q1 call generated approximately $17 million in Q2, resulting in a year-to-date total of over $25 million with an average ticket of just under $2,800, which contributed to our slight decrease in our overall average ticket for the quarter.
Our merchandising team returned from a trip to Vietnam in early May, where they followed up with our vendors on their progress with the movement of our products out of China. The trip was very informative and productive as it enabled the team to reassure our vendors of our commitment to our strategic partnerships. From a category performance perspective, upholstery and bedroom outperformed all other categories with positive sales in the low to mid-single digits, followed by bedding and occasional, which were down low single digits and dining room and decor, which were down high single digits. As mentioned in our last call, we are rolling out our new point of purchase and tagging program in Q3. As a reminder, this should improve the in-store customers' experience by centralizing our special order fabrics to improve the ease of choice while introducing a new tagging system that visually provides our customers with more choices that are not shown on the floors.
Also, it simplifies for our sales and design consultants available configurations by collection. Our goal is to have this fully implemented by the end of Q3 in all stores. While the tariff issues are continuing to create uncertainty within the industry, our merchants are proactively working with our vendors and preparing for potential price changes once the tariffs are finalized. The team's preparation and communication give us confidence to maintain our current gross margin guidance. There is a possibility that some products will return to being manufactured in China, depending on how tariff policies develop in other countries. Decor and lighting products may remain in China if new tariff rates make it more economical compared to establishing production facilities elsewhere. In Vietnam, there are concerns about potential labor shortages and wage challenges resulting from increased production demands.
Resolving the uncertainties around tariffs will allow us to be more focused on serving our customers' needs. Our supply chain team executed a strategy to increase inventories of best-selling products during Q2. Inventories rose approximately $4.6 million or about 5% since Q1. We anticipate that inventories will remain relatively flat for the remainder of the year. We continue our push to open five new stores a year. However, in 2025, we will open two new stores in Houston, Texas and one relocation in Daytona Beach. We will be closing two locations, one in Atlanta and one in Waco, Texas, leaving us with 129 stores at year-end. We have finalized four additional leases for 2026 openings that we are able to announce. In Q1 2026, we will open our second store in the St. Louis market in the Fenton area southwest of the city. In Q2 of '26, we will open our fourth store in the Nashville market in the Mount Juliet area east of Nashville.
The other two leases will be in the Houston market, in the Aliana area southwest of Houston and the Baytown area east of Houston, opening in the latter part of 2026, giving us five stores in the market. As you can see, we are actively looking at opportunities to grow our footprint to leverage our current distribution network and return to our five new stores a year goal in 2026. Our distribution, home delivery, and customer service teams continue to do an excellent job controlling expenses while furnishing happiness to our customers. Each team does a great job of balancing the number of team members to the workflow demand needed due to natural turnover. Our success in distribution, home delivery, and customer service is due to Haverty's team members controlling all aspects of the final mile delivery to the customer. We do not outsource any of these key functions of our business to a third-party company, and we are proud that our regret-free experience is an integral part of our unwavering service that helps separate us from our competitors.
Throughout our 140-year journey, we have navigated economic headwinds similar to today's challenges: housing affordability, high interest rates, tariffs, inflation concerns, and geopolitical uncertainties. What sets us apart is our trusted Haverty brand, our debt-free balance sheet, our operational consistency, our integrity, our consumer-focused in-home design, and our dedicated Haverty team members. Looking into the future, these competitive advantages position us to capture market share. I will now turn the call over to Richard.
Thank you, Steve. In the second quarter of 2025, we reported net sales of $181 million, a 1.3% increase over the prior year quarter. Comparable store sales were down 2.3% over the prior year period. Our gross profit margin increased 40 basis points to 60.8% from 60.4%. This increase was due to product selection and merchandising mix that Steve mentioned previously. Selling, general, and administrative expenses increased $4.2 million or 4.1% to $107.3 million. As a percentage of sales, these costs approximated 59.3% of sales, up from 57.7% in the prior year's quarter. Within this expense category, we experienced increases in advertising, occupancy, and administrative costs, which were partially offset by decreases in selling warehouse and delivery expenses. Other income and expense in the second quarter of 2025 was $65,000 and interest income was approximately $1.5 million. Income before income taxes decreased $2.1 million to $4.3 million.
Our tax expense was $1.6 million for the second quarter of 2025, which resulted in an effective tax rate of 37.8% compared to an effective tax rate of 31.2% in the prior year period. The primary difference in the effective rate and statutory rate is due to expected state income taxes and additional tax expense associated with the vesting of stock awards. Net income for the second quarter of 2025 was $2.7 million or $0.16 per diluted share on our common stock compared to net income of $4.4 million or $0.27 per share in the comparable quarter last year. Now turning to our balance sheet. At the end of the second quarter, our inventories were $93.3 million, which was up $9.9 million from December 31, 2024, and up $900,000 versus Q2 of 2024. At the end of the second quarter, our customer deposits were $39.4 million, which was down $1.4 million from the December 31, 2024 balance and up $600,000 versus the Q2 2024 balance.
