Haverty Furniture Companies, Inc. (HVT)

HVT 
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Haverty Furniture Companies Inc. (HVT)

Q1 2010 Earnings Call

May 6, 2010 10:00 AM ET

Executives

Dennis Fink – Executive Vice President and CFO

Clarence Smith – President and CEO

Analysts

Todd Schwartzman – Sidoti & Company

Budd Bugatch – Raymond James

Presentation

Operator

Ladies and gentlemen, thank you for standing by. And welcome to Haverty's Q1 2010 financial results conference call on the May 6, 2010. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions)

I will now hand the conference over to Mr. Dennis Fink. Please go ahead, sir.

Dennis Fink

Thank you, and good morning, everyone. During this conference, we’ll make forward-looking statements which are subject to risk 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. 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, Clarence Smith, will now give you his update.

Clarence Smith

Thank you. Good morning. Thank you for joining our first quarter conference call. As we previously reported, our sales increased 8.2% to $156 million, compared to $144 million for the quarter.

Comparative store sales for Q1 were 10.1%, which was exciting for our team to finally see a double-digit positive performance. We’re pleased to report that we produced a profit of $2.4 million versus a loss for last year of $7.3 million.

Written sales for the second quarter to date are up 8.8% and for the first time in several years our recent store traffic is positive, up in the mid single digits. Our website traffic is up 13% for the first quarter, which also correlates to a 13% increase in page views.

We had 1.7 million unique visitors to havertys.com in the quarter. According to our year end brand tracking report 75% of our customers go to the web before they purchase demonstrating the importance of our fully interactive site.

While our Internet sales are not a significant part of our total business, havertys.com's high use demonstrates our customer’s attraction to the site and the strength of our interactive marketing program.

Our bedding, upholstery and casual dining business is stronger this year with an encouraging recent trend of increasing bedroom business. While our promotional efforts have worked very well, we are seeing signs of strength in the better goods. We’ve several new better end groups and collections which will be on our floors by mid-summer.

We’re having discussions of price increases with some of our companies but we’ve been successful in keeping our costs under control due to our long-standing commitments to our core vendors. Pricing has caused and will cause some shifts in our merchandise line up. We remain dedicated to providing a superior value in our niche.

Along with our strong relationships with traditional manufacturers, we believe that our combination of our direct sourcing model alongside working relationships with agents and sourcing companies helps to provide great values for our customers while producing good gross margins.

We did not experience some of the shipping problems with containers that many of our competitors did in the first quarter due to our strong contracts with shipping lines and our communications and logistics systems.

We have several ocean carriers available to use from all our major Asian ports which helps ensure that our merchandise will get on a ship when requested. This allows for different transit times from these major ports to even out the arrival of merchandise into our distribution centers.

Many of the factories in China did have fewer workers return from Chinese New Year than they expected and they experienced a tougher time getting ramped up back up for production.

These issues seem to have improved slightly with most of our suppliers now increasing production and shipping sooner than originally planned. We have had a few supply interruptions due to factory closures but for the most part we are in the larger and stronger facilities in Asia and have worked through most problems.

Our merchandising team is frequently in Asia working with these suppliers and several of our executive team will be visiting throughout the next few months. We are adjusting to the realities of relying on Asian production for the majority of our goods.

We are adapting our ordering patterns by factory and group to the changing environment in Asia to minimize stock outs. By analyzing each factory's performance and individual criteria such as quantity minimums and lead times we can adapt our ordering patterns accordingly. We focus on leveraging the better performing shorter lead time merchandise which helps us be in stock and to better serve our customers.

I wanted to review some of the merchandising trends from the recent market. There continues to be a shift to having more function in furniture. One example is built-in storage and wooden case goods. The storage is hidden in many places in the furniture pieces giving the customer as much spatial functionality as possible.

Other examples of higher function are in the home office where features include tilt desks that gave the customer the option of setting customized comfort positions for working at home. And the most obvious example of function in furniture is the reclining motion built into upholstery. In many cases the product has been designed to hide its ability to recline.

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