Q4 2022 Haverty Furniture Companies Inc Earnings Call

Customer deposits were $48 million, which was down $50 9 million or 51% from the December 31, 2021 balance and down $31 8 million or 40% versus the Q3 2022 balance.

We ended the quarter with $123 1 million of cash and cash equivalents and again, we have no funded debt on our balance sheet at the end of Q4 of 2022.

During the fourth quarter of 2022, we amended our revolving credit facility and increased the revolving loan commitments from $60 million to $80 million.

Extended the term of the commitment to October of 2027, and replace the LIBOR rate with a sofa rate as the interest rate benchmark.

Looking at some of our uses of cash flow Capex was $28 4 million for the year. During the year. We also paid $17 8 million of regular dividends and $16 1 million in the form of special dividends in Q4 of 2022.

During the fourth quarter, we didn't purchase any common shares under our existing stock buyback program, but during the year, we did purchased $30 million.

Common shares equating to $1 87, 378 shares and at the end of the fourth quarter of 2022, we have approximately $20 million of existing authorization.

Our buyback program.

And as Youll note during the 2022 year. The company has returned approximately $64 million to shareholders in the form of share repurchases regular dividends and special dividends.

Our earnings release list out several additional forward looking statements, indicating our future expectations of certain financial metrics I would like to highlight a few but please refer to our press release for additional commentary we expect our gross profit margins for 2023 to be between 58 and 58, 5% we anticipate gross.

Profit margins will be impacted by our current estimates of product and freight costs and changes in our LIFO reserve.

Our fixed and discretionary type SG&A expenses for 2023 are expected to be in the $292 million to $295 million range.

The variable type costs within SG&A for 2023 are expected to be in the range of 19, 5% to 19, 7% with the increases over 2022, primarily being inflation, driven and increased third party financing costs.

Our planned Capex for 2023 is $28 million anticipated, new we're play or replacement stores Remodels and expansions account for $19 3 million.

Investments in our distribution network are expected to be $5 8 million and investments in our information technology or expected to be approximately $2 9 million.

This estimate.

Continues to reflect the deferral of the conversion of our home delivery center in Virginia to a regional distribution facility due to the availability and pricing of certain building materials.

Our intest anticipated effective tax rate in 2023 is expected to be 25%. This projection excludes the impact from vesting of stock awards and any potential new tax legislation.

This completes my commentary on the fourth quarter financial results operator, we would like to open the call up for questions at this time.

Certainly, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one at this time one moment, please while we pull for questions.

First question is coming from Anthony <unk> from Sidoti. Your line is now live.

Hey, good morning, gentlemen, and thank you for taking the questions.

So first just on the fourth quarter delivered sales can you give us a rough.

The estimation as far as the breakdown upholstery versus case goods mattresses.

Just in terms of the delivered sales growth.

Yeah, Anthony Let me, let me give it to you for the year.

Have that in front of me so for in terms of sales. The case goods was about 35, 5% of the total sales for the year.

<unk> was 42 five.

Mattresses were eight one and accessories and other was $13 eight.

So it looks in general terms annually it looks like.

The case goods category is holding about about the same as slightly up from last year towards the back half of 2022, we did get caught up quite a bit on that earlier in the year, we had more upholstery, but we've gotten caught up on that you kind of see more along the lines of what you typically see in terms of the segment breakout.

Got it and I think Matt mattress sales are down right.

Mattress sales are slightly down they were eight 9% of sales in 2021 into 2022 their eight one.

Okay got it thanks for that Richard and then in terms of the written business.

Was there any notable variation month to month.

And also do you have.

For Q written same store sales compared to 2019.

The same store sales were written would be approximately the same as what we released the six 2% on the written side.

In terms of the cadence during the months are written business was down.

In October <unk>.

High single digits, and then low single digits.

November December .

And I think we're still in.

Alright.

Yes.

Double digits low double digits.

Okay. So you are up low double digits for us.

For Q2 2019, Okay. That's good to hear Okay got you and then.

Okay, and then just lastly, as far as the store.

Opening plans.

It looks like you haven't shared the locations of those but just just as far as timing of when those stores I believe one story.

You said the opened last week in Durham, but in terms of the rest of the store openings kind of by quarter and when do you expect to close one of the stores.

Is there going to be towards the last latter part of the year. There may be a few you actually in the fourth quarter I mean these are.

The stores that were finalizing some of them were finalizing leases some of them were in the process of working on that so I would say theyre backend weighted significantly this year.

