Havertys 4Q profits drop 22.4%

Atlanta— Retailer Havertys' fourth-quarter profits were down 22.4% from a record quarter last year, but were up for all of 2002 as imports and its proprietary Havertys brand continued to shine in a tough business climate.

Fourth-quarter earnings came to $7.9 million. Sales were up

For the full year, net income rose 7.1% from the previous year to $24.3 million, while sales grew 3.8% to $704 million. Same-store sales for the Top 100 company, which has 111 stores in 14 southern and central states, increased 0.7%.

Havertys met the fourth-quarter earnings guidance it had given earlier, despite a "more challenging than expected sales environment," said Clarence Smith, president and chief executive officer. "Gross profit margins were stronger than last year as sales of imports and our private-label brand performed well."

This year, the Havertys brand has surpassed Broyhill as the retailer's No. 1 selling brand, Smith said in a conference call to the investment community. Havertys sees its own brand continuing to grow as it moves more non-branded merchandise on the floor under the label.

Smith added that import quality from China and the Far East continues to improve. The retailer is starting to receive its first fabric upholstery from China "and we're excited about it," he said.

Havertys' selling, general and administrative expenses rose as expected in the fourth quarter — to $81.7 million from $72.9 million a year ago — partly because of higher overhead associated with eight new stores, three larger relocated stores and two distribution centers opened last year.

This year, Havertys plans to open four stores: a relocated, larger store in Jackson, Miss., which already has opened; a store in Palm Beach, Fla.; its first San Antonio store, late in the second quarter or in the third quarter; and a Bowie, Md., store in the fourth quarter.

Maryland will be Havertys' 15th state. The retailer is further filling out the greater Washington market, where it has performed well in its converted HomeLife Furniture locations.

All told, Havertys plans to add 128,000 square feet of selling space this year, a 3.4% increase.

"Many economic conditions and uncertainties lead us to remain cautious about our near-term sales and earnings outlook," Smith said.

But he said that with the recent strength in home sales, Havertys believes there is strong pent-up demand for furniture, and that Havertys is well positioned to take advantage of any upturn in the economy.