Havertys - 10-Q quarterly report FY2024 Q2

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___

Commission file number: 1-14445

HAVERTY FURNITURE COMPANIES, INC.

(Exact name of registrant as specified in its charter)


Maryland			58-0281900
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
780 Johnson Ferry Road, Suite 800 Atlanta, Georgia			30342
(Address of principal executive offices)			(Zip Code)
(404) 443-2900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	HVT	NYSE
Class A Common Stock	HVTA	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The numbers of shares outstanding of the registrant’s two classes of $1 par value common stock as of August 1, 2024, were: Common Stock – 15,132,639; Class A Common Stock – 1,275,395.

HAVERTY FURNITURE COMPANIES, INC.

INDEX


		Page No.

PART I.	FINANCIAL INFORMATION

	Item 1. Financial Statements

	Condensed Consolidated Balance Sheets – June 30, 2024 (unaudited) and December 31, 2023	1

	Condensed Consolidated Statements of Comprehensive Income – Six Months Ended June 30, 2024 and 2023 (unaudited)	2

	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2024 and 2023 (unaudited)	3

	Notes to Condensed Consolidated Financial Statements (unaudited)	4

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	14

	Item 4. Controls and Procedures	14

PART II.	OTHER INFORMATION

	Item 1. Legal Proceedings	15

	Item 1A. Risk Factors	15

	Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	15

	Item 5. Other Information	15

	Item 6. Exhibits	16

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands)	June 30, 2024		December 31, 2023

Assets
Current assets
Cash and cash equivalents	$	109,942	$	120,635
Restricted cash and cash equivalents	6,125		7,142
Inventories	92,401		93,956
Prepaid expenses	16,445		17,067
Other current assets	15,497		12,793
Total current assets	240,410		251,593
Property and equipment, net	177,449		171,588
Right-of-use lease assets	195,000		202,306
Deferred income taxes	15,478		15,641
Other assets	13,768		13,005
Total assets	$	642,105	$	654,133
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	18,058	$	18,781
Customer deposits	38,731		35,837
Accrued liabilities	37,090		46,289
Current lease liabilities	36,561		37,357
Total current liabilities	130,440		138,264
Noncurrent lease liabilities	176,940		180,397
Other liabilities	27,627		27,106
Total liabilities	335,007		345,767

Stockholders’ equity
Capital Stock, par value $1 per share
Preferred Stock, Authorized – 1,000 shares; Issued: None
Common Stock, Authorized – 50,000 shares; Issued: 2024 – 30,414; 2023 – 30,220	30,414		30,220
Convertible Class A Common Stock, Authorized – 15,000 shares; Issued: 2024 – 1,798; 2023 – 1,804	1,798		1,804
Additional paid-in capital	114,644		113,307
Retained earnings	416,233		419,472
Accumulated other comprehensive loss	(983)		(983)
Less treasury stock at cost – Common Stock (2024 – 15,281 and 2023 – 15,355 shares) and Convertible Class A Common Stock (2024 and 2023 – 522 shares)	(255,008)		(255,454)
Total stockholders’ equity	307,098		308,366
Total liabilities and stockholders’ equity	$	642,105	$	654,133

See notes to these condensed consolidated financial statements.

INDEX

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(In thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Net sales	$	178,636	$	206,289	$	362,633	$	431,042
Cost of goods sold	70,652		81,394		143,630		173,363
Gross profit	107,984		124,895		219,003		257,679

Expenses:
Selling, general and administrative	103,099		110,016		212,455		228,377
Other expense (income), net	(101)		14		(78)		9
Total expenses	102,998		110,030		212,377		228,386

Income before interest and income taxes	4,986		14,865		6,626		29,293
Interest income, net	1,467		973		3,022		1,983

Income before income taxes	6,453		15,838		9,648		31,276
Income tax expense	2,015		4,046		2,817		7,112
Net income	$	4,438	$	11,792	$	6,831	$	24,164