We ended the quarter with $107.4 million of cash and cash equivalents, and we have no funded debt on our balance sheet at the end of the second quarter of 2025. Looking at some of the cash flow usage, CapEx was $5.6 million for the second quarter of 2025, and we also paid out $5.2 million of regular dividends during the quarter. We did not purchase any common shares of stock under our share repurchase program during the second quarter of 2025, and we have approximately $6.1 million of existing authorization in our buyback program. Our earnings release lists several additional forward-looking statements indicating our future expectations of certain financial metrics. I will highlight a few, but please refer to our press release for additional commentary. Our 2025 guidance includes tariffs currently in effect as of July 30, 2025, and does not include the effects of additional proposed tariffs that are not finalized by the Trump administration.
We continue to expect our gross margins for 2025 to be between 60% and 60.5%. We anticipate gross profit margins will be impacted by our current estimates of product and freight costs. Our fixed and discretionary type SG&A expenses for 2025 are expected to be in the $291 million to $293 million range, which is unchanged from our previous guidance. The variable type costs within SG&A for 2025 are expected to be in the range of 18.5% to 18.8%. We anticipate continued efficiencies in warehouse and delivery costs during the remainder of this year. Our planned CapEx for 2025 remains at $24 million. Anticipated new or replacement stores, remodels, and expansions account for $19.6 million. Investments in our distribution network are expected to be approximately $1.8 million, and investments in our information technology are expected to be approximately $2.6 million. Our anticipated effective tax rate in 2025 is expected to be 26.5%.
This projection excludes the impact from the vesting of stock awards and any potential new tax legislation. This completes my commentary on the second quarter financial results. Operator, we would like to open the call up for questions.
分析師問答
Our first question comes from Anthony Lebiedzinski with Sidoti & Co.
It's great to see the increase in sales and gross margin this quarter. The first question is whether you can discuss the trend of your written sales throughout the quarter and if you noticed any significant regional differences in your performance.
Sure, Anthony. Overall, our written business declined about 2% in April. It increased slightly by nearly 1% in May, and then rose approximately 2.5% in June, which reflects the trend for the written business. For the delivered business this quarter, we experienced around a 5% increase in April, about a 2% increase in May, and a slight decline of nearly 3% in June. Steve, would you like to mention anything regarding the regions?
Yes, Anthony. I would say it’s pretty much consistent across all of our districts. While some regions performed a little better than others, we observed that all of them were trending positively as we saw our sales.
Got you. And then is there any way you guys can quantify what the impact may have been as far as your decision to suspend some of the special orders from China, how much impact that was on your same-store business?
That's difficult for us to measure, Anthony. We believe it definitely affected our design business, particularly regarding the number of customers and the percentage of business we were conducting. However, we haven't been able to precisely quantify the overall impact. It impacted certain groups in China that we had to focus on when shifting production, which meant we had to prioritize core items on the floor and pause special items. We are optimistic that we will resume those in the third quarter with all vendors and are pleased with the efforts our merchandising and supply chain teams have made in collaboration with our vendors.
Got you. Okay. And then just in terms of the tariff impact, have you guys taken any pricing actions? Or do you expect to do that in your back half? Kind of how are you thinking about that?
Yes, we did take some actions in early May with the initial 10%. As I mentioned earlier, we are prepared to respond based on the final outcomes of the tariffs. As of July 31, we are still waiting for the final details, as they take effect tomorrow and nothing has been posted yet. We are aware of the 20% tariff, the agreement with Cambodia, and the further extension for China. Indonesia has a deal in place, but we have not received any updates on the registry that would guide our next steps. However, we are ready to proceed. Our merchants have been in discussions with our vendors, and if we face additional tariffs, we will adjust our pricing accordingly.
Got you. So at this point, your gross margin guidance does not include any pricing actions right now, right? Is that fair to say?
Our margins decreased slightly from Q1 to Q2, but we are still confident in our margin guidance. There is potential for increased promotions, which could help us achieve this, along with some uncertainties regarding tariffs. We will pass on most of the price increases, but there is a small buffer included in the margin guidance.
But we feel comfortable with that guidance. Even with what's coming, Anthony, we feel comfortable with it that we'll be able to manage through that.
Got you. Got it. Okay. All right. And then lastly for me, as far as just thinking about the different marketing and promotional strategies. It sounds like you guys are upbeat about that concern. So as we look at the back half of the year, I mean, which of these strategies do you think will be the most impactful in terms of driving same-store sales?
