Trade war weighs on Havertys’ Q3 profit
ATLANTA — Havertys posted a slight third-quarter sales decline and a 27% drop in net income, as the ongoing trade war with China and related shifts in sourcing continued to challenge business during the quarter.
Net sales for the quarter ended Sept. 30, decreased 0.6% to $209.3 million from $210.5 million for the same period a year ago. Comparable store sales decreased 0.4%.
Net income for the quarter declined 27% to $6.1 million from $8.4 million a year ago. On a per-share basis, net income declined 20.1% to 31 cents from 39 cents, as the retailer repurchased $1.5 million worth of common stock during the most recent period.
Havertys also noted that it adopted new lease accounting standards at the beginning of this year, which significantly impacted in balance sheet.
“The third quarter continued to challenge our teams with product flow disruption and merchandise pricing,” President, Chairman and CEO Clarence Smith, said in the earnings release. “Our vendors are working closely with us to ensure that our supply chain information is timely as manufacturing locales shift. The changes in costs have tested our retail pricing strategies and pressured gross profit margins.
Smith noted written business for the quarter was positive, up 1.6%, and the company continues to generate good cash flow.
“The low interest rate and unemployment environment and recent uptick in housing are positive indicators for future home furnishings sales,” smith said. “We believe our focus on merchandising, stores, and operational plans will enable us to profitably grow our business in the future.”
Gross profit margins during the quarter dipped to 53.5% from 54.8% for the same period last year, due mostly to slightly more aggressive promoting and higher product and freight costs. The average ticket, meanwhile, continued to grow, up 4.7% from a year ago, while Havertys’ custom upholstery business was up 13.9%.
For the first nine months, Havertys net sales decreased 3.3% to $588.5 million, and comp store sales were off 2.4%. Net income decreased 24.5% to $15.8 million from $20.9 million in the first nine months of last year. On a per-share basis, earnings per share decreased to 77 cents from 98 cents. Average ticket increased 5.7%, and custom upholstery business grew 10%.
Havertys opened a store in August in St. Louis, a new market; an additional Atlanta market store in Newnan, Ga., in September; and will complete the relocation of a Baton Rouge, La., showroom in November.