Thank you very much for joining us at the Sidoti September 2025 Investor Conference. My name is Anthony Lebiedzinski, and I am the Equity Research Analyst that covers Havertys Furniture ticker symbol HVT. We are very pleased to have with us today Steve Burdette, the CEO. The format for today will be a Fireside Chat, with an opportunity from the audience also to ask questions. If you would like, you can certainly put those into the Q&A box at the bottom of your Zoom screen, and if time permits, we can get to those questions. We'll have a total of 30 minutes. Steve, thanks again for joining us. Absolutely, glad to be here. Yeah, great to have you here today as part of the Sidoti Conference. First, I guess as a quick primer for those who may not be overly familiar with Havertys, obviously your company has been around for a long time, 140 years, in fact, but just if you could, you know, provide a quick background about the company and how you're positioned relative to your competitors. Okay, yeah, great. As you mentioned, we're celebrating 140 years of being in business this year, which is exciting. You know, when you look at our company, we're in 17 states. We have 129 stores. Our largest concentration of stores are in Florida, Texas, and then Georgia, and then I put the Carolinas behind that. You know, our customer, if you think about our customer, it's female, 35- 55, married, educated, college educated, with children, living in suburbia, and, you know, in the $150,000 range household income and above. We, as a company, operate seven distribution centers and/or cross docks. Those three storage facilities are located in Dallas, Texas, Braselton, Georgia, which is just north of Atlanta, and Lakeland, Florida. We have four cross docks in Petersburg, Virginia, Cincinnati, Ohio, Memphis, Tennessee, and Mobile, Alabama. We feel like our direction going forward is we want to leverage those distribution centers. We're looking at, we have a stated growth of five stores a year. We will not meet that this year, unfortunately, but we are opening three stores this year and basically closing three stores. We'll net out at 129 at year end, so we'll be equal to where we were at the end of 2024. When you look at our product mix, we fit somewhat in the upper middle. We look at it from a standpoint, if you think about a pyramid, our house and restoration on the top side. On the bottom side would be an IKEA, Bob's, actually Rooms To Go. We fit right in the middle where we feel with a Crate & Barrel, Pottery Barn, Ethan Allen, Bassett, maybe slightly above a La-Z-Boy and Macy's, you know, from that standpoint of where our product mix is. We offer design, that's been a part of our mix for over 10 years now. It is a big part of our growth and what we're pushing for, and we're going to continue that focus. Right now, today, it's about a third of our business from a volume standpoint, but we think there's opportunity when you look at it on a by-customer basis or per-up basis that we've got an opportunity to grow it. Average ticket on the design side for the company is over $3,400, and on the design side was $7,600 on our most recent quarter reported. We're growing that average ticket on design by 5%, and that's an important part. That kind of gives you a history of the company. If I look at the strengths of what I would throw at, all our product is Haverty branded. I’d look at design as being a strength. I’d look at our operational efficiencies and what we can get done. I’d look at, you know, our integrity and how we operate. Being in business 140 years, obviously we're doing it right, and that's why we're in business this long. The other thing is, every one of our team members are Haverty associates. They're Haverty team members. We do not outsource any part of our business, and we think that is a clear advantage from delivery to distribution to service, to obviously our stores. Nothing is a third party. It's all Haverty team members. Finally, we're debt-free. We have no debt, and we think that's our strengths and separates us. Mm-hmm. Gotcha. You talked about your core target customer. What are some of the main ways that you reach your customers? Maybe you can also talk about the change in your media partner that you had a few quarters ago. Yeah, yeah. You know, obviously we reach the customer the way everybody does. We have broadcast and OTT that we're doing and reaching the customer that way. From the digital side, we have a very big presence with Instagram, all the Meta companies, to reach our customers. We just recently added Pinterest, and we've added more broadcast. That is in reference to what you talked about, Anthony. We added a new media partner last year. That was a real big add for us. We were struggling with traffic. We needed a change. With our ad agency, we made a change with the media partner, and they've been really positive for us. It's Carmichael Lynch out of Minneapolis, and we're very excited to have them on our team and what they're giving us. They've moved us into more broadcast, as I said. They moved us into Pinterest, and those have been big moves, and we've seen a positive move in our traffic. We've talked about it and reported it, Q4, Q1, Q2. Those trends have moved in the mid-single-digit range, have remained positive. There were some other factors layering in there. Obviously, the election in Q4, getting that behind us without having any