Detailed Narrative
Strong Sales Performance and Average Ticket Growth
Haverty's reported net sales of $194.9 million, up 7.7% year-over-year, with comparable store sales increasing 8%. Written sales were even stronger, up 12.6% overall and 12.3% on a comparable basis, marking the fourth consecutive quarter of positive written and delivered comp sales. A key driver was a 14% rise in average ticket to over $3,800, primarily due to an increase in units per ticket and strong performance in design-led custom orders, which grew 23.6%.
Inventory Management and Supply Chain Efficiency
The company successfully reduced inventories from $106.9 million at the end of Q1 to $100.5 million at the end of Q2, demonstrating effective collaboration across supply chain, distribution, merchandising, and store operations. This reduction was achieved while meeting customer demand and improving inventory turns, with a target to end Q3 around $95 million. The company's merchandising and supply chain teams continue to execute, keeping assortments nimble and best sellers in stock.
Tariff Impact and Mitigation
New Section 301 tariffs were set at 10% and 12.5%, while Section 232 tariffs on upholstered wood furniture remained at 25%. The company received $2.1 million in IEEPA tariff refunds, with $1.5 million recognized as a reduction to COGS. Management expects potential future refunds from third-party suppliers (estimated plus or minus $1 million to $1.5 million) to help offset rising fuel-related cost pressures, aiming to maintain gross margin guidance.
Strategic Store Expansion and Refreshes
Haverty's opened two new stores in Q2 (St. Louis, Nashville) and plans to open six more in the second half of 2026, including entry into its 18th state with a Pittsburgh location. The company also continues to refresh mattress departments and design centers, with over half expected to be complete by year-end 2026 and the remainder in 2027, aiming to capitalize on growth opportunities and enhance customer experience.
AI Integration and Customer Engagement
The company is expanding its use of AI beyond marketing, supply chain, and IT into customer-facing and operational areas like home delivery, customer chat, sales, and designer communications. This initiative is expected to improve execution and customer service, serving as a point of differentiation. Marketing efforts continue to focus on attracting new customers, who spend 50% more than repeat customers, while also rewarding loyalty.
Cost Pressures and Financial Flexibility
Haverty's is actively managing three key cost pressures: a 25-30% increase in container rates due to bunker fuel, higher transportation and delivery fuel expenses if diesel remains above $5/gallon, and the impact of fuel increases on product input costs. Despite these, the company maintains a strong balance sheet with $104.3 million in cash and no funded debt, plus $100 million in credit availability, providing flexibility to manage these headwinds.