Assistant Vice President of Financial Reporting and Investor Relations – Tiffany Hinkle<\/p>\n
President and Chief Executive Officer – Steven Burdette<\/p>\n
Executive Vice President and Chief Financial Officer – Richard Hare<\/p>\n
Operator: Greetings, and welcome to the Havertys Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tiffany Hinkle, Assistant Vice President of Financial Reporting and Investor Relations. Thank you. You may begin.<\/p>\n
Tiffany Hinkle: Thank you, operator. Good morning, and thank you for joining us for our second quarter earnings call. I'm here today with our President and CEO, Steve Burdette; and Executive Vice President and CFO, Richard Hare. Before we begin, I'd like to remind everyone that today's conference call may contain forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those made or implied in such statements, which speak only as of the date they are made and which we undertake no obligation to publicly update or revise. Factors that could cause actual results to differ include economic and competitive conditions and other uncertainties detailed in the company's reports filed with the SEC.<\/p>\n
A replay of this call will be available on our Investor Relations website this afternoon. For commentary about our business, I will now turn the call over to Steve.<\/p>\n
Steven Burdette: Thank you, Tiffany. Good morning, and thank you for joining our 2026 second quarter conference call. Q2 was a strong quarter, and I want to lead with the headline. We doubled earnings per share and delivered our fourth consecutive quarter of positive written and delivered comp sales. Net sales for Q2 were $194.9 million, up 7.7%, with comps up 8%. Total written sales were up 12.6%, with comps up 12.3%. Gross margin expanded 60 basis points to 61.4% from 60.8% last year. Pretax income was $7.4 million, or 3.8% of sales, compared with $4.3 million, or 2.4% of sales, a year ago, and earnings per share came in at $0.32 versus $0.16 a year ago.<\/p>\n
Richard will cover the impact of our recent stock buybacks, LIFO, tariff refunds and expectations for future tariff refunds in his discussion. Written sales grew double digits every month of the quarter. Our Memorial Day promotion was up 9.7% for the 4-day period and up 14.1% for the 2-week period. Traffic increased slightly, and closing percentages held steady during the quarter. But the standout was average ticket, which rose 14% to over $3,800, led by design average ticket, which was up 15.7% to over $8,800. Design accounted for 36.5% of our business as it continues to drive our custom special order business, which rose 23.6%.<\/p>\n
Customers love being able to choose exactly the right fabric or leather in their preferred color from our vast assortment. Every merchandise category was positive for the quarter, with double-digit increases in upholstery, bedroom, dining and occasional, and mid-single-digit growth in mattresses and decor. Our merchandising and supply chain teams continue to execute our merchandise plan, keeping assortments nimble and best sellers in stock to meet customer demand. In May, I traveled with our merchandising team to our Vietnam factories to further strengthen our partnerships with our key suppliers. While in Vietnam, I had the opportunity to meet our newly expanded Havertys Vietnam quality team in person.<\/p>\n
The team plays an essential role in Havertys' success, and I came away more energized about our capabilities and our opportunities. We reduced inventories from $106.9 million at the end of Q1 to $100.5 million at the end of Q2. That result shows what supply chain, distribution, merchandising and store operations can accomplish working as one team, driving sales while improving inventory turns. We expect to end Q3 in the $95 million range, with a 5% swing either way, depending on product flow and sales. This will position us to meet our customers' delivery expectations and achieve our sales goals.<\/p>\n
On the tariff front, the new Section 301 tariffs that replaced the Section 122 tariffs on July 24 came in at 10% and 12.5%, giving us more confidence heading into the balance of the year. As expected, the Section 232 tariffs on upholstered wood furniture remained at 25%. We are actively managing 3 cost pressures related to fuel increases that will impact our margins and expenses throughout the remainder of the year. One, beginning in mid-August, we will see roughly a 25% to 30% increase in our container rates due to the increased bunker fuel rates.<\/p>\n
Two, if diesel fuel remains above $5 a gallon due to continued geopolitical pressures, we will continue to see increases in our transportation and delivery fuel expenses through year-end. And three, the additional impact that the fuel increases will have on our product input costs for the remainder of the year. We expect the tariff refunds already received, along with the potential future refunds from third-party suppliers, to help us offset some of these cost pressures. This will give us flexibility to be more selective with any retail price adjustments as we remain committed to our full year gross margin guidance of 60.5% to 61%, excluding any additional tariff refunds.<\/p>\n
Our marketing, creative and media plans remain consistent as we continue to use connected TV, broadcast TV, social media and other digital channels. We continue to utilize direct mail to showcase for our customers what our designers can do to bring their homes to life, focusing on winning new customers. A new customer spends 50% more than a repeat customer, so that shift carries real value. Our second annual Thank You loyalty e-mail campaign, which ended in early June, rewarded our repeat customers for their patronage of our brand. Appealing to both sets of customers, new and repeat, is vital to our overall growth.<\/p>\n
Organic traffic to the site continues to improve as we strengthen our organic visibility in both SEO and GEO, and that helped drive written e-commerce sales up double digits for the quarter. Our marketing dollars were slightly down for the quarter as we continue to leverage these expenses. Our use of 60-months-no-interest financing was consistent with last year, though the cost of these programs continues to tick up. We will stay aggressive with our credit offerings during the promotional periods so that we meet our customers' financing demands and stay competitive in each of our markets. We are encouraged by the momentum of AI across the business.<\/p>\n
During the quarter, we expanded our use of AI beyond marketing, supply chain and IT development into additional customer-facing and operational areas, including home delivery, customer chat and sales, and designer communications with customers. We believe these capabilities will become another point of differentiation by improving both how we execute and how we serve our customers. We ended the quarter with 129 stores. During the quarter, we opened 2 new locations, one in St. Louis, Missouri, and one in Nashville, Tennessee, and both are running ahead of budgeted traffic and volume expectations. We plan to open 6 new stores in the second half of the year, with one being a relocation. Fredericksburg, Virginia, will open late in Q3.<\/p>\n