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Havertys reworking accessory lines

Susan Black joins retailer as accessories merchandiser

During Havertys' first-quarter earnings conference call Thursday, CEO Clarence Smith said the retailer is in the process of reworking its accessories lineup, and has brought in an experienced accessories merchandiser to lead the effort.

The move will help bring more consistency to stores that are undergoing renovations and upgrades made under Havertys' new "Bright Inspirations" program, designed in part to bring the stores up to speed with its web presence. "Over the past year, we have brought down our accessory store inventory levels by closing out slow sellers and in preparing for the store remodeling program," Smith said.

Havertys conducted a six-month search for an experienced accessories merchandiser, hiring Susan Black in March to lead the effort. Black, who previously managed accents and case goods for the former Norwood, Mass.-based Domain and later directed the accessories program for Bassett stores, joined Havertys buyers in High Point in April to work on the lineup.

"We brought Susan on to help us centralize the buying and distribution of accessories," said Richard Gallagher, Havertys' senior vice president of merchandising. "Up to this point the vast majority were purchased by Havertys' individual markets, which inherently made it a little difficult to make sure we had the same presentation from store to store" - one of the goals of Bright Inspirations.

"She is attacking that categorically," Gallagher said, noting that Black has completed rugs and is now on to lamps, artwork and top of bed. Tabletop will be the last segment.

Havertys recently began rolling out part of the new assortment, a process that will take a few months to complete. The company would not disclose its suppliers.

In the conference call, Smith said, "We are committed to making our rugs, accessories, lamps and top-of-bed program the best in our markets, helping to drive our furniture sales," but also with the goal of becoming a profitable growth category on its own.

He later said that home accents typically account for about 3% of sales. Smith wouldn't disclose the goal going forward, but said, "We think we can do a much better job."

Smith also said the company is bringing out a "significant number" of new collections targeted to appeal to a more style-oriented customer. "This new product, which we've had in development for many months, is hitting floors and we're encouraged to see the positive sales reactions this second quarter particularly in the higher price point goods," he said. "We've been working to develop and expand our selection in the better and best price, replacing some of the merchandise which was bought through agents and sourcing companies with merchandise designed by top designers in place with the larger Asian factories and domestic upholstery suppliers."

Despite the tough environment of the first quarter, Smith said Havertys continued to manage its supply chain well as the retailer flowed imported goods in advance of plant closings in Asia for the Chinese New Year, and still ended the quarter with an inventory level nearly $4 million lower than at year's end, and $5.6 million lower than a year ago.

Havertys posted a first-quarter loss of $671,000 or 3 cents per share as a continuing weak housing market and rising fuel, healthcare and other costs weighed on results. The loss compared with a gain of $2.4 million or 11 cents per share in the same period a year ago. Net sales decreased 1.2% to $154.2 million and same-store sales were down 0.6% after five consecutive quarterly gains.

"Our target customer is a homeowner and our business is influenced by housing market activity, which has suffered historic declines," Smith said.

"Housing trends improved modestly last year until the new buyer tax credits expired. Since then, further declines in home values and increased foreclosures have not helped the environment for furniture sales," he said.

Smith added that the retailer has lowered its operating costs over the past few years, but selling, general and administrative costs in the quarter were affected by rising fuel prices, wage increases and higher group insurance premiums. SG&A costs increased $600,000 primarily as a result of those factors.

In the conference call, Smith said the housing market declines the industry has faced for the past four years "may be beginning to level off and said in the second quarter so far the average ticket and average price per SKU is up mid-single digits. It's the first time the retailer has seen a healthy increase in several years and "a positive sign that higher price points are gaining traction."

Gross profit margins decreased to 51.2% from 52.1% for the first quarter a year ago but were in line with results for the past three quarters. "Freight rates on imported products have progressively risen since late 2009, and it is difficult to fully recover the higher costs through our retail pricing," the company said in a release.

Havertys, with 118 stores in 17 Southern and Midwestern states, remains free of funded debts and increased its cash position to $66.1 million at the end of the quarter, up $13.7 million from a year ago.

"We are continuing to make important investments in our current store base, technology and associated training, which are essential to our strategies of focusing on the customer and effective support operations for sustainable long-term growth," Smith said.

He added that the company's investment in store improvements are coming while many of its competitors are unable to do the same, which should help Havertys continue to grab market share. "The new merchandise, our improved store displays and our marketing are on track to attract a better customer, more customers and to get credit for the higher quality and better values that we offer."

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