Other comprehensive income	—		—		—		—


Comprehensive income	$	4,438	$	11,792	$	6,831	$	24,164

Basic earnings per share:
Common Stock	$	0.27	$	0.73	$	0.42	$	1.49
Class A Common Stock	$	0.25	$	0.68	$	0.39	$	1.41

Diluted earnings per share:
Common Stock	$	0.27	$	0.70	$	0.41	$	1.44
Class A Common Stock	$	0.25	$	0.67	$	0.39	$	1.38

Cash dividends per share:
Common Stock	$	0.32	$	0.30	$	0.62	$	0.58
Class A Common Stock	$	0.30	$	0.28	$	0.58	$	0.54

See notes to these condensed consolidated financial statements.

INDEX

HAVERTY FURNITURE COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(In thousands)	Six Months Ended June 30,
	2024		2023
Cash Flows from Operating Activities:
Net income	$	6,831	$	24,164
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,147		9,017
Share-based compensation expense	4,130		4,439
Other	1,314		(256)
Changes in operating assets and liabilities:
Inventories	1,555		3,611
Customer deposits	2,894		(2,380)
Other assets and liabilities	916		11,637
Accounts payable and accrued liabilities	(10,245)		(10,104)
Net cash provided by operating activities	17,542		40,128

Cash Flows from Investing Activities:
Capital expenditures	(15,952)		(40,482)
Proceeds from sale of land, property and equipment	52		23
Net cash used in investing activities	(15,900)		(40,459)

Cash Flows from Financing Activities:




Dividends paid	(10,070)		(9,414)

Taxes on vested restricted shares	(3,282)		(4,083)
Net cash used in financing activities	(13,352)		(13,497)

Decrease in cash, cash equivalents and restricted cash equivalents during the period	(11,710)		(13,828)
Cash, cash equivalents and restricted cash equivalents at beginning of period	127,777		129,930
Cash, cash equivalents and restricted cash equivalents at end of period	$	116,067	$	116,102

See notes to these condensed consolidated financial statements.

INDEX

HAVERTY FURNITURE COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE A - Business and Basis of Presentation

Haverty Furniture Companies, Inc. (“Havertys,” “the Company,” “we,” “our,” or “us”) is a retailer of a broad line of residential furniture in the middle to upper-middle price ranges. We operate all of our stores using the Havertys brand and do not franchise our concept. We operate within a single reportable segment. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The Company believes that the disclosures made are adequate to make the information not misleading. The financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. We believe all adjustments, normal and recurring in nature, considered necessary for a fair presentation have been included. We suggest that these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in our latest Annual Report on Form 10-K.

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from those estimates.

The Company is subject to various claims and legal proceedings covering a wide range of matters, including with respect to product liability and personal injury claims, that arise in the ordinary course of its business activities. We currently have no pending claims or legal proceedings that we believe would be reasonably likely to have a material adverse effect on our financial condition, results of operations or cash flows. However, there can be no assurance that either future litigation or an unfavorable outcome in existing claims will not have a material impact on our business, reputation, financial position, cash flows or results of operations.

INDEX

NOTE B – Stockholders’ Equity

The following outlines the changes in each caption of stockholders’ equity for the current and comparative period and the dividends per share for each class of shares.

For the three months ended June 30, 2024:


(in thousands)	Common Stock		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances at March 31, 2024	$	30,316	$	1,798	$	113,993	$	417,020	$	(983)	$	(255,454)	$	306,690
Net income							4,438						4,438
Dividends declared:
Common Stock, $0.32 per share							(4,842)						(4,842)
Class A Common Stock, $0.30 per share							(383)						(383)


Restricted stock issuances	98				(1,527)								(1,429)
Amortization of restricted stock					1,487								1,487
Directors' Compensation Plan					691						446		1,137

Balances at June 30, 2024	$	30,414	$	1,798	$	114,644	$	416,233	$	(983)	$	(255,008)	$	307,098