Well, I mean, Anthony, I'd say definitely, our new pricing strategy that we put in place that really was in effect as of May 1 with the team, with the stores. And so we've seen a positive impact with that. I think our marketing and what we're doing with the small market plan that we attack them with a separate individual plan is working and helping to drive traffic in those stores. And I think the mailer that we did was a huge success that basically ended at the end of the quarter, but that turned out to be a huge success in driving conversion rates, but also traffic to the stores. So we invested more. We talked about that in the second quarter. We're going to continue that investment and invest more in the third quarter in our marketing. One successful Memorial Day, we extended that promotion from basically two weeks to three weeks. From a marketing perspective, we will do the same with Labor Day.
And then also, we're going to get back into the direct mail business. We've got a new direct mail that will go out at the beginning of August that we're excited about to see that impact that it will have across our markets overall. So we've got a lot going on. We feel real positive about it. We feel good about the trend and what we've seen. If you look from fourth quarter to first quarter to where we are today, we've seen gradual improvement, and our goal is to get back to positive same-store sales and grow it from there.
Our next question comes from Cristina Fernández with Telsey Advisory Group.
I wanted to ask about the promotional environment you're seeing across the industry. It seems like it's picked up a little bit and you as well have used promotions to drive traffic. So I guess your thoughts on the industry and the environment and how do you plan to use promotions going forward strategically so it drives traffic, but at the same time, doesn't depress margins or change the perception of the brand?
Yes, Cristina, we are confident in our promotional strategy and marketing plan. We recognized that our initial efforts were somewhat limited after the first quarter, but with ongoing positive trends in traffic and sales, along with our pricing strategies, we felt it necessary to increase our marketing investments to communicate these changes effectively. We plan to enhance this approach in the third quarter, especially with Labor Day being the most significant event for us, closely followed by Memorial Day. Everything we are doing aligns with our brand message and aims to effectively engage our consumers. Regarding our competitors, they are indeed intensifying their promotional activities, evident through increased discounts and clearance offerings. We will ensure that our offerings maintain our service standards while becoming slightly more aggressive. We recently reintroduced a 60-month financing option after almost a year, launching it on Memorial Day through our website.
Although we hadn’t included it in our TV advertising at that time, we will incorporate it in the third quarter. Despite these promotions, we have not observed an uptick in credit usage from our customers, and credit costs have actually decreased compared to last year. Thus, while customers may not currently need the extended financing, having it available gives us a competitive edge against those who are offering similar options.
And then my second question is as it relates to pricing. I understand the need to have to raise prices more to offset the tariffs. But can you talk about what you've seen so far from the consumer in those products where you raised prices? Are you seeing any pushback? And do you feel like the consumer can absorb higher prices as most retailers will have to raise prices as these tariffs get finalized?
Yes. At this point, we have not seen an impact. As a matter of fact, our unit sales now follow pretty much what our sales are in general. So I mean, that's a good thing. That was not the trend back early part of the pandemic and coming out of it in '21 and '22. So we've recovered on that. Our unit sales are now trending at what our overall sales are, and we're encouraged by that. We're going to be very strategic in how we execute these pricing changes, and where we can get more, we will get more and where we have to stay aggressive, we'll stay aggressive. But the end result will be that we will still be able to maintain our margin guidance that we've given you of 60% to 60.5%. And Cristina, we're encouraged by the trend. I mean traffic remains positive. We've seen it from the fourth quarter to the first to the second. We've seen our business get better, so we certainly are optimistic and encouraged.
My last question is about real estate. If I understand your comment correctly, it seems that some store openings are being pushed to 2026 from 2025. Can you confirm this? Also, what is your general outlook on the real estate environment, and do you feel confident in securing those five openings at a reasonable rent?
Yes, rents have not decreased. As we mentioned in our first quarter call, we reduced our capital expenditures and paused some projects for 60 to 90 days. We had ongoing deals and have since resumed those efforts. We are now more comfortable moving forward. We had hoped to open the Fenton store in St. Louis this year, but that has been pushed to next year. However, we just finalized the lease for the Mount Juliet store in Nashville, which is set to open in the second quarter. Both of these are existing store conversions, with the Fenton store being an old Big Lots location and the Mount Juliet store coming from a Jo-Ann store. We are optimistic about these conversions. The two stores in Houston are mostly complete, but they will require some additional time for execution. Our aim is still to open five stores a year, although we won’t reach that target this year and will remain at 129 stores, the same number we ended with in 2024. We are encouraged by our current initiatives and continue to explore new markets and expansions in existing ones.
There are no further questions at this time. I would now like to turn the floor back over to Richard Hare for closing comments.
Well, thank you for your participation in today's call. We look forward to talking with you in the future when we release our third quarter results later this year.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.