Haverty Furniture Companies Inc (HVT) 2012 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Haverty's Q4 and year 2012 results. (Operator Instructions).

I will now turn the conference over to Mr. Dennis Fink, the Executive Vice President and CFO. Please go ahead, sir.

Thank you, operator. Good morning everyone. During this conference we will make forward-looking statements which are subject to risks and uncertainties. Actual results may differ materially from those made or implied in such statementswhich speak only as of the date they are made in 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, details in the Company's reports filed with the SEC. Our President and CEO Clarence Smith, will now give you an update. Clarence?

Good morning. Thank you for joining our 2012 fourth quarter and year end conference call. We're pleased to report our fourth quarter pre-tax earnings of $10.1 million versus $6.1 million last year.

Pre-tax income for the full year of 2012 increased to $23.5 million compared to $4.6 million for 2011. The earnings per share for the full year 2012 were $0.67 compared to $0.70 for 2011.

Last year included a benefit from income taxes of $14.1 million, or $0.64 in the fourth quarter, related to the release of almost all of the valuation allowance of our net preferred tax assets. As we announced earlier net sales for the fourth quarter were 8.4% higher than Q4 2011.

On a comp store basis, sales for the quarter in creased 6%, the fifth consecutive quarter of positive same-store sales. Total written business for the fourth quarter of 2012 increased 12.7% over the same quarter of 2011.

We are pleased with both our delivered and written sales this year which were up 14% and ahead of expectations. Through January this year we've had six consecutive months of double-digit total written sales increases. However, the remainder of the quarter has some inherent challenges with one less day in February and an early Easter at the end of March.

This year we're in a better inventory position with our bestsellers and have the lowest out of stock position we've had for several years. We believe that our in stock position and our supply chain management is an advantage over several of our competitors and will allow us to more quickly serve our customers.

Our focus on better quality goods has helped drive our average ticket as well as increase our gross margins. Our merchandising team and sourcing group have developed a strong lineup of exclusive products under Haverty's brand created by some of the industry's top designers. These products are receiving strong acceptance and sell-through by our customers.

The higher sales volume has allowed us to better leverage our fixed costs. We have become much better at reaching our targeted on-trend customer with our "discover something new" theme and the new TV creative messages introduced in the first quarter of 2012. We expect to continue to gain customer awareness of our special order and custom choice capabilities, and to drive our upholstery business with our improved operating an forecasting systems as well as with our very strong supplier network.

Our recent research has shown that we are appealing more to a somewhat higher income customer who desires to have better quality. Our customers feel comfortable because we make it easy to make choices that best suit her style with furniture that ranges from custom, to contemporary, to traditional. Our Management Team is very focused on capturing more market share and increasing our sales per square foot of show room space.

We are driving same-store sales by serving our customers better with new fashions, exciting designs, significantly enhanced store presentation, better technology, and top drawer delivery service. We are fully engaged in distinguishing ourselves in the markets we serve with a clear merchandise positioning and a focused marketing message.

We are very pleased with the recent positive trends in sales and we believe that continued sales growth, combined with our efficient operating structure, will generate profits at a greater pace and come closer to our same-store sales levels prior to the great recession which began in 2007 for residential furniture.

Early this year we will close three under performing stores which are at the end of their lease terms, expand three stores with major remodeling projects, and complete another 18 of our Bright Inspiration store upgrades. We began this all encompassing remodel and refresh program three years ago. By the end of 2013, 93 stores, or 80% of our Company, will either be new or updated.

We believe that the significant upgrading of our stores, which are brighter and easier to shop, has been a major contributor to our sales increases these past five quarters and will continue to clearly separate us from the more promotional players in our markets. We are actively looking at a number of potential new sites in major markets within our current distribution footprint. I would now like to turn the call back over to Dennis.

Thank you, Clarence. The strength of our Q4 earnings helped us produce $52.2 million of net cash provided by operating activities for 2012. We are pleased to increase cash by $4 million during the full year of 2012 even with relatively high CapEx for us at $25 million, and total dividends paid out to starred of $24.7 million.

For 2013 planned capital expenditures of $20 million is approximately the same amount as expected depreciation and amortization which are non-cash items. And we expect working capital requirements in 2013 to grow modestly. I will remind you that our book value as of year end 2012 is $259.4 million, or $11.66 per share outstanding.

We regard this figure as conservative since our [inaudible] reserve is at $19 million. We have no intangible assets, such as Good Will recorded, and we own 45 of our 122 retail locations free and clear. That's 37% of our locations.

Operator, at this time we'll be happy to take questions from the audience.

Thank you, sir. (Operator Instructions). Todd Schwartzman, from Sidoti & Company. Please go ahead.

Hi. Good morning, folks. Can you give I sense of how President's day weekend went?

We were pleased with it. We had a really good one last year, but we were pleased with it and I think it's going to contribute nicely to the quarter.

On the written business, Clarence, I know you gave the caveats about the month of March in particular, but in terms of deliveries for this year. With regard to the fourth quarter can you talk a little about the written business by geographic market?

We don't want to give too much about that, Todd. We have said in the past that Texas has been good and it is. The oil and gas has been good for Texas, but frankly we're seeing pretty good balance across all of our Company right now. You know, to be up double digits that many months in a row it's got to be across the board. Our major markets are producing well for us and we're seeing a pretty good balance. Florida has come back from when it was down so significantly, but I would say we have a pretty good overall balance between regions.