For the six months ended June 30, 2024:


(in thousands)	Common Stock		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances at December 31, 2023	$	30,220	$	1,804	$	113,307	$	419,472	$	(983)	$	(255,454)	$	308,366
Net income							6,831						6,831
Dividends declared:
Common Stock, $0.62 per share							(9,330)						(9,330)
Class A Common Stock, $0.58 per share							(740)						(740)
Class A conversion	6		(6)										—

Restricted stock issuances	188				(3,484)								(3,296)
Amortization of restricted stock					4,130								4,130
Directors' Compensation Plan					691						446		1,137

Balances at June 30, 2024	$	30,414	$	1,798	$	114,644	$	416,233	$	(983)	$	(255,008)	$	307,098

INDEX

For the three months ended June 30, 2023:


(in thousands)	Common Stock		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances at March 31, 2023	$	30,122	$	1,806	$	107,759	$	406,237	$	(756)	$	(248,756)	$	296,412
Net income							11,792						11,792
Dividends declared:
Common Stock, $0.30 per share							(4,527)						(4,527)
Class A Common Stock, $0.28 per share							(359)						(359)


Restricted stock issuances	96				(1,390)								(1,294)
Amortization of restricted stock					2,482								2,482
Directors' Compensation Plan					880						197		1,077

Balances at June 30, 2023	$	30,218	$	1,806	$	109,731	$	413,143	$	(756)	$	(248,559)	$	305,583

For the six months ended June 30, 2023:


(in thousands)	Common Stock		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances at December 31, 2022	$	30,006	$	1,806	$	108,706	$	398,393	$	(756)	$	(248,756)	$	289,399
Net income							24,164						24,164
Dividends declared:
Common Stock, $0.58 per share							(8,721)						(8,721)
Class A Common Stock, $0.54 per share							(693)						(693)


Restricted stock issuances	212				(4,294)								(4,082)
Amortization of restricted stock					4,439								4,439
Directors' Compensation Plan					880						197		1,077

Balances at June 30, 2023	$	30,218	$	1,806	$	109,731	$	413,143	$	(756)	$	(248,559)	$	305,583

NOTE C – Interim LIFO Calculations

Inventories are measured using the last-in, first-out (LIFO) method of valuation using an annual LIFO index. Accordingly, interim LIFO calculations must necessarily be based on management’s estimates of the components of the calculation including year-end inventory levels and the expected rate of inflation or deflation for the year. Since these estimates may be affected by factors beyond management’s control, interim results are subject to change based upon the final year-end LIFO inventory valuation.

INDEX

NOTE D – Fair Value of Financial Instruments

The fair values of our cash and cash equivalents, restricted cash and cash equivalents, accounts payable and customer deposits approximate their carrying values due to their short-term nature. The assets related to our self-directed, non-qualified deferred compensation plans for certain executives and employees are valued using quoted market prices multiplied by the number of shares held, a Level 1 valuation technique.

NOTE E – Credit Agreement

We have an $80.0 million revolving credit facility (the “Credit Agreement”) secured primarily by our inventory and maturing on October 24, 2027. Availability fluctuates based on a borrowing base calculation reduced by outstanding letters of credit.

At June 30, 2024 and December 31, 2023, there were no outstanding borrowings under the Credit Agreement. The borrowing base was $117.5 million at June 30, 2024 and there were no outstanding letters of credit and, accordingly, net availability was $80.0 million.

NOTE F – Revenues

We recognize revenue from merchandise sales and related service fees, net of expected returns and sales tax, at the time the merchandise is delivered to the customer. We record customer deposits when payments are received in advance of the delivery of merchandise. Such deposits totaled $38.7 million and $35.8 million at June 30, 2024 and December 31, 2023, respectively. Of the customer deposit liabilities at December 31, 2023, approximately $0.8 million have not been recognized through net sales in the six months ended June 30, 2024.