hangover, being done on election day and knowing who our president was, gave a lift, I think, in attitudes. On the flip side, when we got to Q1 and we had the inauguration, then the pin started going out, and that had an impact the other way. People causing uneasiness with all the executive orders, things that were going out. Through all of that and through housing being in a 30, 40-year low, we've been able to see traffic change, those patterns change. We think the way our media partner's reaching it. On top of that, Anthony, we really made a change with our website at that point. We put in a new website in 2022, end of 2022. It was a bigger undertaking than we thought. It took us well into 2023 to basically get our feet up underneath us and understand what we had. We lost, with a new website, you're basically starting over to some degree, your organic traffic you got to build back. We think that had an impact on us in 2023, 2024. At the end of 2024, we worked with Adobe and their new, what they call, Adobe Edge Services. We got our homepage and our product listing and display pages. I talked about this on the calls, basically got those implemented into this new Adobe Edge Services, and we've seen our organic growth grow double digits, basically beginning in the fourth quarter, but really starting in Q1 and Q2. We think those are contributors, and that's obviously the website is a big part of reaching our customer. We think that's our front door to our business. Absolutely. That's very encouraging. Can you also talk about what's been the response to your regret-free guarantee? It's something you put in place a few months ago, so just wondering how much of a lift you've seen because of that, or your take on that. Yeah, I'm not sure we're getting necessarily a pure lift that I can quantify for you on that, Anthony, but it's more with our team members, and it's a vote of confidence with the consumer that they know when they buy from us, they don't have to worry about whether we're going to, one, be here to take care of them, or that we're going to sit here and try to policy to not service them. We want to make sure they're happy. The reason we can do this and offer it is because we believe in the products we sell, the vendors that we do business with, and we believe in our sales consultants and designers that are selling it. They're selling it for what it is. They do a good job of qualifying our customers, and that limits any mistakes. What's interesting is we've not seen our exchange rates go up, and we've been able to drive down markdowns as a company. We're very good to have that. We think it's a differentiator. Companies are not offering that. We don't charge restocking fees. We don't charge you if you made a mistake and tell you, no, you've owned it, we can't do it, it's special order. We want to do what's right and make sure we're serving that customer. Gotcha. Okay. That makes sense. I'll just chime in with one question from the audience. Just a clarifying question as far as someone who's new to the furniture industry asking about written sales versus delivered sales, if you could just quickly answer that. Yeah, I mean, written is obviously, it's just that. It's what we write, and then the delivered is what we get put into the customer's home, you know, on a monthly basis. There is a lag time generally between written and delivered. We obviously have the capabilities of delivering probably within three to five days if in stock, but on average, if a customer buys, it's probably about two weeks. There is a lag between the written and the delivered. Of course, obviously with custom orders, special orders going up into the 30% of upholstery sales, that's got a lag time of somewhere between five, seven weeks as well on, you know, that. Mm-hmm. Got it. Okay. I hope that answers. Yeah, absolutely. Can you also talk about your Havertys credit card program and how important that is to the overall success of the company? Yeah, absolutely. About a third of our business is done on credit. We do that through a third-party, Synchrony, and they've been a partner of ours. Our customer approval ratings run roughly high 80%- low 90%, depending on the quarter or month you're looking at. We have a very good customer and get a high approval rating. We do have a secondary offering with a company called Fortiva that is not used very much. Most of our customers don't want to move down to that second tier credit. If they don't buy, they generally will move to a credit card or some other way if it doesn't work through Synchrony. The Synchrony credit, we run no interest promotions, we run 18 and 24 months deferred. We run 36, 48, and 60 months no interest. With the recent change that Synchrony made, they had a 2% fee that they implemented last July. That was a result of the late fee changes that were going to come from the administration at that time. They were trying to get ahead of it. They just removed that this July, and we will monitor it. At that same time that they implemented the 2%, we pulled back on our 60 months and 48. We haven't offered it in over a year, and we pulled back on it to control our credit costs. We've done a nice job of doing that. In May, we did start to advertise it over Memorial Day, and we saw some traction with it, but we didn't see a real big increase with it. Still, we saw the customer move into the 18 and 24 months, but as we reported on our