Haverty Furniture Companies Inc. (NYSE:HVT.A) Q2 2019 Earnings Conference Call - Final Transcript

Jul 31, 2019 • 10:00 am ET

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Haverty Furniture Companies Inc. (NYSE:HVT.A) Q2 2019 Earnings Conference Call - Final Transcript

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Operator
Operator

Good day, and welcome to Havertys' Second Quarter 2019 Financial Results Conference Call. [Operator Remarks]

At this time, I'd like to turn the conference over to Chief Financial Officer, Richard B. Hare. Please go ahead, sir.

Executive
Richard B. Hare

Thank you, operator. During this conference call, we'll make forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those made or implied in such statements, which speak only as 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, CEO and Chairman Clarence Smith will now give you an update on our results and provide commentary about our business.

Executive
Clarence H. Smith

Good morning. Thank you for joining our second quarter conference call. Second quarter comparative store sales decreased 2.3%, with written comparative store sales down 3.1%. While we were not happy with the decrease, we are pleased to see the improvement from the first quarter. Q2 earnings of $0.29 per share were equal to last year.

While we've worked through several significant product flow issues and have mostly resolved the movement of product from China to Vietnam. In reaction to the List 3 25% tariff implemented in the quarter, we have set in motion with several of our suppliers the transition to production in Vietnam. And while there are still challenges throughout this major movement, we will see some gaps in the production flow cycle. I believe that our team has effectively mitigated the China tariff issues as well or better than any of our competition.

Because of the additional Chinese tariffs, we will see some gross margin impact. We've negotiated with all of our suppliers and increased some prices strategically, which impacted some of our best selling products, but we believe that most of that negative is reflected in the projected margin in our press release.

We're heavily investing in new systems and technology to improve our customers' experience and to reach our target customers with the message that will help us gain her confidence and grow market share. An increasing percentage of our CapEx is invested in 3D technology; enhanced cloud based platforms, the latest mobile sales tablets and faster devices for all of our team members. I expect that heavier IT investment trend to continue in the next years.

The significant growth in our average ticket and customer order product is directly related to the growth of our H Designs sales. The second average sales were up 5.3% over last year to $2,341. Our merchandise team is focused more on style and fashion and our product and presentations. Working closely well with suppliers, we've shortened the special-order lead times to better serve our customer and to help her feel more comfortable with waiting a few weeks versus months for custom product.

H Design sales are right at the 25% target that we outlined when we