The following table presents our revenues disaggregated by each major product category and service:


(In thousands)	Three Months Ended June 30,								Six Months Ended June 30,
	2024				2023				2024				2023
	Net Sales		% of Net Sales		Net Sales		% of Net Sales		Net Sales		% of Net Sales		Net Sales		% of Net Sales
Merchandise:
Case Goods
Bedroom Furniture	$	25,772	14.4	%	$	33,935	16.5	%	$	51,634	14.2	%	$	68,483	15.9	%
Dining Room Furniture	19,453		10.9		22,952		11.1		38,469		10.6		48,537		11.3
Occasional	13,183		7.4		16,301		7.9		27,390		7.6		35,510		8.2
	58,408		32.7		73,188		35.5		117,493		32.4		152,530		35.4
Upholstery	78,273		43.8		86,574		42.0		161,208		44.5		182,420		42.3
Mattresses	16,640		9.3		18,985		9.2		33,240		9.2		37,397		8.7
Accessories and Other (1)	25,315		14.2		27,542		13.4		50,692		14.0		58,695		13.6
	$	178,636	100.0	%	$	206,289	100.0	%	$	362,633	100.0	%	$	431,042	100.0	%


(1)			Includes delivery charges and product protection.

NOTE G – Leases

We have operating leases for retail stores, offices, warehouses, and certain equipment. Our leases have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 20 years. We determine if an arrangement is or contains a lease at lease inception. Our leases do not have any residual value guarantees or any restrictions or covenants imposed by lessors. We have lease agreements for real estate with lease and non-lease components, which are accounted for separately.

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Certain of our lease agreements for retail stores include variable lease payments, generally based on sales volume. The variable portions of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. Certain of our equipment lease agreements include variable lease costs, generally based on usage of the underlying asset (mileage, fuel, etc.). The variable portions of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded in the period incurred.

At June 30, 2024, we had entered into four leases for additional retail locations which had not yet commenced.

Lease expense is charged to selling, general and administrative expenses. Components of lease expense were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating lease cost	$	12,092	$	12,310	$	24,338	$	24,098
Variable lease cost	1,388		978		2,762		2,674
Total lease expense	$	13,480	$	13,288	$	27,100	$	26,772

Supplemental cash flow information related to leases is as follows (in thousands):


	Six Months Ended June 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	21,273	$	21,519
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	13,636	$	29,334

NOTE H – Income Taxes

Our effective tax rate for the six months ended June 30, 2024 and 2023 was 29.2% and 22.7%, respectively. The primary difference in the effective rate and the statutory rate was due to nondeductible items and state income taxes.

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NOTE I – Stock-Based Compensation Plans

As more fully discussed in Note 12 of the notes to the consolidated financial statements in our 2023 Annual Report on Form 10-K, we have awards outstanding for Common Stock under stock-based employee compensation plans.

The following table summarizes our award activity during the six months ended June 30, 2024:


	Service-Based Restricted Stock Awards			Performance-Based Restricted Stock Awards
	Shares or Units (#)	Weighted-Average Award Price ($)		Shares or Units (#)	Weighted-Average Award Price ($)
Outstanding at December 31, 2023	249,935	$	32.05	353,187	$	31.77
Granted/Issued	160,955	34.71		121,824	34.73
Awards vested or rights exercised(1)	(147,836)	32.24		(145,104)	32.84
Forfeited	(3,900)	34.29		—	—
Additional units earned due to performance	—	—		(25,550)	33.08
Outstanding at June 30, 2024	259,154	$	33.56	304,357	$	32.33
Restricted units expected to vest	259,154	$	33.56	221,517	$	31.44


(1)			Includes shares repurchased from employees for employee’s tax liability.

The aggregate intrinsic value of outstanding service-based restricted stock awards was approximately $6.6 million at June 30, 2024. The restrictions on the service-based awards generally lapse or vest annually, primarily over one-year and three-year periods.

