Haverty Furniture Companies, Inc. Q4 2025 Earnings Call Summary

Haverty Furniture Companies, Inc. Q4 2025 Earnings Call Summary - Moby

Operational Drivers and Performance Attribution

Achieved a second consecutive quarter of positive comparable sales, signaling a strategic inflection point following a period of industry-wide volatility. Performance was heavily driven by the design business, which now accounts for 33.3% of sales, fueled by a 14.8% increase in upholstery special orders. Average ticket size grew 10.9% to $3,759, reflecting a successful shift toward higher-value design-led transactions and increased pieces per ticket. Management attributed a late-quarter written sales deceleration to the 45-day government shutdown, which created consumer uncertainty despite strong post-Thanksgiving momentum. Inventory levels were intentionally increased by $12.7 million to $96.2 million to front-run potential tariff implementations and ensure immediate product availability. E-commerce written sales grew 12.3%, supported by a refined direct mail strategy that targeted 750,000 new customers with specific pricing and design capabilities.

2026 Strategic Outlook and Guidance Framework

Planned capital expenditures of $33.5 million will fund five new store openings, including an entry into Pennsylvania, and four major remodels. Gross margin guidance of 60.5% to 61% assumes a stabilization of product costs and a reduction in the LIFO pressure experienced in 2025. Management expects to work through current high-cost inventory in the first half of 2026 before the full impact of new Section 122 tariffs is realized. The 2026 SG&A framework anticipates $307 million to $309 million in fixed costs, with 40% of the increase driven by occupancy for new store growth. Strategic refresh of mattress and design centers will reach 35% of the store fleet in 2026, aiming to improve brand visibility and consumer navigation.

Tariff Dynamics and Structural Adjustments

A $3.9 million LIFO charge in Q4 significantly impacted reported gross margins, though adjusted margins actually improved by 100 basis points. The company is navigating a complex regulatory shift as a 10% Section 122 worldwide tariff replaces invalidated IEEPA and fentanyl tariffs. Management decided to close the Alexandria, Louisiana location in March due to stagnant housing growth and shifting regional demographics. The Board authorized an additional $15 million for share buybacks, bringing total current authorization to approximately $18.3 million.

Q&A Session Highlights

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Pricing strategy and response to evolving tariff environment

Management will be deliberate and wait to see how the 150-day Section 122 tariff plays out before taking broad pricing actions. Current inventory already has previous tariffs baked in; the company will prioritize competitiveness at specific price points while maintaining margin guidance.

Variable SG&A cost drivers and leverage expectations for 2026

Variable costs are expected to remain flat as a percentage of sales (18.6% to 18.8%) despite anticipated sales leverage. This is due to expected pressure from higher sales commissions and a need to remain competitive through third-party credit costs like 60-month no-interest financing.

Mattress category performance and department refresh results

Haverty's mattress business remained flat in Q4, outperforming an industry that saw mid-single-digit declines. The refresh program focuses on better brand call-outs and making the shopping process more informational for both customers and sales consultants.

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