And for the full year, the average ticket you noted was up a little under 8% if I'm not mistaken. What was the number for Q4?

I think it was about 1,850 and that was up nicely and we're still seeing some nice increases there. Our goal is to get it up to 2,000 so we're closing in on that.

And year-over-year delta in the fourth quarter?

Actually, I think it was up a little higher than that. I think it was up in the double-digit number.

Okay. Great. With respect to the supply chain you mentioned that your in stock position has improved and you do consider the supply chain a competitive advantage. How closely are you watching the ILA labor situation, what are the risks there, and what are the potential impact if any on Haverty's.

Well, we're watching it very closely. I mean it clearly will have on impact if we have a strike on the entire East Coast and the panhandle there's being to be a significant impact to everybody, but we are able to move it from different ports and I think we're as flexible as anybody. We he did anticipate the Chinese New Year coming on this year better than last year and we got a lot of shipments in advance of that which would also be in advance of any strike so I think we're in pretty good position there and I don't think that we'll be out positioned by anybody else if there is a strike.

Is there any set duration of any potential strike that you could easily handle without having any adverse effect on your results or your in stock position?

Well, the fact that it's later in the spring, or could be later in the spring, is a plus because we do feel like we're in a really good position now. If the strike lasts, if it goes two weeks, three weeks then that starts impacting us. If it's a couple of weeks it may not, but we expect this to be settled. I don't think that there will be a significant impact there.

Okay. And just sticking with the supply chain, just as a reminder or maybe an update, what is the number, back of the envelope, number of vendor relationships that you have these days?

I don't know if I can give you that number. You're talking about as far as imports or just overall?

Imports, yes. Sorry.

Oh, that would be a guess, Todd. I would have to guess there. I really don't know. I couldn't answer that right now. We'll get back to you on that.

Alright. Thanks. Lastly, the 1% decrease in retail square footage that you alluded to in the release, does that pertain to full year 2013 or just the front half of the year?

It's full year 2013. I mentioned that we have three stores we're closing this quarter and into next quarter with leases expiring and they were weaker stores. We have been trying to reposition in several markets. There will be a couple of stores that we'll be closing and consolidating into another location in some markets so I think it actually is strengthening our position and we feel pretty good about what we've done in repositioning our stores and getting them in the right locations and now closing the weakest stores.

Sounds good. Thank you very much.

Okay. Thank you, Todd.

Thank you. Our next question is from Budd Bugatch, from Raymond James. Please go ahead.

Good morning, Clarence. Good morning, Dennis. Congratulations on a very good quarter.

Thank you, Budd.

Talk to us a little bit about merchandise differential. What are you seeing? I think you had told us, at least last time I recall, that you were seeing better strength in upholstery versus bedding and I think that had been a bit of a change. Is that still what you're seeing now?

We are seeing more strength in upholstery. Bedding is still strong, but the growth has been mostly in upholstery and I credit our special order emphasis and some of the new vendors we've put in place. We've got systems that allow the sales people to more easily order special order or custom choice merchandise and that's really helped us. It's also something that feeds the business more into the future than in the past because we have to get the goods back in here and it's helped build up some backlog, which again, we're delivering some of what we sold in the fourth quarter this quarter, and I think we'll have a little bit more backlog because of the special order. But I think our marketing, our merchandising, and our presentation of upholstery particularly, and more fashion has helped our business. We're being perceived as a fashion leader, a place to go to get the look that they want in their home and I think we're able to execute it better than our competition and that's helping our business.

Okay. Very good. Have you disclosed which of the three stores you're closing and have they been notified so that you can disclose them to us and where they might be?

They are actually being closed now so yes, we could. That would be Roanoke, the lease ended in Clear Water, we're looking for another location there, and the other one is Jackson, Mississippi.

Okay. And you talked.

We are looking all the some major sites else where.

And you talked about major sites elsewhere, within your distribution footprint. Anything you would like to tip your hand on or is it?

Not yet. There are a number of things we're working on. We're focusing on strengthening our position in our major markets.

How soon?

And major markets would be Dallas, Atlanta, Central Florida, DC, the markets we're already in.

So even though it might be be in your distribution footprint, not necessarily a new advertising market.

That's correct.

When might you make those decisions? What's the likelihood?

We've got a number that we're working on right now, but not ready to announce anything because we don't have any deals set.

Okay. And lastly for me, you have that 14% written so far in the first quarter and you've got the issues and the challenges as you end the quarter. What might you think comp's where you would get that draw then? What's the mathematical way to think about that just to help us figure out where the first quarter might end?

Budd, the written business will probably be impacted more than delivered because the biggest impact is really that Easter weekend where furniture retailers, for the most part, don't advertise, and we're actually closed on Easter Sunday. The delivered business is more impacted just by the comparison and by loss of the day in February. So I think if you just look at number of days on deliveries, it's one day out of 65 that can give you an idea and then the rest just depends on how good business is between now and then.

Okay. Well, congratulations and good luck on the balance of the quarter and the year.

Thank you, Budd.

Thank you.

Thank you. There appear to be no further questions. Please continue with any other points you wish to raise. Thank you.

We appreciate you joining us on our earnings call and we appreciate your interest in Haverty's. Thank you.

Thank you, ladies and gentlemen. This conclude the Haverty Q4 end year 2012 results conference call. Thank you for participating. You may now disconnect.