The total fair value of performance-based restricted stock awards that vested during the six months ended June 30, 2024 was approximately $4.9 million. The aggregate intrinsic value of outstanding performance awards at June 30, 2024 expected to vest was approximately $5.6 million. The performance awards are based on one-year performance periods but cliff vest in approximately three years from grant date.

The compensation for all awards is charged to selling, general and administrative expenses over the respective grants’ vesting periods, primarily on a straight-line basis. The amount charged was approximately $4.1 and $4.4 million for the six months ended June 30, 2024 and 2023, respectively. Forfeitures are recognized as they occur. As of June 30, 2024, the total compensation cost related to unvested equity awards was approximately $8.8 million and is expected to be recognized over a weighted-average period of two years.

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NOTE J – Earnings Per Share

We report our earnings per share using the two-class method. The income per share for each class of common stock is calculated assuming 100% of our earnings are distributed as dividends to each class of common stock based on the contractual rights of the classes.

The Common Stock of the Company has a preferential dividend rate of at least 105% of the dividend paid on the Class A Common Stock. Holders of the Class A Common Stock have greater voting rights which include voting as a separate class for the election of up to 75% of the total number of directors whereas holders of the Common Stock vote as a separate class for the election of at least 25% of the total number of directors. On all other matters subject to shareholder vote, holders of the Class A Common Stock have ten votes per share as opposed to holders of the Common Stock receiving one vote per share. Class A Common Stock may be converted at any time on a one-for-one basis into Common Stock at the option of the holder of the Class A Common Stock.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Common:
Distributed earnings	$	4,842	$	4,527	$	9,330	$	8,721
Undistributed earnings	(728)		6,387		(2,996)		13,637
Basic	4,114		10,914		6,334		22,358
Class A Common earnings	324		878		497		1,806
Diluted	$	4,438	$	11,792	$	6,831	$	24,164

Class A Common:
Distributed earnings	$	383	$	359	$	740	$	693
Undistributed earnings	(59)		519		(243)		1,113
	$	324	$	878	$	497	$	1,806
Denominator:
Common:
Weighted average shares outstanding - basic	15,065		15,046		14,982		14,977
Assumed conversion of Class A Common Stock	1,275		1,283		1,277		1,283
Dilutive options, awards and common stock equivalents	363		417		453		506
Total weighted-average diluted Common Stock	16,703		16,746		16,712		16,766

Class A Common:
Weighted average shares outstanding	1,275		1,283		1,277		1,283

Basic earnings per share:
Common Stock	$	0.27	$	0.73	$	0.42	$	1.49
Class A Common Stock	$	0.25	$	0.68	$	0.39	$	1.41

Diluted earnings per share:
Common Stock	$	0.27	$	0.70	$	0.41	$	1.44
Class A Common Stock	$	0.25	$	0.67	$	0.39	$	1.38

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes contained herein and with the audited consolidated financial statements, accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“Form 10-K”).

Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q (the "Form 10-Q") and the schedules hereto that are not purely historical facts or that necessarily depend on future events, including statements about our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on forward-looking statements. In addition, oral statements made by our directors, officers, and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements. All forward-looking statements are based upon currently available information and the Company's current assumptions, expectations, and projections about future events. Forward-looking statements are by nature inherently uncertain and involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Known material risk factors applicable to us that could cause our actual results to differ from these forward-looking statements are described in "Item 1A. Risk Factors" of our Form 10-K and in the subsequent reports we file with the Securities and Exchange Commission. Consequently, all forward-looking statements in this report are qualified by the factors, risks and uncertainties contained therein. All forward‑looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report except as required by law.