We are seeing I will tell you Anthony we are seeing some really good opportunities that we're encouraged by that.

Sure.

So we'll probably go into next year, we still have a target of five five this year and file next year and.

We are encouraged some of the opportunities.

Got it alright, well thank you all.

Pass it on the best of luck going forward. Thanks.

Thank you Ed.

Thank you. Your next question is coming from Cristina Fernandez from Telsey Advisory Group. Your line is now live.

Yes, good morning, and congratulations on a good quarter I had a couple of questions.

The first one and I think Steve.

I alluded to this in his remarks.

So maybe Paul could balance you have now on the backlog.

I mean, how much longer can we reported sales outpace written order trends.

Let me start it off Kristina so yes.

No our back our customer deposit trends and our backlog trends are very similar.

Correlate with one another and so we did have a significant drop in the backlog with these deliveries in the fourth quarter.

As I mentioned earlier, it went down 40% in one quarter, 50% for the year.

I believe Steve mentioned in his commentary that we expect to get back to these levels.

The historical levels sometime mid year.

Last one dependent on the current written business Christina how that.

<unk> and 'twenty three.

Yes that makes sense, but it seems like based on what Youre seeing today.

Second and third quarter.

No.

Reported sales in Britain order sales would be more in line with that.

<unk>.

Are you referring to this.

2023 or 2022.

2023.

Okay.

Well, we really can't forecast much about 'twenty two 'twenty three we can say what we expect.

Still expect that our backlog will be back to more historical levels. It really is going to depend on what the risk businesses.

We did see more of a drop in the backlog in the third.

Q3 to Q4 than we had expected.

The excel.

Exceptional deliveries that we had in our written business in the fourth quarter, we thought was going to be a little stronger than it came in.

Okay understood.

The second question I had was on the variable SG&A as a percentage of sales so it's a little bit higher than what.

Anticipated and obviously a step up from 2022 can you parse out where you're seeing inflation and how much.

<unk> crop wages or other parts of the business versus third party financing.

<unk>.

Yes, Kristina its.

The majority of that is the third party financing cost. So if you recall our agreement.

With synchrony is based on LIBOR. So if you look at the LIBOR trends over the last four quarters, we get our LIBOR rates get set frequently during the year, sometimes we get caught up with them. So.

So youll have rates go up more.

<unk> period, and then they will charge us in later periods their rates will go up but big picture if <unk> got about a third of a third of our sales our credit sales and Youre seeing a two to 300 basis point increase in LIBOR over over those four quarters.

Youre going to see these kind of numbers here. So we saw it in the fourth quarter and then we're continuing to see rates rise and so we basically took the.

18, 9% variable G&A number for Q4, and we're seeing where rates.

Have gone up and we think theyre going to continue to go up and so that's why we pushed up our variable G&A guidance for.

From 18, nine up to 19, 5% to 19 seven.

Okay.

That makes sense.

The other topic I wanted to talk about with.

What are you seeing from the from the new website as far as customer engagement and on the back of that launch in the changes in your marketing marketing plans for social media as we move through 2023.

Yes Kristina.

As we said and we talked we were excited to get it launched in December .

What we have seen has been encouraging as we have seen an increase in engagement.

From our visitors and we have seen an increase in new visitors.

And also an improvement with our organic.

Traffic there. So those are encouraging things we are doing and have started experimenting with some personalization in AB testing.

But still very early in the process.

And I would say at this time, we have not made any strategic.

Changes in the first two months in our marketing plan.

Certainly we are excited about what we're going to learn from it as we go forward and that will impact our direction as to how we go about that.

As far as rates into our customer, whether it's through social or through our.

Other media TV.

Sources that we're using.

And then the last question I had was on share repurchases and just capital deployment in general you didn't make any in the fourth quarter.

Just your thoughts.

Given the environment today about being.

Thats it from share repurchases increasing dividends.

For 2020.

Well, that's something that the board decides obviously.

We have increased our dividend every year for a number of years.

And we like that track record.

We do have the ability to buy the stock we have not announced anything on that.

So.

We look at that opportunity every quarter with our board and we do meet with them. This week.

Thank you and good luck this quarter.

Okay. Thank you. Thank you so much Christine.

Thank you we reached end of our question and answer session I'd like to turn the floor back over to management for any further or closing comments.

Well, we appreciate your participation in today's call and we look forward to talking to you in the future when we release our first quarter results. Later this year. Thank you.

Thank you that does conclude today's teleconference. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.

Okay.

Okay.

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