Q2 call, we were up over 14% for the Memorial Day weekend, which was a real change from what we had seen. Certainly, coming off a disappointing President's Day, we were very excited about it. Mm-hmm. Gotcha. All right. Thinking about store growth, I know you touched on this a little bit, Steve, earlier. You plan five stores per year, although this year you will not get to that five number. How do we think about as far as which markets are you looking to grow into? Is there a specific focus? You certainly returned to Houston, Texas, about a year ago or so. Maybe talk to us about which markets you are focusing on in terms of leveraging your infrastructure. Yeah, a couple of things. Obviously, Florida is a big one and Texas, with the migration that's happening to those two states, albeit we're getting numbers and hearing things that are slowing, but still positive, but not at the pace that it was in 2021, 2022, which would be expected. We certainly feel like in Florida, you almost could put a store about every 20 miles in Florida. We have a lot of opportunity there to grow and add more. That's a big focus there, how we can leverage that, Texas as well. When you get outside of that, we've gone into the bigger markets, metropolitan markets where we might be missing and reevaluating, starting with our big markets. I think that's some of it. There'll be some relocations that are done within those markets, similar to what we did this past year. Daytona is a perfect example. It's part of the Orlando market. We relocated that store to a better site, seeing better traffic and an increase in our business. It was a good move for us. We'll continue to do those type things and make sure we're positioned correctly in our major markets. I'm talking Tampa, West Palm, Orlando. I'm talking Dallas, Austin, San Antonio, Houston, where we're going to have, obviously, we want to build there, somewhere between six and eight stores. We right now have two with a third one opening this year, Washington, DC, Nashville. We've done some growth up in the Midwest, Indianapolis. We opened a store, second store. That's a big metropolitan market. St. Louis, we've got a store that we opened and we've announced that. That will open in Q1 of next year. Columbus, Ohio, with all that's happening in that market and the growth that's expected there with the Intel and expansion that's going on in that market, we see that as an opportunity for another store. We're continuing to look across the network and really we're looking at contiguous states as well, Oklahoma, Pennsylvania, opportunities that could be there that we can serve out of our current DCs. As you mentioned, Steve, housing is still, you know, at a 30+ year low. Just curious to get your take on the performance of some of the recent store openings. How have those done versus your expectations? As with, you know, if you look at a group of 10, you're going to have some you're very happy with. You're going to have some that are running mediocre, and you have a couple that you sit back and say, okay, we've got some work to do, relative to those stores. I think all in all, we're pleased with our growth and what we're doing. It generally takes about a year that we hope if a store is really good that it will be producing what we call an internal profit. Then, you know, generally on average, if you look at it, it's about three years that we really get a turn and start getting in a rate that it's really starting to contribute to the overall. You know, we're excited. We think it's the right thing to do. It's obviously affecting some of our expenses, and we call that out on our calls. We feel like it's the right time to do. We like that we're growing in a time when things, there's so much uncertainty. We think that's a plus. When this housing does turn, and it will, when it does, we're going to be there to take advantage of it and be right and ready to go. Mm-hmm. As you mentioned that you upgraded your e-commerce site, it was a bigger undertaking than you initially expected. That being said, can you just comment on sales through your e-commerce website and kind of what are the opportunities and challenges other than macro-related as you look to increase sales from e-commerce? Yeah, you know, that's always been one. We have been quoted as saying we'd like to see it get to be 10% of our business. We're running in the low single digits and have been. During the pandemic, we jumped up into the high single digits for a period of time, and then it settled back down. We think of our website as our front doors, as I said earlier, to our business. It's a way for the consumer to learn who we are and what we offer, and we felt like the revamp of the website was critical in making sure that we were up to date and providing the consumer with all the necessary information that she wants and needs and put it at her fingertips. We still got to figure that out, Anthony. We think there's an opportunity there. You know, you've got a lot of retailers that are going out there with marketplaces, creating their own marketplaces. Best Buy is doing it. Obviously, you've got Amazon and others that are going out after that, and certainly Walmart's in the hunt trying to go after, big time. We're just going to be cognizant of it. We do offer what we have. We do ship, you know, FedEx, UPS to the consumer on those items that are able to, but right now we wanted to make sure