Net Sales

Our sales are generated by customer purchases of home furnishings. Revenue is recognized upon delivery to the customer. Comparable-store or “comp-store” sales is a measure which indicates the performance of our existing stores and website by comparing the growth in sales in store and online for a particular month over the corresponding month in the prior year. Stores are considered non-comparable if they were not open during the corresponding month in the prior year or if the selling square footage has been changed significantly. The method we use to compute comp-store sales may not be the same method used by other retailers. We record our sales when the merchandise is delivered to the customer. We also track “written sales” and “written comp-store sales,” which represent customer orders prior to delivery. As a retailer, comp-store sales and written comp-store sales are an indicator of relative customer spending and store performance. Comp-store sales, total written sales and written comp-store sales are intended only as supplemental information and none are substitutes for net sales presented in accordance with U.S. GAAP.

The following table outlines our sales and comp-store sales increases and decreases for the periods indicated. (Amounts and percentages may not always add to totals due to rounding.)


	2024										2023
	Net Sales						Comp-Store Sales				Net Sales						Comp-Store Sales
Period	Total Dollars		% Change		$ Change		% Change		$ Change		Total Dollars		% Change		$ Change		% Change		$ Change
Q1	$	184.0	(18.1)	%	$	(40.8)	(18.5)	%	$	(41.4)	$	224.8	(5.9)	%	$	(14.2)	(6.7)	%	$	(16.0)
Q2	$	178.6	(13.4)	%	$	(27.7)	(13.6)	%	$	(27.7)	$	206.3	(18.5)	%	$	(46.9)	(19.1)	%	$	(48.0)

YTD Q2	$	362.6	(15.9)	%	$	(68.4)	(16.2)	%	$	(69.1)	$	431.0	(12.4)	%	$	(61.1)	(13.1)	%	$	(64.0)

Total sales for the second quarter of 2024 decreased $27.7 million, or 13.4%, compared to the same period in 2023. Our comp-store sales decreased 13.6% or $27.7 million, in the second quarter of 2024 compared to the same period in 2023.

Total sales for the six months ended June 30, 2024, decreased $68.4 million, or 15.9%, compared to the same period in 2023. Our comp-store sales decreased 16.2%, or $69.1 million, in the first six months of 2024 compared to the same period in 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our free in-home design service is being used by more customers. Designers helped drive 35.8% of our total written business for the second quarter of 2024 compared to 28.6% for the same period in 2023. For the first six months of 2024, our designers' written business was 34.0% compared to 27.3% for the same period of 2023.

Demand for home furnishings rose rapidly during the COVID years as consumers redecorated their homes and outfitted home offices, pulling forward sales. Furthermore, recent inflationary pressures and economic uncertainty have had negative effects on consumer discretionary spending. Rising interest rates have also exacerbated the small supply of homes available for sale and further weakened the housing market. All of which has had a negative impact on demand for furniture and has adversely impacted our sales volumes in the first and second quarters of 2024. Written business for the second quarter of 2024 compared to the second quarter of 2023 was down 15.2% and written comp-store sales were down 15.8%.

Gross Profit

Gross profit for the second quarter of 2024 was 60.4%, down 10 basis points compared to the prior year period of 60.5%. For the second quarter of 2024, the change in the LIFO reserve generated an immaterial impact on gross profit compared to a positive impact of $3.4 million for the same period of 2023. Gross profit for the six months ended June 30, 2024 was 60.4% compared to 59.8% for the same period of 2023. Our gross margins, excluding the impact of LIFO, were up based on product selection and merchandising mix in 2024 compared to 2023.

We expect annual gross profit margins for 2024 will be 60.0% to 60.5%. Gross profit margins fluctuate quarter to quarter in relation to our promotional cadence.

Substantially all of our occupancy and home delivery costs are included in selling, general and administrative expenses (“SG&A”), as are a portion of our warehousing expenses. Accordingly, our gross profit may not be comparable to those entities that include these costs in cost of goods sold.

