Business Context and Reporting Period
Company: Haverty Furniture Companies, Inc.
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 1998
Business Overview: A full-service home furnishings retailer operating 100 showrooms across 14 southern and central states. The company targets middle to upper-middle income consumers with a focus on merchandise value, selection, and customer service. It operates a wholly-owned credit subsidiary, Havertys Credit Services, Inc.
Key Financial Metrics
Note: Specific revenue, profit, and cash flow totals are incorporated by reference from the Annual Report to Stockholders and are not explicitly stated in the provided text. The following metrics are available from the filing text:
- Store Count: 100 retail locations (48 owned, 52 leased).
- Real Estate: Total retail square footage of 3,295,000 sq. ft. (4.0% increase from 1997).
- Sales Efficiency: Annual Net Sales per Square Foot: $168 (1998) vs. $158 (1997).
- Credit Portfolio: Approximately $195 million in receivables (before reserves).
- Credit Yield: Average interest yield of approximately 8.7% for 1998.
- Financing Mix: Amount financed under company credit programs declined to 49% of net sales (down from 55% in 1997).
- Allowance for Doubtful Accounts: Ending balance of $8.3 million (1998) vs. $8.5 million (1997).
- Revenue Composition (1998): Living Room Furniture (48.5%), Bedroom Furniture (23.4%), Dining Room Furniture (11.9%), Bedding (7.6%), Accessories (5.6%), Credit Service Charges (3.0%).
Material Changes vs. Prior Period
- Expansion: Entered five new cities in 1998 (Birmingham AL, Bowling Green KY, Fredericksburg VA, Roanoke VA, Springfield MO). Springfield, MO represents entry into a new state.
- Store Footprint: While store count increased by only 10 since 1994, total square footage increased 40% due to a strategy of replacing smaller stores with larger facilities.
- Strategic Alliance: In February 1998, announced a strategic alliance with Furniture Brands International to allocate up to 50% of retail square footage to their products (currently ~30%).
- Credit Operations: Continued centralization of credit operations completed in 1997; 1998 saw a shift in customer payment behavior with increased use of third-party credit cards and cash, reducing the company's financed sales percentage.
- Product Mix: Living room furniture revenue share decreased from 51.0% (1997) to 48.5% (1998), while accessories and other categories grew from 3.4% to 5.6%.
Outlook, Risks, and Management Commentary
Guidance and Plans:
- Plans to open five remodeled stores and three newly constructed stores in 1999, including a unique mall location in Atlanta.
- Expected to close one large clearance center and two small showrooms in 1999.
- Targeting the completion of the Furniture Brands International alliance (50% square footage allocation) in the second half of 1999.
Risks and Uncertainties:
- General economic conditions and consumer spending on large-ticket items.
- Highly fragmented and competitive retail furniture industry.
- Forward-looking statements are subject to risks that could cause actual results to differ materially.
Unusual Items:
- During the credit centralization transition (1996-1997), the company experienced an increase in delinquencies, which management attributed to industry-wide trends.
- Shortened deferred payment periods from six months to five months in January 1998 to manage risk while remaining competitive.
Investor Verification Checklist
- Verify total Net Sales, Net Income, and Operating Cash Flow figures in the "Selected Financial Data" and "Financial Statements" sections incorporated by reference (pages 13, 20-38 of the Annual Report).
- Confirm the impact of the Furniture Brands International alliance on gross margins and inventory turnover in subsequent quarters.
- Review the "Management's Discussion and Analysis" (pages 14-19 of Annual Report) for detailed commentary on the 4.0% square footage growth and its correlation to the $10 increase in sales per square foot.
- Assess the credit portfolio quality by reviewing the specific delinquency rates and charge-off ratios in the Notes to Consolidated Financial Statements.
- Monitor the execution of the 1999 store opening/closing plan and its effect on operating leverage.