we had the foundation built first and that we get our stores back positive before we start taking on that initiative to try to see what we can't do to grow that business and get it to 10%. I don't think it'll ever be more than 10%. I mean, that's not, you know, a direct, but I think certainly we can do better than what we're doing off of it, you know, and providing to the consumer. Right, right. Sure. There's upside potential, sounds like. Thinking about your merchandising mix, can you talk to us about that, like what that is, you know, upholstery versus case goods, and you do some mattresses as well. Maybe while on that subject, just talk about the impact of tariffs on the different product categories. Yeah, so, if you look at our category mix, I'd say the living room, which is upholstery and occasionals, is around 50% of our business. If you look at bedrooms, you pull down that we run somewhere in the 14%- 6%. If you look at dining rooms, we're around 10%- 12%. If you look at mattresses, we're somewhere around 9%- 11%. If you go down into decor and all of that, we're down into the mid-single digits. When I look at tariffs, tariffs' biggest impact is obviously on bedroom and dining room. I mean, that's where it's having the biggest impact. It's having a big impact on motion, leather, that we had coming out of China, that now we've had resourced either out of Vietnam or have moved down to Mexico or potentially in Cambodia. That's the biggest impact on tariffs, those places. When we think of tariffs, it's an ongoing issue right now that is not totally resolved. We are positioned and comfortable with where we are at the 20% for Vietnam. Basically, with Mexico, the USMCA agreements, we don't have anything there that we're affected. We are covered by that. Cambodia is at 19%. I think Indonesia is around 20%. We're comfortable with that. We've got that all priced in. We've worked with our vendors and partners, and we feel comfortable. If this most latest tweet or call out by the president about furniture coming back to the U.S., and if he does something different there, then we'll have to take a look at it. I mean, I'm not factoring that in. We're hopeful that he was doing some of that in preparation, thinking that the appellate court was going to kick out that he wasn't, you know, had the right to do the reciprocal tariffs and that it was going to end up going to the Supreme Court. He wanted some other alternatives, but only time's going to tell. We'll know something pretty in short order here. I think the furniture deal, they had about 50 days till October 11 or so to make that call, but the Supreme Court, I think it's going to be pushed out. Hopefully, it gets done before year end. We'll have to wait and see. Right, right. Of course. I'm sure you guys are staying agile as much as you can. Absolutely. You've taken some pricing actions. Can you talk to us about the extent of those price increases that you have put in place thus far and the impact on unit volumes as a result of that? Yeah, you know, we haven't quite yet seen an impact on units. They haven't fully been, you know, we've gone through some holidays. We had Memorial Day, had July 4th, Labor Day. Obviously, since we can't quite give you any commentary on Q3, of course, but we have not seen, generally, we have seen the units come back and start to mimic what our regular store sales are running, starting to run pretty close to that. Where when you look back during the pandemic, units were dropping precipitously and the volume was still holding up, but units were going down because of average ticket going up so fast. We'll have to monitor that to see what happens going forward on the unit sales, Anthony. At this point, I don't see it. Now, when you look at pricing, we've already implemented some price increases on the original 10% that was back in April and May that was put in place. Those increases have been put in place. We've not, again, like I said, seen an impact on that through the second quarter. We'll continue to monitor it. This additional 10%, we've gotten in front of that and passed it, but it doesn't mean it affects every product or every piece of product. Our merchants are looking at it by category, by group, where it makes sense, where we have competitive issues, and they may take increases on some, and they may not take increases on others. They may take more increases on some because we can get it to cover up for the ones that we can't. They're being very selective, and we feel like it's important that we get out in front of it and put those out there as early as possible to know how the product is going to work at those new price points. If they're not, then our merchants can make decisions, work with our vendors, and/or look to reassort that product and get it replaced because it's not going to be able to carry its weight on the floor. We've given our margin guidance of 60%- 60.5%. So long as things stay where they are, we feel comfortable with that. Right. It sounds like you've taken a really surgical approach to pricing actions, and your current gross margin guidance reflects everything that was put in place, absent the potential actions from the last tweet, I think in late August, I believe, right? Yeah, that's right. Okay. Okay. Yeah, our merchants and supply chain team have done a great job, and I can't say enough about the partners that we have. You know, our vendor partners