Selling, General and Administrative Expenses

Our SG&A costs as a percent of sales for the second quarter of 2024 were 57.7% versus 53.3% for the same period in 2023 largely as a result of decreased sales. SG&A dollars decreased $6.9 million, or 6.3%, for the second quarter of 2024 compared to the same prior year period. The change is driven by lower warehouse and delivery costs of $3.5 million primarily from reduced labor costs, lower costs in selling expense of $3.3 million, decrease of $1.6 million in administrative expenses due to lower stock compensation costs, and a decrease of $1.3 million in advertising expenses. Occupancy costs were $2.8 million higher as rent expense in the prior year quarter was reduced by $1.8 million for incentives to vacate a property before the end of its lease term.

Our SG&A costs as a percent of sales for the first six months of 2024 were 58.6% versus 53.0% for the same period in 2023 largely as a result of decreased sales. SG&A dollars decreased $15.9 million, or 7.0%, for the first half of 2024 compared to the same prior year period. The change results primarily from lower costs in selling expense of $8.0 million, a decrease in warehouse and delivery costs of $6.8 million, and an increase in occupancy costs of $2.7 million.

We classify our SG&A expenses as either variable or fixed and discretionary. Our variable expenses include the costs in the selling and delivery categories and certain warehouse and distribution expenses, as these amounts will generally move in tandem with our level of sales. The remaining categories and expenses for occupancy, advertising, and administrative costs are classified as fixed and discretionary because these costs do not fluctuate with sales.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table outlines our SG&A expenses by classification:


(In thousands)	Three Months Ended June 30,								Six Months Ended June 30,
	2024				2023				2024				2023
	$		% of Net Sales		$		% of Net Sales		$		% of Net Sales		$		% of Net Sales
Variable	$	34,746	19.4	%	$	40,996	19.9	%	$	71,732	19.8	%	$	85,865	19.9	%
Fixed and discretionary	68,353		38.3	%	69,020		33.4	%	140,723		38.8	%	142,512		33.1	%
	$	103,099	57.7	%	$	110,016	53.3	%	$	212,455	58.6	%	$	228,377	53.0	%

The variable expenses in dollars were lower in the second quarter and for the first six months of 2024 compared to the same periods in 2023, primarily due to the decrease in commission expense and third-party credit costs.

Fixed and discretionary expenses were impacted in the second quarter and first half of 2024 primarily by decreases in advertising expenses, warehouse costs, and administrative expenses and in the second quarter by an increase in occupancy costs compared to the prior year comparable periods.

Our variable expenses within SG&A for the full year of 2024 are anticipated to be 19.7% to 20.0%, a 20 basis point decrease primarily due to lower delivery and third-party credit costs. Fixed and discretionary expenses are expected to be to approximately $282.0 to $284.0 million for the full year of 2024, a decrease of $8.0 million from our previous guidance based on reductions in advertising, incentive compensation, and professional fees.

Liquidity and Capital Resources

Cash and Cash Equivalents

At June 30, 2024, we had $109.9 million in cash and cash equivalents, and $6.1 million in restricted cash equivalents. We believe that our current cash position, cash flow generated from operations, funds available from our credit agreement, and access to the long-term debt capital markets should be sufficient for our operating requirements and to enable us to fund our capital expenditures, dividend payments, and lease obligations through the next several years. In addition, we believe we have the ability to obtain alternative sources of financing, if needed.

Long-Term Debt

In October 2022, we entered into the Fourth Amendment to our Amended and Restated Credit Agreement (as amended, the “Credit Agreement”) with Truist Bank. The Credit Agreement, which matures October 24, 2027, provides for a $80.0 million revolving credit facility. The borrowing base at June 30, 2024 was $117.5 million and the net availability was $80.0 million.

Leases

We lease a portion of our real estate, including our stores, distribution centers, and store support space, pursuant to operating leases.

Cash Flows Summary

Operating Activities. Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, employee compensation, operations, and occupancy costs.

Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, inventory selection, the timing of cash receipts and payments, and vendor payment terms.

