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Bear of the Day: Havertys (HVT)

Havertys HVT is facing headwinds in 2024 from a slow housing market and inflation. This Zacks Rank #5 (Strong Sell) is expected to see earnings decline by the double digits in 2024. The pandemic furniture buying surge is definitely over.

Havertys is a full-service home furnishings retailer with 124 showrooms in 16 Southern and Midwest states. It has been in business since 1885.

An Earnings Miss in the Fourth Quarter 2023

On Feb 21, 2024, Havertys reported its fourth quarter 2023 results and missed on the Zacks Consensus by $0.06. Earnings were $0.89 versus the consensus of $0.95.

Sales fell 24.9% to $210.7 million while comparable store sales also decreased 25.5%.

Gross profit margin, however, rose to 62.4% from 57% last year.

For the full year, sales and earnings were also challenged. Consolidated sales fell 17.7% to $862.1 million. Comparable store sales fell 18.4%.

Gross profit margin for the year was 60.7% compared to 57.7% in 2022.

"Higher interest rates and record low housing sales and inflation combined with prior years' outsized sales results have generated challenging headwinds," said Clarence H. Smith, CEO.

Analysts Slash 2024 Earnings Estimates

Havertys gave expected gross profit margins for 2024 to be between 59.5% and 60%.

The analysts are bearish on 2024. 2 estimates have been cut in the last 30 days. The 2024 Zacks Consensus has been slashed to $2.45 from $3.40 during that time.

That's an earnings decline of 24.6% as Havertys made $3.25 in 2023.

It would mark the second year in a row of an earnings decline, after the surge in furniture sales during the pandemic.

Are Shares on Sale?

Havertys shares peaked in 2021 when everyone was buying new couches, outdoor furniture and desks for work-from-home during the pandemic. Home sales surged. When you buy a new house, you buy furniture.

Year-to-date shares are down 10% but they haven't completely broken down. Here's the 5-year chart.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Shares are cheap, with a forward P/E of 13.7.

Havertys is also shareholder friendly. It paid out $16.1 million in special cash dividends and $19.1 million in quarterly dividends last year. It also bought 227,000 shares of common stock for $6.9 million.

The company has no funded debt and cash and cash equivalents of $127.8 million as of Dec 31, 2023.

Havertys has paid a cash dividend in each year since 1935. It's annual dividend currently yields 3.7%.

But given the headwinds in the furniture industry, investors interested in furniture retailers like Havertys might want to wait for improvement in the housing market, and the earnings outlook, before diving in.


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