are fabulous, and they work with us, and we're in this together. You know, we want to see them be successful. We're not trying to hammer and run them out of business. That does us no good. We want them to get through this along with us. They are key to our success. Right. All right. In terms of just the pain of the tariffs, it sounds like your suppliers are also sharing some of that pain as well. Absolutely. Okay. All right. Relative to pre-COVID times, it does certainly appear that you've been running the business leaner with a lower headcount. You have operated your stores with shorter operating hours and reduced your cost structure. Can you just talk about that change and how you guys think about your ability to manage expenses and leverage that as business eventually picks back up? Yeah, I mean, I'm real proud of the team and what we've been able to accomplish through the pandemic and where we are today. You know, sometimes you got to get hit in the face or have cold water thrown on you to figure out that you can really do something. You know, we reduced our staffing tremendously, as you called out. We were 3,500 before the pandemic, roughly, and we're down, you know, somewhere south of 2,400 today, running more stores. In our distribution centers, we're able to maneuver our distribution and home delivery and be more flexible there, as the business flows, ebbs and flows with turnover. We're not having to take any kind of hits with layoffs, things of that nature. Our sales team and our store teams, we feel like we've right-sized. I mean, we have anywhere from 10- 15 people basically per store. That includes management, sales, design, display, and the office. We are a very thin staff. You know, multitasking is a phrase we want to use all the time. How can we multitask more and take advantage of it and have our better people have an opportunity to serve the customer? We think that's a win-win for us, and we're going to stay focused on that. Our hours of operation, we're comfortable with. We think the customer will seek us out, and we think through our relationships, we're fine. We're open basically 10:00 A.M. to 7:00 P.M., Monday through Saturday, and noon to 6:00 P.M. on Sunday. I don't see that changing. I don't see our staffing in our stores changing. We'll continue to look at how we can be more efficient. AI is an opportunity. How will it impact us as we go forward? We're in the midst of doing analysis on that right now. We use it a little bit in our marketing and writing copy and doing certain things in SEO and in supply chain, but it's some of the basic machine learning, that type of stuff. We want to get it up and start talking about the agentic and things like that that you're hearing out there. We're exploring into that, what it can do for us. Our objective is not to replace somebody. Our objective is to grow back to a billion dollars and not have to add to, and that we can use AI to help leverage that and leverage that cost, and really push our profits back because we want to get back to that double-digit operating margin. Mm-hmm. Havertys has done a great job of maintaining a very strong balance sheet and has over the years been a very consistent producer of free cash flows. Could you talk a little bit about your capital allocation priorities? We'd love to hear your thoughts on that. Yeah, I mean, if you look at it this year, we said our capital allocation was going to be around $24 million. It's been somewhat in the prior years up in the $30, around $30 million. A lot of that is tied to new stores, distribution, IT, all those infrastructure repairs, all that type stuff. You know, when we look outside of that, we look at dividends, special dividends, and buybacks as another way to give back to our shareholders. That's something the board looks at every quarter and assesses, and what they feel is the right way to go. We've paid a dividend since 1935, and, you know, obviously that's an important part of who we are. I see that obviously continuing. Whether we do special dividends or buybacks, we've done so far this year, $2 million. We have an authorization out there right now sitting somewhere between $4 and $6 million that's left. That'll be something the board makes and looks at every quarter. We have discussions about that, and then we'll move accordingly based on the board's direction. Got it. Of course. Yeah, yeah. We're almost out of time here. Is there anything else that we missed that you think the investors should know before we wrap up this fireside chat? No, I mean, I'm telling you, we're a great company. We're a company that's built on service and taking care of our customers. We're going to be here for another 140 years. You can count on that. It is a cyclical business, and we will ride those cycles. We're trying to find our way, how we can get out in front of it. My goal is to get us back to a billion dollars. That's no questions about it. We've been there, we've tasted it, and we want to get back to it, and we think we deserve it. We're not getting our fair share, and the team is committed 100% working toward that goal. We appreciate y'all's interest too. All right. Sounds like a great plan. Thank you very much, Steve, and thank you also everyone listening in as well. We'll wrap it up here, and I hope everyone has a productive day. Thank you very much. Thank you. Appreciate it. Take care. Thank you. Bye-bye. Bye. Thanks.