Net cash provided by operating activities was $17.5 million in the first six months of 2024 compared to $40.1 million during the same period in 2023. This difference resulted primarily from a decrease in net income and changes in working capital. Working capital was impacted by more normalized levels of inventories and customer deposits in 2024, as compared against the reduction of the backlog in 2023 and an increase in other liabilities.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Investing Activities. Cash used in investing activities decreased by $24.6 million in the first six months of 2024 compared to the first six months of 2023, due to capital expenditure spend.

Financing Activities. Cash used in financing activities for the payment of dividends and taxes on vested shares was comparable in the first six months of 2024 compared to the first six months of 2023.

Store Plans and Capital Expenditures


Location or Market	Opening Quarter Actual or Planned	Category
Memphis, TN	Q-1-24	Open
Pine Bluff, AR	Q-1-24	Closure
Destin, FL	Q-2-24	Open
Tampa, FL	Q-3-24	Open
Miami, FL	Q-3-24	Open
Greenwood, IN	Q-4-24	Open
Houston, TX	Q-4-24	Open

Assuming the new stores open as planned, the above activity and other changes are expected to increase net selling space at the end of 2024 by approximately 3.4% over net selling space at the end of 2023.

Total capital expenditures for the full year of 2024 are estimated to be $33.0 million depending on the timing of spending for our capital projects.

Critical Accounting Estimates

Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. We reviewed our accounting estimates, and none were deemed to be considered critical for the accounting periods presented in our Form 10-K. We had no significant changes in those accounting estimates since our last annual report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, see "Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” of our Form 10-K. Our exposure to market risk has not changed materially since December 31, 2023.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, our management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report and provide reasonable assurance that information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosure.

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 that occurred during the Company’s fiscal quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. We have reviewed our financial reporting process to provide reasonable assurance that we could report our financial results accurately and timely, and we will continue to evaluate the impact of any related changes to our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding legal proceedings is described under the subheading “Business and Basis of Presentation” in Note A of the Notes to the Condensed Consolidated Financial Statements set forth in this Form 10-Q.

Item 1A. Risk Factors

"Item 1A. Risk Factors” in our Form 10-K includes a discussion of our known material risk factors. There have been no material changes from the risk factors described in our Form 10-K.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

The board of directors has authorized management, at its discretion, to purchase and retire limited amounts of our Common Stock and Class A Common Stock. A program was initially approved by the board on November 3, 1986. On August 5, 2022, the board authorized additional amounts under such stock repurchase program. The stock repurchase program has no expiration date but may be terminated by our board at any time.

There were no repurchases of Havertys’ common stock during the second quarter of 2024. As of June 30, 2024, the approximate dollar value of shares that may yet be purchased under the program was $13.1 million.

Item 5. Other Information

During the three months ended June 30, 2024, none of our directors or officers adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits

(a)Exhibits

The exhibits listed below are filed with or incorporated by reference into this report (those filed with this report are denoted by an asterisk). Unless otherwise indicated, the exhibit number of documents incorporated by reference corresponds to the exhibit number in the referenced documents.


Exhibit Number						Description of Exhibit (Commission File No. 1-14445)
3.1						Articles of Amendment and Restatement of the Charter of Haverty Furniture Companies, Inc. effective May 26, 2006 (Exhibit 3.1 to our Second Quarter 2006 Form 10-Q).
3.2						By-laws of Haverty Furniture Companies, Inc. as amended and restated effective February 24, 2023 (Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022).
10.1						Independent Contractor Agreement, dated June 12, 202 4 (Exhibit 10.1 to our Current Report on Form 8-K filed on June 14, 2024).
*31.1						Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as amended.
*31.2						Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as amended.
**32.1						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101						The following financial statements from Haverty Furniture Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in inline XBRL, include: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements.
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


		HAVERTY FURNITURE COMPANIES, INC. (Registrant)

Date: August 6, 2024	By:	/s/ Clarence H. Smith
		Clarence H. Smith Chairman of the Board and Chief Executive Officer (principal executive officer)

	By:	/s/ Richard B. Hare
		Richard B. Hare Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

Havertys - 10-Q quarterly report FY2024 Q2

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